CANTON, Ohio, Feb. 1 /PRNewswire-FirstCall/ -- The Timken Company
(NYSE:TKR) today announced record sales of $5.2 billion, up 15
percent from a year ago. Net income in 2005 increased sharply to a
record $260.3 million, or $2.81 per diluted share, from $135.7
million, or $1.49 per diluted share, last year. Excluding the
impact of special items, the company reported adjusted 2005 net
income of $234.2 million or $2.53 per diluted share, compared to
$122.3 million or $1.35 per diluted share in 2004. These special
items include the benefits received under the Continued Dumping and
Subsidy Offset Act [CDSOA], partially offset by charges related to
restructuring and rationalization of operations. (Logo:
http://www.newscom.com/cgi-bin/prnh/19991012/TKRLOGO ) "In 2005,
demand across a broad range of industrial markets drove record
sales. The combination of strong markets and our execution
translated into significantly improved results," said James W.
Griffith, president and CEO. "We have made considerable strides in
our efforts to structurally improve Timken's profitability. We
continued that process in 2005 by launching several key initiatives
to position the company for continued success." During 2005, the
company: - Leveraged demand and implemented surcharges and price
increases to recover high raw material costs; - Improved the
business mix and increased production capacity in targeted areas,
including significant investments in the U.S., China and Romania; -
Launched a major growth initiative in Asia with the objective of
increasing market share, influencing major design centers and
expanding our network of sources of globally competitive friction
management products; - Initiated Project ONE, a five-year program
designed to improve business processes and systems to deliver
enhanced customer service and financial performance. With an
expected cost of $90 million, Project ONE is targeted to achieve
annual savings of approximately $75 million upon project
completion, as well as improved working capital management; - Began
restructuring automotive operations to address challenging market
issues, with expected costs of $80 to $90 million and targeted
annual savings of approximately $40 million by the end of 2007; -
Reached a new four-year agreement with the United Steelworkers
union, covering employees in the Canton, Ohio bearing and steel
plants. As a result of the contract settlement, the company has
refined its plans to rationalize the Canton bearing operations,
with expected costs of approximately $35 to $40 million over the
next four years and targeted annual savings of approximately $25
million; - Improved the business portfolio. The company expanded
its presence in the aerospace aftermarket through acquisitions and
alliances, providing a broader range of engine bearing repair and
reconditioning, while also completing the divestiture of several
non-strategic product lines; and - Strengthened the balance sheet,
reducing debt while contributing $226 million to the company's U.S.
pension plans. Fourth quarter results For the quarter ended
December 31, 2005, sales were $1.3 billion, an increase of 8
percent from a year ago. Sales across all three business groups
improved from the fourth quarter of 2004. Earnings per diluted
share for the fourth quarter were $1.01, compared to $0.71 in the
same period a year ago. Excluding special items, the company's
adjusted fourth quarter earnings per diluted share were $0.54,
versus $0.44 a year ago. Special items in the fourth quarter
included income from CDSOA, a gain on the sale of assets and
restructuring and rationalization charges. "While adjusted fourth
quarter earnings per diluted share were up 23 percent over the same
period last year, they were lower than anticipated due to higher
manufacturing costs, a write-off of obsolete and slow-moving
inventory and increased reserves for automotive industry credit
exposure," said Mr. Griffith. Industrial Group Results Industrial
Group 2005 sales increased 13 percent from the prior year to a
record $1.9 billion. The increase was driven by higher volume and
improved product mix. Many end markets were strong, especially
mining, metals, rail, aerospace and oil and gas, which also drove
strong distribution sales. The Industrial Group also benefited from
growth in emerging markets, especially China. Industrial Group 2005
earnings before interest and taxes (EBIT) increased to $199.9
million from $177.9 million in 2004, reflecting volume growth and
price increases, partially offset by investments in Project ONE and
Asia growth initiatives. Industrial Group sales in the 2005 fourth
quarter increased to $491.9 million, up 10 percent from the prior
year with continued market strength. EBIT was $41.9 million, down
from $47.6 million a year ago. The positive impact of improvements
in volume and mix were more than offset by higher manufacturing
costs associated with the ramping up of capacity to meet customer
demand, investments in Project ONE and Asia growth initiatives, and
a write-off of obsolete and slow-moving inventory. Automotive Group
Results Automotive Group 2005 sales increased 5 percent to a record
$1.7 billion. Sales grew due to favorable pricing actions and
growth in medium and heavy truck markets. The Automotive Group had
a loss in 2005 of $19.9 million, compared to EBIT of $15.9 million
in 2004. Increased volume and pricing were more than offset by
higher manufacturing costs associated with ramping up plants
serving industrial customers and from reduced unit volume from
light vehicle customers. Automotive results were also impacted by
investments in Project ONE and an increase in accounts receivable
reserves. In the third quarter, the company announced a
restructuring plan as part of its effort to improve Automotive
Group performance and address challenges in the automotive markets.
In the fourth quarter, the Automotive Group had sales of $406.9
million, a 4 percent increase from a year ago. The Automotive Group
had a loss of $7.5 million in the fourth quarter of 2005, compared
to a loss of $1.9 million for the same period a year ago. Despite
higher pricing, fourth quarter results were negatively impacted by
higher manufacturing costs, investments in Project ONE and an
increase in accounts receivable reserves. Steel Group Results Steel
Group 2005 sales, including inter-segment sales, were a record $1.8
billion, up 27 percent from 2004. The sales growth reflected record
shipments, driven by strong industrial markets, as well as
surcharges and price increases to offset higher raw material and
energy costs. For 2005, EBIT increased to $219.8 million from $54.8
million in 2004, driven by higher volume, raw material surcharges
and price increases. High capacity utilization and record
productivity also improved the results. Steel Group sales in the
fourth quarter, including inter-segment sales, were $419.7 million,
an 8 percent increase from the prior year. Fourth- quarter EBIT was
$49.6 million, compared to $32.2 million a year ago. Both sales and
EBIT reflected the strong business performance experienced
throughout the year. Outlook The company expects continued
financial improvement in 2006. Global industrial markets are
expected to remain strong, while improvements in Timken's operating
performance will be partially constrained by investments in Project
ONE and Asia growth initiatives as well as the expensing of stock
options. Earnings per diluted share for 2006, excluding special
items, are estimated at $2.65 to $2.80 for the full year and $0.55
to $0.60 for the first quarter. The company will host a conference
call for investors and analysts today to discuss financial results.
Conference Call: Wednesday, Feb. 1, 2006 11:00 a.m. Eastern
Standard Time All Callers: Live Dial-In: 706-634-0975 (Call in 10
minutes prior to be included) Replay Dial-In through Feb. 8, 2006:
706-645-9291 Conference ID: 3960158 Live Webcast:
http://www.timken.com/ The Timken Company (NYSE: TKR;
http://www.timken.com/) keeps the world turning, with innovative
ways to make customers' products run smoother, faster and more
efficiently. Timken's highly engineered bearings, alloy steels and
related products and services turn up everywhere. With operations
in 27 countries, sales of $5.2 billion in 2005 and 27,000
employees, Timken is Where You Turn(TM) for better performance.
Certain statements in this news release (including statements
regarding the Company's forecasts, estimates 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 related to expected savings
and costs of the Company's programs and initiatives and
expectations concerning the Company's financial performance, as
well as 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: fluctuations in raw material and energy costs and the
operation of the Company's surcharge mechanisms; the Company's
ability to respond to the changes in its end markets; changes in
the financial health of the Company's customers; 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 future and ongoing programs
and initiatives, including the implementation of its Automotive
Group restructuring, the rationalization of the Company's Canton
bearing operations, manufacturing transformation and
rationalization activities. These and additional factors are
described in greater detail in the Company's Annual Report on Form
10-K for the year ended December 31, 2004, in the Company's 2004
Annual Report, page 64 and in the Company's Form 10-Q for the
quarter ended September 30, 2005. The Company undertakes no
obligation to update or revise any forward-looking statement.
CONTACT: Media, Denise Bowler, Manager-Global Corporate &
Financial Communications, +1-330-471-3485, or facsimile,
+1-330-471-4118, or , or Investors, Steve Tschiegg,
Manager-Investor Relations, +1-330-471-7446, or facsimile,
+1-330-471-2797, or , both of The Timken Company CONSOLIDATED
STATEMENT OF INCOME AS REPORTED (Thousands of U.S. dollars, except
share data) 4Q 05 4Q 04 Year 05 Year 04 Net sales $1,281,083
$1,187,875 $5,168,434 $4,513,671 Cost of products sold 1,019,120
940,317 4,095,209 3,670,584 Manufacturing
rationalization/Integration/ Reorganization expenses - cost of
products sold 4,315 1,128 14,504 4,502 Gross Profit $257,648
$246,430 $1,058,721 $838,585 Selling, administrative & general
expenses (SG&A) 171,501 157,045 658,826 565,400 Manufacturing
rationalization/Integration/ Reorganization expenses - SG&A
1,289 5,778 2,766 22,523 Impairment and restructuring 1,686 9,436
26,093 13,434 Operating Income $83,172 $74,171 $371,036 $237,228
Other expense (5,331) (11,964) (17,764) (30,964) Special items -
other income 82,435 36,876 85,422 42,952 Earnings Before Interest
and Taxes (EBIT) (2) $160,276 $99,083 $438,694 $249,216 Interest
expense, net (10,991) (14,262) (48,148) (49,437) Income Before
Income Taxes $149,285 $84,821 $390,546 $199,779 Provision for
income taxes 54,404 20,439 130,265 64,123 Net Income $94,881
$64,382 $260,281 $135,656 Earnings Per Share $1.03 $0.71 $2.84
$1.51 Earnings Per Share- assuming dilution $1.01 $0.71 $2.81 $1.49
Average Shares Outstanding 92,426,648 90,397,233 91,533,242
89,875,650 Average Shares Outstanding-assuming dilution 93,616,089
91,314,698 92,537,529 90,759,571 (1) "Adjusted" statements exclude
the impact of impairment and restructuring, manufacturing
rationalization/integration/reorganization and special charges and
credits for all periods shown. CONSOLIDATED STATEMENT OF INCOME
ADJUSTED (1) (Thousands of U.S. dollars, except share data) 4Q 05
4Q 04 Year 05 Year 04 Net sales $1,281,083 $1,187,875 $5,168,434
$4,513,671 Cost of products sold 1,019,120 940,317 4,095,209
3,670,584 Manufacturing rationalization/Integration/ Reorganization
expenses - cost of products sold - - - - Gross Profit $261,963
$247,558 $1,073,225 $843,087 Selling, administrative & general
expenses (SG&A) 171,501 157,045 658,826 565,400 Manufacturing
rationalization/Integration/ Reorganization expenses - SG&A - -
- - Impairment and restructuring - - - - Operating Income $90,462
$90,513 $414,399 $277,687 Other expense (5,331) (11,964) (17,764)
(30,964) Special items - other income - - - - Earnings Before
Interest and Taxes (EBIT) (2) $85,131 $78,549 $396,635 $246,723
Interest expense, net (10,991) (14,262) (48,148) (49,437) Income
Before Income Taxes $74,140 $64,287 $348,487 $197,286 Provision for
income taxes 23,495 24,429 114,304 74,969 Net Income $50,645
$39,858 $234,183 $122,317 Earnings Per Share $0.55 $0.44 $2.56
$1.36 Earnings Per Share- assuming dilution $0.54 $0.44 $2.53 $1.35
Average Shares Outstanding 92,426,648 90,397,233 91,533,242
89,875,650 Average Shares Outstanding-assuming dilution 93,616,089
91,314,698 92,537,529 90,759,571 (1) "Adjusted" statements exclude
the impact of impairment and restructuring, manufacturing
rationalization/integration/reorganization and special charges and
credits for all periods shown. BUSINESS SEGMENTS (Thousands of U.S.
dollars) 4Q 05 4Q 04 Year 05 Year 04 Industrial Group Net sales to
external customers $491,465 $448,496 $1,925,211 $1,709,770
Intersegment sales 386 454 1,847 1,437 Total net sales $491,851
$448,950 $1,927,058 $1,711,207 Adjusted earnings before interest
and taxes (EBIT)* (2) $41,864 $47,636 $199,936 $177,913 Adjusted
EBIT Margin (2) 8.5% 10.6% 10.4% 10.4% Automotive Group Net sales
to external customers $406,875 $391,585 $1,661,048 $1,582,226
Adjusted (loss) earnings before interest and taxes (EBIT)* (2)
($7,529) ($1,863) ($19,886) $15,919 Adjusted EBIT (Loss) Margin (2)
-1.9% -0.5% -1.2% 1.0% Steel Group Net sales to external customers
$382,743 $347,794 $1,582,175 $1,221,675 Intersegment sales 36,909
40,794 178,157 161,941 Total net sales $419,652 $388,588 $1,760,332
$1,383,616 Adjusted earnings before interest and taxes (EBIT)* (2)
$49,609 $32,246 $219,780 $54,756 Adjusted EBIT Margin (2) 11.8%
8.3% 12.5% 4.0% * Industrial Group, Automotive Group and Steel
Group EBIT do not equal Consolidated EBIT due to intersegment
adjustments which are eliminated upon consolidation. (2) EBIT is
defined as operating income plus other income (expense). EBIT
Margin is EBIT as a percentage of net sales. EBIT and EBIT margin
on a segment basis exclude certain special items set forth above.
EBIT and EBIT Margin are important financial measures used in the
management of the business, including decisions concerning the
allocation of resources and assessment of performance. Management
believes that reporting EBIT and EBIT Margin best reflect the
performance of our business segments and EBIT disclosures are
responsive to investors. Reconciliation of Total Debt to Net Debt
and the Ratio of Net Debt to Capital: (Thousands of U.S. Dollars)
Dec 31, 2005 Dec 31, 2004 Short-term debt $159,279 $158,690
Long-term debt 561,747 620,634 Total Debt 721,026 779,324 Less:
cash and cash equivalents (65,417) (50,967) Net Debt $655,609
$728,357 Shareholders' equity 1,497,067 1,269,848 Ratio of Total
Debt to Capital 32.5% 38.0% Ratio of Net Debt to Capital (Leverage)
30.5% 36.5% This reconciliation is provided as additional relevant
information about Timken's financial position. Capital is defined
as debt plus shareholder's equity. Management believes Net Debt is
more representative of Timken's indicative financial position, due
to a temporary increase in cash and cash equivalents.
Reconciliation of GAAP net income and EPS - Basic and Diluted as
previously disclosed. This reconciliation is provided as additional
relevant information about the company's performance. Management
believes adjusted net income and adjusted earnings per share are
more representative of the company's performance and therefore
useful to investors. Management also believes that it is
appropriate to compare GAAP net income to adjusted net income in
light of special items related to impairment and restructuring and
manufacturing rationalization/integration/reorganization costs,
Continued Dumping and Subsidy Offset Act (CDSOA) receipts, and gain
on the sale of non-strategic assets. Fourth Quarter 05 04
(Thousands of U.S. dollars, except share data) $ EPS $ EPS Net
income $94,881 $1.01 $64,382 $0.71 Pre-tax special items:
Manufacturing rationalization/integration/ reorganization expenses
- cost of products sold 4,315 0.05 1,128 0.01 Manufacturing
rationalization/integration/ reorganization expenses - SG&A
1,289 0.01 5,778 0.06 Impairment and restructuring 1,686 0.02 9,436
0.10 Special items - other (income) expense: Gain on sale of
non-strategic assets/dissolution of British Timken (6,012) (0.06)
(190) - CDSOA receipts, net of expenses (77,069) (0.82) (36,686)
(0.40) Adoption of FIN 46 for investment in PEL - - - - Other 646
0.01 - - Tax effect of special items 30,909 $0.32 (3,990) (0.04)
Adjusted net income $50,645 $0.54 $39,858 $0.44 Year 05 04
(Thousands of U.S. dollars, except share data) $ EPS $ EPS Net
income $260,281 $2.81 $135,656 $1.49 Pre-tax special items:
Manufacturing rationalization/integration/ reorganization expenses
- cost of products sold 14,504 0.16 4,502 0.05 Manufacturing
rationalization/integration/ reorganization expenses - SG&A
2,766 0.03 22,523 0.25 Impairment and restructuring 26,093 0.28
13,434 0.15 Special items - other (income) expense: Gain on sale of
non-strategic assets/dissolution of British Timken (8,547) (0.09)
(190) - CDSOA receipts, net of expenses (77,069) (0.83) (44,429)
(0.49) Adoption of FIN 46 for investment in PEL - - 948(3) 0.01
Other 194 - 719 0.01 Tax effect of special items 15,961 $0.17
(10,846) (0.12) Adjusted net income $234,183 $2.53 $122,317 $1.35
(3) In the first quarter of 2004, Timken adopted Interpretation No.
46, "Consolidation of Variable Interest Entities, an interpretation
of Accounting Research Bulletin No. 51" (FIN 46). Timken concluded
that its investment in a joint venture, PEL, was subject to the
provisions of FIN 46 and that Timken was the primary beneficiary of
PEL. Accordingly, Timken consolidated PEL, effective March 31,
2004, which resulted in a charge to earnings related to the
cumulative effect of change in accounting principle. Reconciliation
of Outlook Information - Expected earnings per diluted share for
the first quarter and the full year exclude special items. Examples
of such special items include impairment and restructuring,
manufacturing rationalization/integration/reorganization expenses,
gain on the sale of non-strategic assets, and payments under the
CDSOA. It is not possible at this time to identify the potential
amount or significance of these special items. We cannot predict
whether we will receive any additional payments under the CDSOA in
2006 and if so, in what amount. If we do receive any additional
CDSOA payments, they will most likely be received in the fourth
quarter. CONSOLIDATED BALANCE SHEET Dec 31 Dec 31 (Thousands of
U.S. dollars) 2005 2004 ASSETS Cash & cash equivalents $65,417
$50,967 Accounts receivable 711,783 717,425 Deferred income taxes
107,632 114,657 Inventories 998,368 874,833 Total Current Assets
$1,883,200 $1,757,882 Property, plant & equipment 1,547,044
1,583,425 Goodwill 204,129 189,299 Other assets 359,056 415,056
Total Assets $3,993,429 $3,945,662 LIABILITIES Accounts payable
& other liabilities $500,939 $504,585 Short-term debt 159,279
158,690 Accrued expenses 411,298 370,101 Total Current Liabilities
$1,071,516 $1,033,376 Long-term debt 561,747 620,634 Accrued
pension cost 246,692 468,644 Accrued postretirement benefits cost
513,771 490,366 Other non-current liabilities 102,636 62,794 Total
Liabilities $2,496,362 $2,675,814 SHAREHOLDERS' EQUITY 1,497,067
1,269,848 Total Liabilities and Shareholders' Equity $3,993,429
$3,945,662 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the
three months For the year ended ended Dec 31 Dec 31 Dec 31 Dec 31
(Thousands of U.S. dollars) 2005 2004 2005 2004 Cash Provided
(Used) OPERATING ACTIVITIES Net Income $94,881 $64,382 $260,281
$135,656 Adjustments to reconcile net income to net cash provided
(used) by operating activities: Depreciation and amortization
57,294 52,515 218,059 209,431 Other 97,507 74,944 93,304 81,097
Changes in operating assets and liabilities: Accounts receivable
80,836 7,067 (29,426) (114,264) Inventories 1,819 (38,702)
(160,287) (130,407) Other assets 7,571 8,693 (21,099) 9,544
Accounts payable and accrued expenses (126,477) (23,170) (47,288)
(73,218) Foreign currency translation (gain) loss (424) 948 5,157
2,690 Net Cash Provided (Used) by Operating Activities $213,007
$146,677 $318,701 $120,529 INVESTING ACTIVITIES Capital
expenditures ($97,002) ($59,951) ($225,607) ($155,180) Other 3,116
5,565 9,963 5,268 Proceeds from disposals of non-strategic assets
10,109 50,690 21,838 50,690 Acquisitions (42,367) 874 (48,996)
(9,359) Net Cash Used by Investing Activities ($126,144) ($2,822)
($242,802) ($108,581) FINANCING ACTIVITIES Cash dividends paid to
shareholders ($13,911) ($11,753) ($55,149) ($46,767) Proceeds from
exercise of stock options 9,053 3,884 39,793 17,628 Net (payments)
borrowings on credit facilities (79,337) (146,038) (40,938) 27,277
Net Cash (Used) Provided by Financing Activities ($84,195)
($153,907) ($56,294) ($1,862) Effect of exchange rate changes on
cash ($356) $8,148 ($5,155) $12,255 Increase (Decrease) in Cash and
Cash Equivalents 2,312 (1,904) 14,450 22,341 Cash and Cash
Equivalents at Beginning of Period $63,105 $52,871 $50,967 $28,626
Cash and Cash Equivalents at End of Period $65,417 $50,967 $65,417
$50,967 First Call Analyst: FCMN Contact:
http://www.newscom.com/cgi-bin/prnh/19991012/TKRLOGO
http://photoarchive.ap.org/ DATASOURCE: The Timken Company CONTACT:
Media, Denise Bowler, Manager-Global Corporate & Financial
Communications, +1-330-471-3485, or facsimile, +1-330-471-4118, or
, or Investors, Steve Tschiegg, Manager-Investor Relations,
+1-330-471-7446, or facsimile, +1-330-471-2797, or , both of The
Timken Company Web site: http://www.timken.com/
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