CANTON, Ohio, April 27 /PRNewswire-FirstCall/ -- The Timken Company
(NYSE:TKR) today reported record first quarter sales of $1.35
billion, up 3 percent from the same period a year ago. First
quarter net income increased 13 percent to $65.9 million, or $0.70
per diluted share, from $58.2 million, or $0.63 per diluted share,
in the first quarter a year ago. (Logo:
http://www.newscom.com/cgi-bin/prnh/19991012/TKRLOGO) Excluding
special items, earnings per diluted share increased 11 percent to
$0.71 from $0.64 in last year's first quarter. Special items in the
first quarter included manufacturing restructuring and
rationalization charges that totaled $4.8 million of pretax
expense, compared to $1.1 million in the same period a year ago.
"Our strong first quarter results reflect the ongoing strength of
industrial markets and the performance of our steel business," said
James W. Griffith, president and chief executive officer. "We are
focused on accelerating profitable growth in industrial markets
while repositioning our automotive portfolio to improve its
earnings power." During the quarter, the company: - Set production
and shipment records in the Steel Group; - Continued major capacity
expansions for industrial products at several plant locations
around the world; and - Made further progress relating to
Automotive Group restructuring actions and manufacturing
performance improvement. Total debt at March 31, 2006 was $768.5
million, or 32.8 percent of capital. Debt was higher than the 2005
year-end level of $721.0 million due to seasonal working capital
requirements. Net debt at March 31, 2006 was $737.2 million, or
31.9 percent of capital. The company expects to end the year with
lower net debt and leverage than last year. Industrial Group
Results The Industrial Group had first quarter sales of $503.9
million, up 7 percent from $468.8 million for the same period last
year. Industrial end markets showed broad strength, with the
highest growth in the aerospace, distribution and heavy industry
sectors. The Industrial Group's earnings before interest and taxes
(EBIT) of $45.9 million were down 2 percent from $47.0 million in
the first quarter of 2005. EBIT performance was negatively affected
by higher manufacturing costs due to the ramp up of capacity
additions and higher raw material and energy costs. While operating
margins in the first quarter were lower than the same period a year
ago, the company expects Industrial Group margins for the full year
to improve over last year's levels. Automotive Group Results The
Automotive Group's first quarter sales of $421.0 million were flat
compared to the same period a year ago. Improved pricing was offset
by lower volume due to decreased North American light truck
production. The Automotive Group recorded a first quarter loss of
$3.1 million compared to a loss of $5.1 million for the same period
a year ago. The first quarter of 2006 was negatively impacted by a
$3.5 million increase in the company's accounts receivable reserve
for automotive industry credit exposure. The Automotive Group's
results benefited from improved pricing and manufacturing
performance. The company expects improved Automotive Group
performance throughout the rest of the year. Steel Group Results
Steel Group sales of $468.2 million were up slightly from record
sales in the first quarter a year ago. Increased pricing and higher
demand in aerospace, service center and energy markets were mostly
offset by lower automotive sales. First quarter EBIT was a record
$71.1 million, up 12 percent from $63.7 million for the same period
last year. Price increases, improved sales mix and increased
manufacturing productivity accounted for the strong performance.
The company expects the Steel Group profitability for the year to
approach last year's record performance. Outlook The company, which
recently increased 2006 earnings estimates, expects continued
strength in industrial markets, particularly in aerospace, energy,
mining and rail. Margin improvement is expected in the Automotive
and Industrial Groups, and Steel Group margin performance should
approach last year's record levels. Earnings per diluted share,
excluding special items, are estimated to be $0.75 to $0.80 for the
second quarter. The company recently increased its 2006 earnings
estimate to $2.80 to $2.95 per diluted share, excluding special
items. Conference Call Information The company will host a
conference call for investors and analysts today to discuss
financial results. Conference Call: Thursday, April 27, 2006 11
a.m. Eastern Daylight Time Live Dial-In: 706-634-0975 (Call in 10
minutes prior to be included) Replay Dial-In through May 4, 2006:
706-645-9291 Conference ID: #5676501 Live Web cast:
http://www.timken.com/investors About The Timken Company 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 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. 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, 2005, page 65. The Company undertakes no
obligation to update or revise any forward-looking statement. Media
Contact: Denise Bowler, Manager - Global Corporate & Financial
Communications, Telephone: (330) 471-3485, Facsimile: (330)
471-4118, Investor Contact: Steve Tschiegg, Manager - Investor
Relations, Telephone: (330) 471-7446, Facsimile: (330) 471-2797,
CONSOLIDATED STATEMENT OF INCOME AS REPORTED ADJUSTED (1)
(Thousands of U.S. dollars, except share data) (Unaudited) 1Q 06 1Q
05 1Q 06 1Q 05 Net sales $1,347,080 $1,304,540 $1,347,080
$1,304,540 Cost of products sold 1,056,658 1,031,566 1,056,658
1,031,566 Manufacturing rationalization/Reorgani- zation expenses -
cost of products sold 3,036 1,124 - - Gross Profit $287,386
$271,850 $290,422 $272,974 Selling, administrative & general
expenses (SG&A) 173,875 163,630 173,875 163,630 Manufacturing
rationalization/Reorgani- zation expenses - SG&A 377 409 - -
Impairment and restructuring 1,040 - - - Operating Income $112,094
$107,811 $116,547 $109,344 Other expense (4,771) (5,146) (4,771)
(5,146) Special items - other (expense) income (308) 386 - -
Earnings Before Interest and Taxes (EBIT)(2) $107,015 $103,051
$111,776 $104,198 Interest expense, net (11,602) (12,102) (11,602)
(12,102) Income Before Income Taxes $95,413 $90,949 $100,174
$92,096 Provision for income taxes 29,473 32,714 33,158 33,155 Net
Income $65,940 $58,235 $67,016 $58,941 Earnings Per Share $0.71
$0.64 $0.72 $0.65 Earnings Per Share- assuming dilution $0.70 $0.63
$0.71 $0.64 Average Shares Outstanding 92,942,082 90,804,936
92,942,082 90,804,936 Average Shares Outstanding-assuming dilution
94,010,483 91,871,363 94,010,483 91,871,363 (1) "Adjusted"
statements exclude the impact of impairment and restructuring,
manufacturing rationalization/reorganization and special charges
and credits for all periods shown. BUSINESS SEGMENTS (Thousands of
U.S. dollars) (Unaudited) 1Q 06 1Q 05 Industrial Group Net sales to
external customers $503,444 $468,449 Intersegment sales 435 398
Total net sales $503,879 $468,847 Adjusted earnings before interest
and taxes (EBIT) * (2) $45,885 $46,999 Adjusted EBIT Margin (2)
9.1% 10.0% Automotive Group Net sales to external customers
$420,984 $420,265 Adjusted (loss) earnings before interest and
taxes (EBIT) * (2) ($3,141) ($5,100) Adjusted EBIT (Loss) Margin
(2) -0.7% -1.2% Steel Group Net sales to external customers
$422,652 $415,826 Intersegment sales 45,530 51,605 Total net sales
$468,182 $467,431 Adjusted earnings before interest and taxes
(EBIT) * (2) $71,136 $63,725 Adjusted EBIT Margin (2) 15.2% 13.6%
*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) (Unaudited) Mar 31, 2006
Dec 31, 2005 Short-term debt $208,237 $159,279 Long-term debt
560,286 561,747 Total Debt 768,523 721,026 Less: cash and cash
equivalents (31,285) (65,417) Net Debt $737,238 $655,609
Shareholders' equity 1,572,222 1,497,067 Ratio of Total Debt to
Capital 32.8% 32.5% Ratio of Net Debt to Capital (Leverage) 31.9%
30.5% 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 the amount of 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/reorganization costs, Continued Dumping and Subsidy
Offset Act (CDSOA) receipts, and gain on the sale of non-strategic
assets. First Quarter First Quarter 06 05 (Thousands of U.S.
dollars, except share data) (Unaudited) $ EPS $ EPS assuming
assuming dilution dilution Net income $65,940 $0.70 $58,235 $0.63
Pre-tax special items: Manufacturing rationalization/reorganization
expenses - cost of products sold 3,036 0.03 1,124 0.01
Manufacturing rationalization/reorganization expenses - SG&A
377 - 409 - Impairment and restructuring 1,040 0.01 - - Special
items - other expense (income): 308 - (386) - Provision for income
taxes (3,685) ($0.03) (441) $0.00 Adjusted net income $67,016 $0.71
$58,941 $0.64 Reconciliation of Outlook Information - Expected
earnings per diluted share for the second quarter and the full year
exclude special items. Examples of such special items include
impairment and restructuring, manufacturing rationalization/
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 Mar 31
Dec 31 (Thousands of U.S. dollars) (Unaudited) 2006 2005 ASSETS
Cash & cash equivalents $31,285 $65,417 Accounts receivable
784,920 711,783 Inventories 1,045,580 998,368 Deferred income taxes
108,649 104,978 Other current assets 113,317 102,763 Total Current
Assets $2,083,751 $1,983,309 Property, plant & equipment
1,535,583 1,547,044 Goodwill 204,892 204,129 Other assets 259,585
259,252 Total Assets $4,083,811 $3,993,734 LIABILITIES Accounts
payable & other liabilities $524,228 $500,939 Short-term debt
208,237 159,279 Income Taxes 52,063 38,993 Accrued expenses 313,373
375,264 Total Current Liabilities $1,097,901 $1,074,475 Long-term
debt 560,286 561,747 Accrued pension cost 236,481 246,692 Accrued
postretirement benefits cost 518,047 513,771 Other non-current
liabilities 98,874 99,982 Total Liabilities $2,511,589 $2,496,667
SHAREHOLDERS' EQUITY 1,572,222 1,497,067 Total Liabilities and
Shareholders' Equity $4,083,811 $3,993,734 CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS For the three months ended Mar 31 Mar 31
(Thousands of U.S. dollars) (Unaudited) 2006 2005 Cash Provided
(Used) OPERATING ACTIVITIES Net Income $65,940 $58,235 Adjustments
to reconcile net income to net cash provided (used) by operating
activities: Depreciation and amortization 51,601 $54,100 Other
3,632 ($273) Changes in operating assets and liabilities: Accounts
receivable (70,316) ($82,242) Inventories (37,855) ($75,771) Other
assets 314 ($11,870) Accounts payable and accrued expenses (43,891)
$34,898 Foreign currency translation (gain) loss (6,101) 3,204 Net
Cash Provided (Used) by Operating Activities ($36,676) ($19,719)
INVESTING ACTIVITIES Capital expenditures ($41,073) ($32,363) Other
1,188 $288 Acquisitions - (6,556) Net Cash Used by Investing
Activities ($39,885) ($38,631) FINANCING ACTIVITIES Cash dividends
paid to shareholders ($14,026) ($13,686) Net proceeds from common
share activity 6,132 $10,075 Net (payments) borrowings on credit
facilities 49,175 65,462 Net Cash (Used) Provided by Financing
Activities $41,281 $61,851 Effect of exchange rate changes on cash
$1,148 ($2,700) Increase (Decrease) in Cash and Cash Equivalents
(34,132) 801 Cash and Cash Equivalents at Beginning of Period
$65,417 $50,967 Cash and Cash Equivalents at End of Period $31,285
$51,768 http://www.newscom.com/cgi-bin/prnh/19991012/TKRLOGO
http://photoarchive.ap.org/ DATASOURCE: The Timken Company CONTACT:
Denise Bowler, Manager - Global Corporate & Financial
Communications, +1-330-471-3485, or Fax, +1-330-471-4118, or , or
Steve Tschiegg, Manager - Investor Relations, +1-330-471-7446, or
Fax, +1-330-471-2797, or , both of The Timken Company Web site:
http://www.timken.com/
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