6309 Monarch Park Place, Suite 203
Niwot, CO 80503, USA
Phone (303) 443-5060
Toll free (888) 742-5060
The Timken Company reported sales of $1.3 billion in the first quarter of 2005, up 19 percent from a year ago, driven by strong industrial demand. Timken had record net income of $58.2 million compared to $28.5 million in the first quarter a year ago.
"We continued to see broad strength in industrial markets, leading the Industrial and Steel Groups to deliver solid earnings this quarter. The performance in these areas more than offset the results of the Automotive Group, which reflected the relative weakness of the North American automotive industry," said James W. Griffith, president and CEO. "Over the past few years, we have taken actions to improve competitiveness in preparation for the upturn in global markets, and we are now benefiting from these actions. Overall, we are pleased with our first-quarter results and are continuing to focus on improving margins and performance."
Total debt at March 31, 2005 was $837.5 million, 39.1 percent of capital. Debt was higher than the 2004 year-end level of $779.3 million due to higher working capital requirements, resulting from increased sales volume and seasonality. During the quarter, Standard & Poors Ratings Services and Moody's Investors Service improved their outlook on Timken debt from negative to stable and also reaffirmed their ratings of BBB- and Ba1, respectively. The company expects its leverage to be lower at the end of this year, compared to last year.
Industrial Group Results
For the first quarter, the Industrial Group achieved record sales of $468.8 million, up 14 percent from $410.6 million last year. End market demand continued to be robust with the strongest growth in rail, mining, construction, agriculture and heavy industrial applications. The group is continuing to focus on customer service and expanding market opportunities. During the first quarter, for example, Timken expanded its industrial product line through a licensing and supply agreement with Federal-Mogul Corporation to sell National(R) industrial seal products in theU.S. and Canada under the Timken brand.
The Industrial Group's continued strong performance was reflected in earnings before interest and taxes (EBIT) of $47.0 million, up 31 percent from $35.8 million last year. Higher volume, price increases and improved productivity drove the EBIT increase, which was partially offset by increased costs for growth initiatives.
Automotive Group Results
Automotive Group sales were $420.3 million, up 1 percent from $415.6 million in the first quarter of last year. Continued strong demand in the heavy truck market was nearly offset by a production decline in North American light vehicles. Sales also benefited from new platforms launched in 2004, such as the Nissan Titan and Pathfinder Armada and Ford F-150.
The Automotive Group recorded an EBIT loss of $5.1 million in the first quarter of 2005, compared to EBIT of $18.3 million last year. The loss was due primarily to higher raw material costs, which could not be completely offset due to contractual commitments with certain customers. However, the company is making progress in recovery of raw material cost increases. The Automotive Group's results were also negatively impacted by lower volume in passenger car applications.
Steel Group Results
The Steel Group benefited from strong performance in both its alloy steel and specialty steel businesses. The group posted record sales of $467.4 million, up 51 percent from $309.3 million in the first quarter of last year. The increase was due to three factors: higher volume, with the strongest demand from aerospace, energy and general industrial customers; surcharges; and price increases. EBIT was a record $63.7 million, compared to $2.7 million last year. The group's improved profitability reflects increased volume, price increases and its success in recovering higher raw material costs through surcharges. In addition, high operating