Exhibit 99.1
NEWS RELEASE
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MEDIA CONTACT: WORLDWIDE LEADER IN BEARINGS AND STEEL
Carol A. Titus
Communications Manager
(330) 471-3757
www.timken.com/media
INVESTOR CONTACT:
Kevin R. Beck
Manager - Investor Relations
(330) 471-7181
Earnings in line with guidance
TIMKEN ANNOUNCES FIRST QUARTER RESULTS
Canton, OH - April 28, 2003 -- The Timken Company today announced first quarter
results that include six weeks of ownership of The Torrington Company, which
Timken acquired on February 18, 2003.
For the quarter ended March 31, the company reported sales of $838 million,
up 36% from $616 million in the year-ago period. The acquisition, strong
automotive demand, and the positive impact of currency exchange rates
contributed to the sales increase.
Net income for the quarter was $11.3 million or $0.15 per diluted share,
which included net expense for special items of $0.04 per diluted share. Those
special items are pretax implementation charges of $9.1 million for the
Torrington acquisition, which were partially offset by a $5.4 million pretax
gain on the sale of land. Excluding these items, adjusted net income was $14.0
million or $0.19 per diluted share.
In first quarter 2002, there was a net loss of $3.5 million or ($0.06) per
diluted share. This includes a $12.7 million after tax charge for goodwill
impairment for FAS 142. This also included
THE TIMKEN COMPANY Carol A. Titus Kevin R. Beck
Mail Code: GNW-37 Mail Code: GNE-26
1835 Dueber Avenue, S.W. 1835 Dueber Avenue, S.W.
P.O. Box 6932 P.O. Box 6928
Canton, OH 44706-0932 U.S.A. Canton, OH 44706-0928 U.S.A.
Telephone: (330) 471-3757 Telephone: (330) 471-7181
Facsimile: (330) 471-4118 Facsimile: (330) 471-3810
e-mail: titusc@timken.com E-mail: beckk@timken.com
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special items of $8.1 million of pretax restructuring and reorganization
expenses related to our manufacturing strategy initiative. Excluding these
items, the adjusted net income for 2002's first quarter, was $14.0 million or
$0.23 per diluted share. The special charges for 2003 are entirely related to
the Torrington acquisition and do not include any costs related to Timken's
manufacturing strategy initiative.
The company's results were impacted by increases in operating expenses that
were cited earlier this year - soaring scrap and energy costs and higher pension
and benefits expenses, as well as continuing sluggish industrial markets and
inefficiencies related to the manufacturing restructuring in the Automotive
Group.
Excluding the effects of the Torrington acquisition, Timken's sales were up
12% and adjusted earnings per share were $0.19. This is in line with the
guidance of $0.17 to $0.21 per share provided by the company earlier this year.
"The integration of Torrington into Timken is proceeding as planned," said
James W. Griffith, president and CEO. "With our sales forces consolidated, we
soon expect to win our first major order that combines Timken and Torrington
technology. We remain on track to achieve our expectations of having the
Torrington acquisition be accretive to our full-year earnings by at least 10
percent. We continue to rationalize manufacturing operations to construct a
global network of focused factories, with emphasis on increasing production in
lower-cost locations. At the same time, we continue to push for more
productivity increases in all of our facilities."
Timken's integration plan is on target to achieve its expectations of
annualized pretax savings of $20 million by the end of 2003, increasing to $80
million by the end of 2005. Even before the acquisition closed, integration
teams and their responsibilities were defined, and work is now well under way.
In just the first 60 days following the acquisition:
THE TIMKEN COMPANY
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- - The combined management team is in place.
- - Sales forces have been consolidated.
- - The Darlington, England industrial bearing plant has begun the eight to
12-month process of closing.
- - Two distribution centers in England have been consolidated.
- - In a series of meetings, the company brought together suppliers of Timken
and Torrington to begin the process of achieving savings from the combined
$1.6 billion of annual purchases.
In connection with the $840 million purchase of Torrington, Timken
increased equity by $320 million with 22 million shares issued to finance the
acquisition. Timken shares outstanding now total 85.5 million. The company
financed the remaining $520 million with debt. At the end of the first quarter,
Timken had total assets of $3.9 billion, an increase of $1.2 billion from the
end of 2002. This increase was due primarily to the Torrington acquisition and
included approximately $190 million of goodwill, based on preliminary estimates.
While integrating Torrington, Timken reorganized its Automotive and
Industrial Groups. The company's automotive aftermarket business is part of the
Industrial Group, which is now managing the combined distribution operations.
The company's sales to emerging markets - principally in central and eastern
Europe and Asia - previously were reported as part of the Industrial Group. Now,
emerging market sales to automotive original equipment manufacturers are
included in the Automotive Group. The segment results that follow reflect the
reorganization for this and prior periods and exclude special charges.
THE TIMKEN COMPANY
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AUTOMOTIVE GROUP RESULTS
For the first quarter, Automotive Group sales were $298.1 million, up
63% from $183.4 million in the year ago period. EBIT (earnings before interest
and taxes) was $8.9 million compared with $7.5 million a year earlier. Excluding
Torrington, sales were $211.2 million and EBIT was $3.3 million.
Automotive Group results continue to be negatively impacted by
inefficiencies related to the manufacturing restructuring by both Timken and
Torrington. Pricing pressures and higher pension and benefit expenses also
affected results for the quarter. Contributing favorably to Automotive Group
results were the Torrington acquisition, new product introductions and currency
exchange rates.
The Torrington acquisition significantly strengthened Timken's
Automotive Group. Torrington's sophisticated needle bearing technology
complements Timken's leading tapered roller bearing technology. The combination
provides many opportunities for innovation, particularly in power trains.
INDUSTRIAL GROUP RESULTS
For the first quarter, Industrial Group sales were $305.0 million, up
31% from $233.2 million last year. EBIT was $17.8 million compared to $11.1
million in 2002's first quarter. Excluding Torrington, sales were $243.0 million
and EBIT was $17.3 million.
Industrial Group results were favorably impacted by improved
performance in the distribution business, favorable currency exchange rates and
benefits of the company's manufacturing strategy initiative. Partially
offsetting these benefits were continued weakness in the industrial markets and
increased costs for energy, pension and benefits.
THE TIMKEN COMPANY
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The Torrington acquisition significantly broadens the group's product
line and is already leading to increased sales opportunities. The group also has
begun the rationalization of distribution and manufacturing facilities, which is
key to achieving the necessary synergies.
STEEL GROUP RESULTS
For the first quarter, Steel Group sales were $275.8 million, up 16%
from $238.4 million a year ago. EBIT was $6.5 million, down from $12.1 million
in the year-ago period. This includes intersegment sales of approximately $40
million for both periods. All market segments, except aerospace, were stronger
than the weak first quarter a year ago. Performance benefited from modest price
increases on certain product lines and from significantly improved labor
productivity. More than offsetting those accomplishments were significant
increases in the costs of raw materials and energy and higher costs for pensions
and benefits. Surcharges and price increases will partially cover the increases
in raw material and energy costs and will begin to have a positive impact in the
second quarter.
OUTLOOK
The Timken Company expects net income per diluted share for the full year
to be between $1.20 to $1.40, excluding special items. For the second quarter,
the company expects net income per diluted share to be between $0.20 to $0.28,
excluding special items. This guidance assumes continued strength in automotive
markets and some improvement in industrial markets. It also assumes some
reduction in scrap and energy costs.
The Timken Company (NYSE: TKR) (www.timken.com) is a leading international
manufacturer of highly engineered bearings, alloy and specialty steels and
components, and a provider of related
THE TIMKEN COMPANY
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products and services. Timken employs 28,000 people in operations in 29
countries. In 2002, the combined Timken and Torrington companies had sales of
approximately $3.8 billion. The company will conduct a teleconference on April
29 at 10 a.m. Eastern Time on its first quarter results. Dial in 706-634-0975
(reference Timken) or link to www.timken.com for the Web cast. Replay will be
available by calling 706-645-9291 at 1 p.m. Eastern Time, April 29 through May 9
at 11:59 p.m. Access Code is 9561735.
Certain statements in this news release (including statements regarding the
Company's forecasts, beliefs 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: uncertainties in both timing
and amount, if any, of actual benefits realized through the integration of
Torrington with Timken's operations and the timing and amount of the resources
required to achieve those results; risks associated with diversion of
management's attention from operations during the integration process; risks
associated with the greater level of debt associated with the acquisition; and
the impact on operations of general economic conditions, higher scrap and energy
costs, the cyclicality of the Company's business, customer demand and the
Company's ability to achieve the benefits of its ongoing programs. These and
additional factors are described in greater detail in the Company's Prospectus
Supplement dated February 11, 2003 relating to the offering of the Company's
common stock, in the Company's Annual Report on Form 10-K for the year ended
December 31, 2002, and in the Company's 2002 Annual Report, page 47. The Company
undertakes no obligation to update or revise any forward-looking statement.
#####
CONSOLIDATED STATEMENT OF OPERATIONS AS REPORTED ADJUSTED (1)
(THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA) 1Q 03 1Q 02 1Q 03 1Q 02
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Net sales $838,007 $615,757 $838,007 $615,757
Cost of products sold 704,053 494,816 704,053 494,816
Reorganization expenses - cost of products sold 3,688 2,299 - -
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GROSS PROFIT $130,266 $118,642 $133,954 $120,941
Selling, administrative & general expenses (SG&A) 99,896 83,248 99,896 83,248
Reorganization/Implementation expenses - SG&A 5,375 2,744 - -
Impairment and restructuring - 3,057 - -
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OPERATING INCOME $24,995 $29,593 $34,058 $37,693
Gain on sale of land 5,447 - - -
Other expense (1,593) (7,468) (1,593) (7,468)
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EARNINGS BEFORE INTEREST AND TAXES (EBIT) (2) $28,849 $22,125 $32,465 $30,225
Interest expense (10,161) (8,035) (10,161) (8,035)
Interest income 210 380 210 380
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INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE $18,898 $14,470 $22,514 $22,570
Provision for income taxes 7,559 5,282 8,555 8,582
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INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE $11,339 $9,188 $13,959 $13,988
Cumulative effect of change in accounting principle (net of
income tax benefit of $7,786) - (12,702) - -
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NET INCOME (LOSS) $11,339 ($3,514) $13,959 $13,988
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EARNINGS PER SHARE:
INCOME BEFORE ACCOUNTING CHANGE $0.15 $0.15 $0.19 $0.23
CUMULATIVE EFFECT OF ACCOUNTING CHANGE - ($0.21) - -
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EARNINGS PER SHARE $0.15 ($0.06) $0.19 $0.23
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EARNINGS PER SHARE-ASSUMING DILUTION:
INCOME BEFORE ACCOUNTING CHANGE $0.15 $0.15 $0.19 $0.23
CUMULATIVE EFFECT OF ACCOUNTING CHANGE - ($0.21) - -
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EARNINGS PER SHARE-ASSUMING DILUTION $0.15 ($0.06) $0.19 $0.23
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Average Shares Outstanding 74,444,132 59,914,680 74,444,132 59,914,680
Average Shares Outstanding-assuming dilution 74,613,170 60,395,183 74,613,170 60,395,183
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BUSINESS SEGMENTS
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(THOUSANDS OF U.S. DOLLARS) 1Q 03 1Q 02
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AUTOMOTIVE GROUP (3)
Net sales to external customers $298,129 $183,398
Earnings before interest and taxes (EBIT) * (2) $8,868 $7,459
EBIT Margin 3.0% 4.1%
INDUSTRIAL GROUP (3)
Net sales to external customers $304,963 $233,238
Earnings before interest and taxes (EBIT) * (2) $17,810 $11,080
EBIT Margin 5.8% 4.8%
STEEL GROUP
Net sales to external customers $234,915 $199,121
Intersegment sales 40,864 39,273
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Total net sales $275,779 $238,394
Earnings before interest and taxes (EBIT) * (2) $6,530 $12,119
EBIT Margin 2.4% 5.1%
* Automotive, Industrial and Steel EBIT do not equal Consolidated EBIT due to
intersegment adjustments which are eliminated upon consolidation.
(1) "Adjusted" statements exclude the impact of restructuring and reorganization
charges for all quarters shown, gain on sale of land in 2003 and cumulative
effect of change in accounting principle recognized in 2002.
(2) EBIT is defined as operating income (loss) 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. Management
believes that reporting EBIT and EBIT Margin best reflect the performance of our
business segments, and EBIT disclosures are responsive to investors.
(3) Automotive Group and Industrial Group 2002 segmented results have been
adjusted for 2003 reclassification of Automotive Aftermarket and Emerging
Markets' results.
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 that it is appropriate to compare
GAAP net income to adjusted net income in light of special items related to
restructuring and reorganization/implementation costs, a one-time gain on sale
of land and cumulative effect of change in accounting principle.
1Q 03 1Q02
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(Thousands of U.S. dollars, except share data) $ EPS $ EPS
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Net income (loss) $11,339 $0.15 ($3,514) ($0.06)
Reorganization/implementation expenses - cost of products sold 3,688 0.05 2,299 0.04
Reorganization/implementation expenses - SG&A 5,375 0.07 2,744 0.04
Impairment and restructuring - - 3,057 0.05
Gain on sale of land (5,447) (0.07) - -
Tax effect of special items (996) (0.01) (3,300) (0.05)
Cumulative effect of change in accounting principle - - 12,702 0.21
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Adjusted net income $13,959 $0.19 $13,988 $0.23
Impact of Torrington acquisition (1) (1,760) $0.00
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Adjusted net income, excluding Torrington acquisition $12,199 $0.19
Average shares outstanding - assuming dilution 74,613,170
Impact of Torrington acquisition (1) (11,023,822)
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Adjusted average shares outstanding - assuming dilution 63,589,348
(1) Impact of Torrington acquisition includes acquisition earnings and
financing.
RECONCILIATION OF 1Q 03 TIMKEN COMPANY AND IMPACT OF TORRINGTON ACQUISITION FOR BUSINESS SEGMENTS
1Q 03 ADJUSTED (2)
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IMPACT OF
TORRINGTON TIMKEN
TIMKEN COMPANY ACQUISTIMKEN STANDALONE
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AUTOMOTIVE GROUP
Net sales to external customers $298,129 $86,974 $211,155
EBIT $8,868 $5,547 $3,321
EBIT Margin 3.0% 6.4% 1.6%
INDUSTRIAL GROUP
Net sales to external customers $304,963 $62,000 $242,963
EBIT $17,810 $543 $17,267
EBIT Margin 5.8% 0.9% 7.1%
STEEL GROUP
Net sales to external customers $234,915 - $234,915
Intersegment sales 40,864 - 40,864
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Total net sales $275,779 - $275,779
EBIT $6,530 - $6,530
EBIT Margin 2.4% - 2.4%
CONSOLIDATED
Net sales to external customers $838,007 $148,974 $689,033
Total EBIT for reportable segments $33,208 6,090 $27,118
Intersegment adjustments (743) - (743)
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Total EBIT $32,465 6,090 $26,375
EBIT Margin 3.9% 4.1% 3.8%
(2) "Adjusted" statements exclude the impact of restructuring and
reorganization/implementation charges for all quarters shown and gain on sale of
land in 2003.
RECONCILIATION OF OUTLOOK INFORMATION
Expected net income per diluted share for the full year and the second quarter
exclude special items. Examples of such special items include restructuring,
reorganization and implementation costs and payments under the Continued Dumping
and Subsidy Offset Act (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 payments under the CDSOA in 2003 and if so, in what
amount. If we do receive any CDSOA payments, they will be received in the fourth
quarter.
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CONSOLIDATED STATEMENT OF CASH FLOWS For the three months ended
MAR 31 Mar 31
(THOUSANDS OF U.S. DOLLARS) 2003 2002
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CASH PROVIDED (USED)
OPERATING ACTIVITIES
Net Income (Loss) $11,339 ($3,514)
Adjustments to reconcile net income to net cash provided
by operating activities:
Cumulative effect of accounting change - 12,702
Depreciation and amortization 41,265 36,762
Gain on disposals of property, plant and equipment (5,734) (2,875)
(Credit) Provision for deferred income taxes (2,100) 9,272
Stock issued in lieu of cash to employee benefit plans 714 1,031
Non-cash impact of impairment and restructuring charges - (6,671)
Changes in operating assets and liabilities:
Accounts receivable (54,614) (49,862)
Inventories (22,463) (17,128)
Other assets (10,200) 2,637
Accounts payable and accrued expenses 53,973 (1,510)
Foreign currency translation (1,859) (465)
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $10,321 ($19,621)
INVESTING ACTIVITIES
Capital expenditures ($22,998) ($16,504)
Proceeds from disposals of property, plant and equipment 9,895 1,441
Other net changes in property, plant and equipment (2,064) 7,499
Acquisitions (858,952) (6,751)
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NET CASH USED BY INVESTING ACTIVITIES ($874,119) ($14,315)
FINANCING ACTIVITIES
Cash dividends paid to shareholders ($8,252) ($7,789)
Issuance of common stock for acquisition 320,220 -
Accounts receivable securitization financing borrowings 125,000 -
Payments on long-term debt (124) (1,727)
Proceeds from issuance of long-term debt 424,553 -
Short-term debt activity - net (36,939) 27,498
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NET CASH PROVIDED BY FINANCING ACTIVITIES $824,458 $17,982
Effect of exchange rate changes on cash 577 (388)
DECREASE IN CASH AND CASH EQUIVALENTS ($38,763) ($16,342)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 82,050 33,392
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $43,287 $17,050
==================================
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CONSOLIDATED BALANCE SHEET MAR 31 Dec 31
(THOUSANDS OF U.S. DOLLARS) 2003 2002
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ASSETS
Cash & cash equivalents $43,287 $82,050
Accounts receivable 603,352 361,316
Deferred income taxes 35,351 36,003
Inventories 738,127 488,923
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TOTAL CURRENT ASSETS $1,420,117 $968,292
Property, plant & equipment 1,557,101 1,226,244
Goodwill 320,868 129,943
Other assets 579,801 423,877
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TOTAL ASSETS $3,877,887 $2,748,356
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LIABILITIES
Accounts payable & other liabilities $389,336 $296,543
Short-term debt & commercial paper 218,632 111,134
Accrued expenses 278,983 226,393
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TOTAL CURRENT LIABILITIES $886,951 $634,070
Long-term debt 778,066 350,085
Accrued pension cost 753,834 723,188
Accrued postretirement benefits 493,302 411,304
Other non-current liabilities 24,392 20,623
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TOTAL LIABILITIES $2,936,545 $2,139,270
SHAREHOLDERS' EQUITY 941,342 609,086
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,877,887 $2,748,356
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