Exhibit 99.1
NEWS RELEASE
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MEDIA CONTACT: WORLDWIDE LEADER IN BEARINGS AND STEEL
Denise L. Bowler
Manager - Communictions Planning and Integration
(330) 471-3485
www.timken.com/media
INVESTOR CONTACT:
Kevin R. Beck
Manager - Investor Relations
(330) 471-7181
RECORD QUARTERLY SALES OF $1.1 BILLION
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STRONG EARNINGS IMPROVEMENT OVER LAST YEAR'S FIRST QUARTER
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TIMKEN ANNOUNCES RECORD FIRST QUARTER SALES
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Canton, OH - April 22, 2004 - The Timken Company (NYSE:TKR) today
reported record sales of $1.1 billion for the first quarter of 2004, an increase
of 31 percent from the prior year. Adjusted to include pro forma results for
Torrington for the full first quarter of 2003, sales were up 11 percent. Sales
were higher across all three business groups, Automotive, Industrial and Steel,
compared to the first quarter of 2003. Timken completed its $840 million
strategic acquisition of The Torrington Company on February 18, 2003.
Timken reported $0.32 per diluted share, more than double the $0.15 per
diluted share from a year ago. Excluding special items, adjusted earnings per
share were $0.31, or 63 percent higher than the $0.19 last year. This compared
favorably to previous company estimates of $0.25 to $0.30 per diluted share,
excluding special items. Special items in 2004 totaled $0.7 million of pretax
income, with $7.7 million of income received under the Continued Dumping and
Subsidy Offset Act
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Denise L. Bowler 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) 471-3485 Telephone: (330) 471-7181
Facsimile: (330) 471-4118 Facsimile: (330) 471-2797
e-mail: denise.bowler@timken.com E-mail: kevin.beck@timken.com
THE TIMKEN COMPANY
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(CDSOA) virtually offset by integration expenses related to Torrington. In the
first quarter of 2003, special items were $3.6 million of pretax expense.
"We have seen a broad-based improvement across our three business
groups," said James W. Griffith, president and CEO. "Improving markets, coupled
with actions taken in 2003 to strengthen the businesses, are hitting the bottom
line."
Stronger demand in industrial markets benefited both the Industrial and
Steel Groups. "We are in a good position to leverage this economic upturn," Mr.
Griffith said. "Changes to surcharge mechanisms were effective in partially
offsetting unprecedented increases in scrap steel prices and allowed the Steel
Group to return to profitability. Automotive Group margins were better than last
year, reflecting stronger volume and manufacturing improvements."
"We are reporting record sales, but are still well below record earning
levels," said Mr. Griffith. "We are encouraged by the growing strength of the
global economy, but still face an increasingly competitive environment, and we
will continue to take aggressive action to improve performance."
For the quarter, the company achieved pretax integration savings of $17
million, driven by leveraging the combined purchasing of Torrington and Timken.
The company is on track to achieve its target of $80 million of pretax
integration savings during 2005.
Total debt at March 31, 2004 was $812.3 million, 42.3 percent of
capital. Debt was higher than the 2003 year-end level of $734.6 million due to
cash contributions to domestic pension plans and seasonal working capital. The
company expects its leverage to be lower at the end of this year compared to
last year.
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THE TIMKEN COMPANY
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AUTOMOTIVE GROUP RESULTS
For the first quarter, Automotive Group sales were $415.6 million, up
39 percent from $298.1 million in the first quarter of last year. Including pro
forma results for Torrington, sales were up 8 percent.
Strong demand in North American light truck and medium/heavy truck
sectors drove the sales increase. Light truck production was up approximately 3
percent, due to recent product introductions, while medium/heavy truck
production was up approximately 36 percent. Partially offsetting this increase
was a 6 percent decrease in passenger car production.
Earnings before interest and taxes (EBIT) were $18.3 million, compared
to $8.9 million last year. EBIT margin of 4.4 percent improved from 3.0 percent
a year ago. The EBIT improvement was the result of leveraging strong sales,
combined with manufacturing integration cost savings. Cost-saving actions
included a workforce reduction in excess of 750 positions during the second half
of 2003, improved European operations and integration activities.
INDUSTRIAL GROUP RESULTS
For the first quarter, Industrial Group sales were $410.6 million, up
35 percent from $305.2 million last year. Including pro forma results for
Torrington, sales were up 11 percent. Most market segments saw double-digit
sales percentage increases over last year's levels. Distribution sales showed
some improvement due to strengthening end markets, while distributors reduced
inventory levels of some of the company's products.
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THE TIMKEN COMPANY
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EBIT was $35.8 million, compared to $17.8 million last year. EBIT
margin of 8.7 percent improved from 5.8 percent a year ago. The increase was
attributed to improved volume, integration and other cost reduction initiatives.
STEEL GROUP RESULTS
For the first quarter, Steel Group sales were $309.3 million, up 12
percent from $275.8 million last year. Strong demand from both automotive and
industrial customers drove record shipments. In addition, top-line growth
benefited from surcharges to offset rising raw material costs.
EBIT was $2.7 million, compared to $6.5 million last year. EBIT margin
of 0.9 percent was below the 2.4 percent EBIT margin a year ago. The group had
record sales for the quarter along with record high raw material costs. A
significant portion of these costs is being recovered with recent surcharge
provisions and price increases. This was the first profitable quarter since the
second quarter of 2003. Productivity improvements and volume also contributed
positively.
OUTLOOK
The company continues to expect improved performance in 2004 across all
three segments. The company expects earnings per diluted share, excluding
special items, to be $0.27 to $0.32 for the second quarter and $1.00 to $1.10
for the year.
North American light vehicle production is expected to be up slightly
and medium/heavy truck production should continue to be very strong relative to
last year. Automotive Group profitability is expected to continue to be better
than 2003, as the benefits of cost reduction efforts impact performance. The
company continues to see growing demand in global industrial markets, which
should favorably impact results. Steel Group profitability is expected to be
challenged by
THE TIMKEN COMPANY
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continued high raw material and energy costs, but improved volume coupled with
surcharge mechanisms and price increases should allow the Group to remain
profitable for the year.
CONFERENCE CALL INFORMATION
The company will host a conference call for investors and analysts today to
discuss financial results.
Conference Call: Thursday, April 22, 2004
10 a.m. Eastern Time
All Callers: Live Dial-In: (706) 634-0975
(Call in 10 minutes prior to be included)
Replay Dial-In: (706) 645-9291
Replay Passcode: 6388595
Live Web cast: www.timken.com
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The Timken Company (NYSE: TKR); (www.timken.com) is a leading global
manufacturer of highly engineered bearings and alloy steels and a provider of
related products and services with operations in 27 countries. A Fortune 500
company, Timken recorded 2003 sales of $3.8 billion and employed approximately
26,000 at year-end.
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. In particular, the statements contained in the
paragraph 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:
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; and the impact on
operations of general economic conditions, higher raw material and energy costs,
the cyclicality of
THE TIMKEN COMPANY
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the Company's business, fluctuations in customer demand and the Company's
ability to achieve the benefits of its ongoing programs, including the
implementation of its manufacturing transformation and rationalization
activities. These and additional factors are described in greater detail in the
Company's Prospectus Supplements dated February 11, 2003 and October 15, 2003
relating to the offerings of the Company's common stock, in the Company's Annual
Report on Form 10-K for the year ended December 31, 2003, and in the Company's
2003 Annual Report, page 58. The Company undertakes no obligation to update or
revise any forward-looking statement.
#####
THE TIMKEN COMPANY
CONSOLIDATED STATEMENT OF INCOME AS REPORTED ADJUSTED (1)
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(THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA) 1Q 04 1Q 03 1Q 04 1Q 03
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Net sales $1,098,785 $838,007 $1,098,785 $838,007
Cost of products sold (2) 894,886 696,557 894,886 696,557
Integration/Reorganization expenses - cost of products sold 1,376 3,688 - -
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GROSS PROFIT $202,523 $137,762 $203,899 $141,450
Selling, administrative & general expenses (SG&A) (2) 138,715 107,392 138,715 107,392
Integration/Reorganization expenses - SG&A 3,988 5,375 - -
Impairment and restructuring 730 - - -
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OPERATING INCOME $59,090 $24,995 $65,184 $34,058
Other expense (8,820) (1,593) (8,820) (1,593)
Special items - other income 6,795 5,447 - -
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EARNINGS BEFORE INTEREST AND TAXES (EBIT) (3) $57,065 $28,849 $56,364 $32,465
Interest expense, net (11,145) (9,951) (11,145) (9,951)
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INCOME BEFORE INCOME TAXES $45,920 $18,898 $45,219 $22,514
Provision for income taxes 17,450 7,559 17,183 8,555
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NET INCOME $28,470 $11,339 $28,036 $13,959
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EARNINGS PER SHARE $0.32 $0.15 $0.31 $0.19
EARNINGS PER SHARE-ASSUMING DILUTION $0.32 $0.15 $0.31 $0.19
Average Shares Outstanding 89,265,382 74,444,132 89,265,382 74,444,132
Average Shares Outstanding-assuming dilution 90,137,140 74,613,170 90,137,140 74,613,170
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(1) "Adjusted" statements exclude the impact of impairment and restructuring,
integration/reorganization and special charges for all periods shown.
(2) First quarter 2003 results include a reclassification of $7,496 from cost of
products sold to selling, administrative and general expenses for Torrington
engineering and research and development expenses to be consistent with Timken's
cost classification methodology.
BUSINESS SEGMENTS
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(THOUSANDS OF U.S. DOLLARS) 1Q 04 1Q 03
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AUTOMOTIVE GROUP
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Net sales to external customers $415,602 $298,129
Adjusted earnings before interest and taxes (EBIT) * (3) $18,323 $8,868
Adjusted EBIT Margin (3) 4.4% 3.0%
INDUSTRIAL GROUP
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Net sales to external customers $410,269 $304,963
Intersegment sales 289 192
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Total net sales $410,558 $305,155
Adjusted earnings before interest and taxes (EBIT) * (3) $35,766 $17,810
Adjusted EBIT Margin (3) 8.7% 5.8%
STEEL GROUP
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Net sales to external customers $272,914 $234,915
Intersegment sales 36,417 40,864
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Total net sales $309,331 $275,779
Adjusted earnings before interest and taxes (EBIT) * (3) $2,724 $6,530
Adjusted EBIT Margin (3) 0.9% 2.4%
* Automotive Bearings, Industrial Bearings and Steel EBIT do not equal
Consolidated EBIT due to intersegment adjustments which are eliminated upon
consolidation.
(3) 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 AND THE RATIO OF TOTAL DEBT TO CAPITAL:
MAR 31, 2004 DEC 31, 2003
Short-term debt $188,123 $121,194
Long-term debt 624,141 613,446
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Total Debt $812,264 $734,640
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Total debt $812,264 $734,640
Shareholders' equity 1,107,036 1,089,627
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Total debt + shareholders' equity (Capital) $1,919,300 $1,824,267
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Ratio of Total Debt to Capital 42.3% 40.3%
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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 integration/reorganization costs,
one-time gains/losses on sales of assets, Continued Dumping and Subsidy Offset
Act (CDSOA) receipts and payments.
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1Q 04 1Q 03
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(THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA) $ EPS $ EPS
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Net income $28,470 $0.32 $11,339 $0.15
Pre-tax special items:
Integration expense - cost of products sold 1,376 0.02 3,688 0.05
Integration expenses - SG&A 3,988 0.04 5,375 0.07
Impairment and restructuring 730 0.01 - -
Special items - other (income) expense:
CDSOA receipts, net of expenses (7,743) (4) (0.09) - -
Adoption of FIN 46 for investment in PEL 948 (5) 0.01 - -
Gain on sale of land - - (5,447) (0.07)
Tax effect of special items 267 0.00 (996) (0.01)
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Adjusted net income $28,036 $0.31 $13,959 $0.19
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(4) CDSOA receipts are reported net of applicable expenses.
(5) In the first quarter of 2004, Timken adopted Interpretation No. 46,
"Consolidation of Variable Interest Entities, an interpretation of Accounting
Research Bulletin No. 51" (FIN 46). Timken concluded that its investment in a
joint venture, PEL, was subject to the provisions of FIN 46 and that Timken was
the primary beneficiary of PEL. Accordingly, Timken consolidated PEL effective
March 31, 2004, which resulted in a charge to earnings related to the cumulative
effect of change in accounting principle.
CALCULATION OF TIMKEN COMPANY Q1 2003 PRO FORMA NET SALES
1Q 04 1Q 03
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TIMKEN TIMKEN IMPACT OF TIMKEN
COMPANY, AS COMPANY, AS TORRINGTON COMPANY, PRO
REPORTED REPORTED ACQUISITION (6) FORMA
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AUTOMOTIVE GROUP
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Net sales to external customers $415,602 $298,129 $87,721 $385,850
INDUSTRIAL GROUP
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Net sales to external customers $410,269 $304,963 $63,522 $368,485
Intersegment sales 289 192 - 192
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Total net sales $410,558 $305,155 $63,522 $368,677
STEEL GROUP
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Net sales to external customers $272,914 $234,915 - $234,915
Intersegment sales 36,417 40,864 - 40,864
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Total net sales $309,331 $275,779 - $275,779
CONSOLIDATED
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Net sales to external customers $1,098,785 $838,007 $151,243 $989,250
(6) Impact of Torrington Acquisition represents Torrington sales for 2003 prior
to the acquisition. Timken sales to Torrington prior to the acquisition have
been excluded. This is consistent with the methodology used to calculate pro
forma financial results in 2003. Allocation of net sales within the business
groups was calculated using the ratio of first quarter 2003 net sales subsequent
to the acquisition. Management believes this comparison is helpful for investors
to evaluate first quarter 2004 sales compared to the first quarter 2003, as if
Timken had acquired Torrington on January 1, 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 impairment and
restructuring, integration/reorganization expenses 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 2004 and if so, in what amount. If we do receive any
additional CDSOA payments, they will most likely be received in the fourth
quarter.
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CONSOLIDATED BALANCE SHEET MAR 31 Dec 31
(THOUSANDS OF U.S. DOLLARS) 2004 2003
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ASSETS
Cash & cash equivalents $35,015 $28,626
Accounts receivable 691,167 602,262
Deferred income taxes 50,033 50,271
Inventories 718,183 695,946
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TOTAL CURRENT ASSETS $1,494,398 $1,377,105
Property, plant & equipment 1,583,229 1,608,594
Goodwill 202,853 173,099
Other assets 545,154 530,991
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TOTAL ASSETS $3,825,634 $3,689,789
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LIABILITIES
Accounts payable & other liabilities $511,902 $425,157
Short-term debt 188,123 121,194
Accrued expenses 509,436 508,205
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TOTAL CURRENT LIABILITIES $1,209,461 $1,054,556
Long-term debt 624,141 613,446
Accrued pension cost 368,622 424,414
Accrued postretirement benefits cost 482,028 476,966
Other non-current liabilities 34,346 30,780
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TOTAL LIABILITIES $2,718,598 $2,600,162
SHAREHOLDERS' EQUITY 1,107,036 1,089,627
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,825,634 $3,689,789
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the three months ended
MAR 31 MAR 31
(THOUSANDS OF U.S. DOLLARS) 2004 2003
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CASH PROVIDED (USED)
OPERATING ACTIVITIES
Net Income $28,470 $11,339
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 53,928 41,265
Other 4,872 (7,119)
Changes in operating assets and liabilities:
Accounts receivable (87,328) (54,614)
Inventories (15,767) (22,463)
Other assets (6,046) (10,201)
Accounts payable and accrued expenses (3,283) 53,973
Foreign currency translation 1,476 (1,859)
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NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES ($23,678) $10,321
INVESTING ACTIVITIES
Capital expenditures ($24,449) ($22,998)
Other (2,099) 7,831
Acquisitions (1,549) (718,952)
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NET CASH USED BY INVESTING ACTIVITIES ($28,097) ($734,119)
FINANCING ACTIVITIES
Cash dividends paid to shareholders ($11,614) ($8,252)
Issuance of common stock for acquisition - 180,220
Net borrowings on credit facilities 67,749 512,490
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NET CASH PROVIDED BY FINANCING ACTIVITIES $56,135 $684,458
Effect of exchange rate changes on cash $2,029 $577
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,389 (38,763)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $28,626 $82,050
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $35,015 $43,287
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