CANTON, Ohio, April 26, 2011 /PRNewswire/ -- The Timken Company
(NYSE: TKR) today reported sales of $1.3
billion in the first quarter of 2011, an increase of 37
percent over the same period a year ago. The sales increase
reflects stronger global demand across most of the company's end
markets as well as higher material surcharges and pricing.
(Logo: http://photos.prnewswire.com/prnh/20100210/TIMKENLOGO
)
The company generated record first-quarter income from
continuing operations of $112.7
million, or $1.13 per diluted
share, net of non-controlling interest, compared with $28.3 million, or $0.29 per share a year ago.
The improvement in first-quarter earnings reflects increased
demand and favorable mix, as well as surcharges and pricing.
Together, they more than offset year-over-year increases in
material costs and selling and administrative expenses.
"Timken's first-quarter results set the company on pace to
achieve record earnings this year, and demonstrate that our
strategic work over the past few years to transform the company is
serving us well," said James W. Griffith, Timken
president and chief executive officer. "We are driving
productivity, capacity improvements and new product introductions
to serve growing demand from our customers around the world."
At quarter-end, total debt was $522.4 million, or 20.2 percent of
capital. As of Mar. 31, 2011, the company had cash
of $637.6 million, or
$115.2 million in excess of
total debt, compared with a net cash position of $363.4 million as of
Dec. 31, 2010. The change reflects higher working
capital requirements of approximately $175 million to support
increased demand, as well as discretionary pension contributions of
$150 million, which were partially offset by strong
earnings.
Among recent developments, the company:
- Announced a $35 million investment to install an in-line
forge press at the Faircrest Steel Plant in Canton, Ohio;
- Accelerated capacity expansions in Asia, including its Chennai, India, plant and its plants in Wuxi
and Xiangtan, China; and
- Announced planned productivity improvements across its steel
plants to achieve a 120,000-ton capacity increase.
Mobile Industries Segment Results
In the first quarter, Mobile Industries' sales were
$443 million, up 21 percent from last year's
first-quarter sales of $367.5 million. Higher demand across all of
the segment's end markets drove the increase, led by the
off-highway and rail sectors.
EBIT for the segment was $68 million for the first quarter,
up from $39.6 million in the
same period a year ago. Improvements in volume and manufacturing
utilization accounted for most of the increase.
Process Industries Segment Results
Process Industries' first-quarter sales were $285 million,
up 38 percent from $206.6 million for the same period a year
ago. Increased global demand from industrial distribution, growth
in Asia and sales of new products
contributed to the improvement.
Process Industries achieved first-quarter EBIT of $66.7 million, up from $24.1 million a year ago. The increase
reflects higher volume as well as favorable pricing and mix.
Aerospace and Defense Segment Results
Aerospace and Defense had first-quarter sales of $79.1 million, down 14 percent from
$92.1 million for the same
period last year. The decline reflects reduced demand,
principally in the segment's defense-related business.
The segment's EBIT was $2.2 million, compared with $11.9 million a year ago. The decline
reflects lower sales volume and unfavorable manufacturing
utilization.
Steel Segment Results
Sales for the Steel segment, including inter-segment sales, were
$481.5 million in the first
quarter, an increase of 78 percent from $270.3 million for the same period last
year. Stronger demand, particularly in the oil and gas and
industrial market sectors, and surcharges contributed to the
improvement. Raw-material surcharges increased approximately
$75 million from the first quarter last year.
First-quarter EBIT was $60 million, up from $19.9 million for the same period a year
ago. EBIT performance benefited from stronger demand as well
as mix, pricing and surcharges, partially offset by increased
material costs.
Outlook
Timken is increasing its 2011 full-year sales outlook to be up
approximately 20 to 25 percent over 2010, driven primarily by
stronger demand in the Steel, Process Industries and Mobile
Industries segments. For its business segments, Timken expects:
- Mobile Industries segment sales to be up 10 to 15 percent,
with increased overall demand in the off-highway, rail and
heavy-truck sectors;
- Process Industries segment sales to be up 20 to
25 percent, driven by increased demand from global industrial
distribution, combined with sales of new products and continued
growth in Asia;
- Aerospace and Defense segment sales to be up 5 to
10 percent, reflecting improving demand in commercial
aerospace and health and positioning control sectors, while the
defense sector remains weak; and
- Steel segment sales to increase 35 to 40 percent from
2010, driven by improved demand across all market sectors, capacity
increases and surcharges.
The company is raising its 2011 full-year earnings estimate to a
range of $3.80 to $4.10 per diluted
share from its prior estimate of $3.30 to
$3.60 per share. The increase reflects the company's
strong first-quarter results and improved outlook for the balance
of the year. The company expects cash from operating activities to
be approximately $390 million, after $150 million of
discretionary pension contributions made in the first quarter. Free
cash flow is expected to be approximately $100 million after
capital expenditures of around $220 million and dividends of
approximately $70 million.
Conference Call Information
The company will host a conference call for investors and
analysts today to discuss financial results.
Conference Call:
|
Tuesday, Apr.
26, 2011
|
|
|
11:00 a.m. Eastern
Time
|
|
|
|
|
Live Dial-In:
|
800-344-0593 or
706-634-0975
|
|
|
(Call in 10 minutes prior to be
included.)
|
|
|
Conference ID:
15484513
|
|
|
|
|
|
Replay Dial-In through May 3,
2011:
|
|
|
800-642-1687 or
706-645-9291
|
|
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|
Live Webcast:
|
www.timken.com/investors
|
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|
About The Timken Company
The Timken Company (NYSE: TKR; www.timken.com) keeps the world
turning with innovative friction management and power transmission
products and services that are critical to help hard-working
machinery to perform more efficiently and reliably. With sales of
$4.1 billion in 2010 and operations
in 28 countries with approximately 20,000 people, Timken is Where
You Turn® 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 expectations
regarding the company's future financial performance, including
information 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: the finalization of the
company's financial statements for the first quarter of 2011; the
company's ability to respond to the changes in its end markets that
could affect demand for the company's products; unanticipated
changes in business relationships with customers or their purchases
from the company; changes in the financial health of the company's
customers, which may have an impact on the company's revenues,
earnings and impairment charges; fluctuations in raw material and
energy costs and their impact on the operation of the company's
surcharge mechanisms; the impact of the company's last-in,
first-out accounting; weakness in global economic conditions and
financial markets; changes in the expected costs associated with
product warranty claims; and the impact on operations of general
economic conditions, higher or lower raw material and energy costs,
and fluctuations in customer demand. These and additional factors
are described in greater detail in the company's Annual Report on
Form 10-K for the year ended Dec. 31,
2010, page 44. The company undertakes no obligation to
update or revise any forward-looking statement.
The Timken
Company
|
|
CONDENSED CONSOLIDATED STATEMENT
OF INCOME
|
|
(Unaudited)
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
(Dollars in millions, except
share data)
|
2011
|
2010
|
|
Net sales
|
$
1,254.1
|
$
913.7
|
|
Cost of products sold
|
920.8
|
691.0
|
|
|
Gross Profit
|
333.3
|
222.7
|
|
Selling, general &
administrative expenses (SG&A)
|
150.3
|
133.0
|
|
Impairment and
restructuring
|
1.1
|
5.5
|
|
|
Operating Income
|
181.9
|
84.2
|
|
Other expense, net
|
(2.4)
|
(0.6)
|
|
|
Earnings Before Interest and
Taxes (EBIT) (1)
|
179.5
|
83.6
|
|
Interest expense, net
|
(8.3)
|
(9.0)
|
|
|
Income From Continuing
Operations
|
171.2
|
74.6
|
|
Provision for income
taxes
|
57.4
|
45.9
|
|
|
Income From Continuing
Operations
|
113.8
|
28.7
|
|
Income from discontinued
operations, net of income taxes (2)
|
-
|
0.3
|
|
|
Net Income
|
113.8
|
29.0
|
|
|
|
Less: Net Income Attributable to
Noncontrolling Interest
|
1.1
|
0.4
|
|
|
Net Income Attributable to The
Timken Company
|
$
112.7
|
$
28.6
|
|
|
|
|
|
|
|
|
|
Net Income per Common Share
Attributable to The Timken Company Common
Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share
- Continuing Operations
|
$
1.15
|
$
0.29
|
|
|
Basic Earnings Per Share
- Discontinued
Operations
|
-
|
0.01
|
|
|
|
Earnings Per
Share
|
$
1.15
|
$
0.30
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share
- Continuing Operations
|
$
1.13
|
$
0.29
|
|
|
Diluted Earnings Per Share
- Discontinued
Operations
|
-
|
-
|
|
|
|
Earnings Per
Share
|
$
1.13
|
$
0.29
|
|
|
|
|
|
|
|
|
|
Average Shares
Outstanding
|
97,444,389
|
96,360,137
|
|
Average Shares Outstanding -
assuming dilution
|
98,895,826
|
96,861,401
|
|
|
|
|
|
|
|
|
BUSINESS SEGMENTS
(unaudited)
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
(Dollars in millions, except
share data)
|
|
2011
|
2010
|
|
|
|
|
|
|
Mobile Industries
Segment
|
|
|
|
|
Net sales to external
customers
|
|
$
442.9
|
$ 367.5
|
|
Intersegment sales
|
|
0.1
|
-
|
|
Total net sales
|
|
$
443.0
|
$ 367.5
|
|
Earnings before interest and
taxes (EBIT) (1)
|
|
$
68.0
|
$ 39.6
|
|
EBIT Margin (1)
|
|
15.3%
|
10.8%
|
|
|
|
|
|
|
Process Industries
Segment
|
|
|
|
|
Net sales to external
customers
|
|
$
284.1
|
$ 205.9
|
|
Intersegment sales
|
|
0.9
|
0.7
|
|
Total net sales
|
|
$
285.0
|
$ 206.6
|
|
Earnings before interest and
taxes (EBIT) (1)
|
|
$
66.7
|
$ 24.1
|
|
EBIT Margin (1)
|
|
23.4%
|
11.7%
|
|
|
|
|
|
|
Aerospace and Defense
Segment
|
|
|
|
|
Net sales to external
customers
|
|
$
79.1
|
$ 92.1
|
|
Earnings before interest and
taxes (EBIT) (1)
|
|
$
2.2
|
$ 11.9
|
|
EBIT Margin (1)
|
|
2.8%
|
12.9%
|
|
|
|
|
|
|
Steel Segment
|
|
|
|
|
Net sales to external
customers
|
|
$
448.0
|
$ 248.2
|
|
Intersegment sales
|
|
33.5
|
22.1
|
|
Total net sales
|
|
$
481.5
|
$ 270.3
|
|
Earnings (loss) before interest
and taxes (EBIT) (1)
|
|
$
60.0
|
$ 19.9
|
|
EBIT Margin (1)
|
|
12.5%
|
7.4%
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated corporate
expense
|
|
$
(18.0)
|
$ (14.4)
|
|
Intersegment eliminations income
(3)
|
|
$
0.6
|
$ 2.5
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
Net sales to external
customers
|
|
$ 1,254.1
|
$ 913.7
|
|
Earnings before interest and
taxes (EBIT) (1)
|
|
$
179.5
|
$ 83.6
|
|
EBIT Margin (1)
|
|
14.3%
|
9.1%
|
|
|
|
|
|
|
(1) EBIT is defined as operating
income plus other income (expense). EBIT Margin is EBIT as a
percentage of net sales. 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 the company's
business segments and EBIT disclosures are responsive to
investors.
|
|
|
|
(2) Discontinued Operations
relate to the sale of the Needle Roller Bearings (NRB) operations
to JTEKT Corporation on December 31, 2009.
|
|
|
|
(3) Intersegment eliminations
represent profit or loss between the Steel segment and the Mobile
Industries, Process Industries and Aerospace and Defense
segments.
|
|
|
|
|
|
Reconciliation of GAAP income
from continuing operations before income taxes
|
|
This reconciliation is provided
as additional relevant information about the company's performance.
Management believes Consolidated earnings before interest and
taxes (EBIT) are more representative of the company's performance
and therefore useful to investors. Management also believes
that it is appropriate to compare GAAP income from continuing
operations before income taxes to Consolidated EBIT.
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
|
|
2011
|
2010
|
|
(Dollars in millions)
(Unaudited)
|
|
|
|
|
Income from continuing
operations before income taxes
|
|
$ 171.2
|
$ 74.6
|
|
|
|
|
|
|
Pre-tax reconciling
items:
|
|
|
|
|
Interest expense
|
|
9.8
|
9.6
|
|
Interest income
|
|
(1.5)
|
(0.6)
|
|
Consolidated earnings before
interest and taxes (EBIT)
|
|
$ 179.5
|
$ 83.6
|
|
|
|
|
|
Reconciliation of Total Debt to
Net Debt and the Ratio of Net Debt to Capital:
|
|
(Dollars in millions)
(Unaudited)
|
|
March
31,
2011
|
|
December
31,
2010
|
|
Short-term debt
|
|
$
39.1
|
|
$
32.0
|
|
Long-term debt
|
|
483.3
|
|
481.7
|
|
Total Debt
|
|
522.4
|
|
513.7
|
|
Less: Cash and cash
equivalents
|
|
(637.6)
|
|
(877.1)
|
|
Net (Cash) Debt
|
|
$ (115.2)
|
|
$
(363.4)
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
$ 2,066.3
|
|
$
1,941.8
|
|
|
|
|
|
|
|
Ratio of Total Debt to
Capital
|
|
20.2%
|
|
20.9%
|
|
Ratio of Net (Cash) Debt to
Capital (Leverage)
|
|
(5.9%)
|
|
(23.0%)
|
|
|
|
|
|
|
|
This reconciliation is provided
as additional relevant information about The Timken Company's
financial position. Capital is defined as total debt plus
total shareholders' equity.
|
|
Management believes Net (Cash)
Debt is more indicative of Timken's financial position, due to the
amount of cash and cash equivalents.
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
Free cash flow:
|
|
2011
|
|
2010
|
|
(Dollars in millions)
(Unaudited)
|
|
|
|
|
|
Net cash used by operating
activities
|
|
$ (197.6)
|
|
$
(13.9)
|
|
Less: capital
expenditures
|
|
(20.1)
|
|
(14.0)
|
|
Less: cash dividends paid to
shareholders
|
|
(17.6)
|
|
(8.7)
|
|
Free cash flow
|
|
$ (235.3)
|
|
$
(36.6)
|
|
Plus: first quarter
discretionary pension contributions,
|
|
|
|
|
|
|
net of the tax benefit
(4)
|
|
98.0
|
|
63.2
|
|
Free cash flow less first
quarter discretionary contributions
|
|
$ (137.3)
|
|
$
26.6
|
|
|
|
Management believes that free
cash flow and free cash flow less discretionary pension and
postretirement contributions are useful to investors because they
are meaningful indicators of cash generated from operating
activities available for the execution of its business
strategy.
|
|
|
|
(4) The discretionary
pension contributions for the first quarter of 2011 was $151.4
million, net of the tax benefit of $53.4 million. The
discretionary pension contributions for the first quarter of 2010
was $100 million, net of the tax benefit of $36.8 million.
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE
SHEET
|
March
31,
|
December
31,
|
|
(Dollars in millions)
(Unaudited)
|
2011
|
2010
|
|
|
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
637.6
|
$
877.1
|
|
|
Accounts receivable
|
672.5
|
516.6
|
|
|
Inventories, net
|
917.5
|
828.5
|
|
|
Other current assets
|
189.8
|
177.0
|
|
|
Total Current
Assets
|
2,417.4
|
2,399.2
|
|
|
Property, Plant and Equipment -
Net
|
1,250.9
|
1,267.7
|
|
|
Goodwill
|
225.9
|
224.4
|
|
|
Other assets
|
286.4
|
289.1
|
|
Total Assets
|
$ 4,180.6
|
$
4,180.4
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Accounts payable
|
$
320.9
|
$
263.5
|
|
|
Short-term debt
|
39.1
|
32.0
|
|
|
Income taxes
|
48.0
|
14.7
|
|
|
Accrued expenses
|
335.2
|
409.7
|
|
|
|
Total Current
Liabilities
|
743.2
|
719.9
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
483.3
|
481.7
|
|
|
Accrued pension cost
|
241.0
|
394.5
|
|
|
Accrued postretirement benefits
cost
|
529.4
|
531.2
|
|
|
Other non-current
liabilities
|
117.4
|
111.3
|
|
|
|
Total Liabilities
|
2,114.3
|
2,238.6
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
The Timken Company shareholders'
equity
|
2,048.1
|
1,925.0
|
|
|
Noncontrolling
Interest
|
18.2
|
16.8
|
|
|
|
Total Equity
|
2,066.3
|
1,941.8
|
|
Total Liabilities and
Equity
|
$ 4,180.6
|
$
4,180.4
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENT
OF CASH FLOWS
|
|
(Dollars in millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
March 31,
|
|
|
|
|
|
|
|
2011
|
2010
|
|
Cash Provided
(Used)
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
Net income attributable to The
Timken Company
|
|
$ 112.7
|
$ 28.6
|
|
|
Income from discontinued
operations
|
|
-
|
(0.3)
|
|
|
Net income attributable to
noncontrolling interest
|
|
1.1
|
0.4
|
|
|
Adjustments to reconcile net
income to net cash
|
|
|
|
|
|
|
provided (used) by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
47.5
|
47.7
|
|
|
|
|
Impairment charges
|
|
1.8
|
-
|
|
|
|
|
Pension and other postretirement
expense
|
|
22.3
|
25.2
|
|
|
|
|
Pension and other postretirement
benefit contributions and payments
|
|
(166.0)
|
(118.7)
|
|
|
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(149.6)
|
(82.1)
|
|
|
|
|
|
Inventories
|
|
(80.4)
|
(22.5)
|
|
|
|
|
|
Accounts payable
|
|
54.8
|
66.5
|
|
|
|
|
|
Accrued expenses
|
|
(81.0)
|
(7.8)
|
|
|
|
|
|
Income taxes
|
|
41.3
|
44.2
|
|
|
|
|
|
Other - net
|
|
(2.1)
|
4.6
|
|
|
Net Cash Used by Operating
Activities - Continuing Operations
|
|
(197.6)
|
(14.2)
|
|
|
Net Cash Provided by Operating
Activities - Discontinued Operations
|
|
-
|
0.3
|
|
|
|
Net Cash Used By Operating
Activities
|
|
(197.6)
|
(13.9)
|
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
Capital expenditures
|
|
(20.1)
|
(14.0)
|
|
|
Investments - net
|
|
(13.3)
|
-
|
|
|
Other
|
|
1.2
|
(1.1)
|
|
|
|
Net Cash Used by Investing
Activities
|
|
(32.2)
|
(15.1)
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
Cash dividends paid to
shareholders
|
|
(17.6)
|
(8.7)
|
|
|
Purchase of treasury shares,
net
|
|
(25.3)
|
(14.0)
|
|
|
Net proceeds from common share
activity
|
|
15.2
|
8.3
|
|
|
Net proceeds from credit
facilities
|
|
8.3
|
3.7
|
|
|
Other
|
|
(4.5)
|
-
|
|
|
|
Net Cash Used by Financing
Activities
|
|
(23.9)
|
(10.7)
|
|
Effect of exchange rate changes
on cash
|
|
14.2
|
(6.5)
|
|
|
|
Decrease In Cash and Cash
Equivalents
|
|
(239.5)
|
(46.2)
|
|
Cash and cash equivalents at
beginning of period
|
|
877.1
|
755.5
|
|
|
|
Cash and Cash Equivalents at End
of Period
|
|
$ 637.6
|
$ 709.3
|
|
|
|
|
|
|
|
|
|
Contacts - Media: Lorrie Paul
Crum, Ofc: 330.471.3514; Mob: 330.224.5021.
lorrie.crum@timken.com;
Investors: Steve Tschiegg, Ofc:
330.471.7446. steve.tschiegg@timken.com, The Timken Company.
SOURCE The Timken Company