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.
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: 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.
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