(Source: Business Wire)
The Timken Company (NYSE: TKR) today reported sales of $763.6 million
for the third quarter of 2009, a decrease of 43 percent over the same
period a year ago. The sales decline reflects weaker demand in many of
the company's end markets and lower surcharges, partially offset by
improved pricing. Sales for all periods exclude the results of the
Needle Roller Bearings business, accounted for as "discontinued
operations."
The company incurred a third-quarter loss of $50.1 million, or $0.52 per
share, including a loss of $30.8 million, or $0.32 per share, from the
Needle Roller Bearings business. The company's continuing operations
incurred a loss of $19.3 million, or $0.20 per share, in the third
quarter, compared with income of $123.9 million, or $1.28 per diluted
share, a year ago.
Excluding special items, net income was $5.2 million, or $0.05 per
share, for the third quarter, including a loss of $2.3 million, or $0.03
per share, from discontinued operations. Income from the company's
continuing operations for the third quarter was $7.5 million, or $0.08
per share, excluding special items, compared with $129.2 million, or
$1.34 per diluted share, in the prior year. Earnings reflect lower sales
volume and manufacturing utilization, reduced surcharges and lower LIFO
(last-in, first-out accounting) income. These items were partially
offset by cost reductions, improved pricing and lower material costs
compared with a year ago.
Special items, net of tax, in the third quarter of 2009 amounted to
$55.4 million of expense, compared with $5.5 million in the same period
last year. Special items in the third quarter of 2009 included
manufacturing rationalization, impairment and restructuring charges, the
largest being a $25.1-million impairment, net of tax, associated with
the pending sale of the Needle Roller Bearings business.
Table 1: Third-Quarter 2009 Earnings Per Share
As Reported Adjusted (a)
Continuing Operations $ (0.20 ) $ 0.08
Discontinued Operations (0.32 ) (0.03 )
Total Earnings Per Share $ (0.52 ) $ 0.05
(a): "Adjusted" earnings per share exclude the impact of impairment andrestructuring, manufacturing rationalization/reorganization and special chargesand credits.
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"This quarter's performance is more about how we're managing the
business than a shift in marketplace trends," said James W. Griffith,
Timken president and chief executive officer. "Without the benefit of
improved volume, we're yielding better results from structural changes
we've made, in part from our Project O.N.E. and portfolio management
initiatives."
In recent months, the company also:
Signed an agreement to sell the assets of its Needle Roller Bearings
business to JTEKT Corporation, for which Timken will receive
approximately $330 million, subject to certain closing conditions;
Announced plans to streamline its distribution footprint by
consolidating its Ohio and South Carolina distribution centers into a
new facility;
Entered into a three-year, $500-million unsecured Senior Credit
Facility, replacing a previous facility set to expire in June 2010;
Completed a $250-million public offering of 6.00% unsecured Senior
Notes due 2014, proceeds of which will be used to repay the company's
5.75% notes due February 15, 2010;
Expanded its ability to offer engineered steel solutions in Asia
through collaboration with Daido Steel Co. Ltd.; and
Reached a tentative four-year labor agreement with the United
Steelworkers union, covering approximately 2,300 associates in Canton,
Ohio.
The company continues to maintain a strong balance sheet with ample
liquidity. Total debt was $800.9 million as of Sept. 30, 2009, or 33.5
percent of capital. Net debt at Sept. 30, 2009, was $169.9 million, or
9.6 percent of capital, compared with $490.5 million, or 22.8 percent,
as of Dec. 31, 2008. During the quarter the company generated cash from
operating activities of $170.9 million, driven primarily by inventory
reductions.
Nine Months' Results
For the first nine months of 2009, sales were $2.37 billion, a decrease
of 40 percent from the same period in 2008. The company incurred a loss
of $0.56 per share from continuing operations for the first nine months
of 2009, compared with earnings of $2.87 per diluted share last year.
Special items, net of tax, in the first nine months of 2009 totaled
$81.4 million of expense, compared with $3.0 million in the prior-year
period. Special items in 2009 primarily reflect impairment and severance
charges, while prior-year special items included a gain on a real estate
divestment associated with a prior plant closure, offset by charges
related to restructuring, rationalization and impairment. Excluding
special items, year-to-date income from continuing operations was $0.22
per diluted share, versus earnings of $2.91 per diluted share in the
same period last year. During the first nine months of 2009, the company
was affected by weaker demand across most of its end markets, partially
offset by pricing and cost-reduction initiatives.
Table 2: Nine Months' 2009 Earnings Per Share
As Reported Adjusted (a)
Continuing Operations $ (0.56 ) $ 0.22
Discontinued Operations (0.62 ) (0.31 )
Total Earnings Per Share $ (1.18 ) $ (0.09 )
(a): "Adjusted" earnings per share exclude the impact of impairment andrestructuring, manufacturing rationalization/reorganization and special chargesand credits.
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The following business results reflect continuing operations,
excluding special items:
Bearings and Power Transmission Group
Results
The Bearings and Power Transmission Group had third-quarter sales of
$614.8 million, down 28 percent from $849.1 million for the same period
last year. Earnings before interest and taxes (EBIT) for the third
quarter were $48.9 million, down 47 percent from $91.8 million in the
third quarter of 2008.
For the first nine months of 2009, Bearings and Power Transmission Group
sales were $1.86 billion, down 28 percent from the same period a year
ago. EBIT for the first nine months of 2009 was $150.0 million, or 8.1
percent of sales, compared with EBIT of $248.4 million, or 9.6 percent
of sales, in the first nine months of 2008.
Mobile Industries Segment Results
In the third quarter, Mobile Industries sales were $327.6 million, a
decrease of 23 percent from $426.5 million for the same period a year
ago. The sales decline was driven by weaker demand in the off-highway,
heavy-truck and rail market sectors, partially offset by favorable
pricing. Light-vehicle demand was up slightly compared with a year ago,
driven by the emergence of automotive customers from bankruptcy and
consumer stimulus programs, which accelerated demand during the quarter.
Third-quarter EBIT was $13.7 million, an increase of 58 percent from
$8.7 million for the same period a year ago. The benefits from cost
reduction initiatives and pricing were partially offset by the impact of
lower global demand and underutilized capacity.
For the first nine months of 2009, Mobile Industries sales of $920.4
million were down 34 percent from the same period a year ago. EBIT for
the first nine months was a loss of $0.6 million, or 0.1 percent of
sales, compared with EBIT of $43.4 million, or 3.1 percent of sales, in
the first nine months of 2008.
Process Industries Segment Results
Process Industries had third-quarter sales of $187.0 million, down 41
percent from $317.9 million for the same period a year ago. Lower demand
across most industrial market sectors more than offset favorable
pricing. Sales declines were significant in both original equipment and
distribution channels.
Third-quarter EBIT was $16.1 million, down 78 percent from $73.3 million
in the same period a year ago. Lower EBIT primarily resulted from
volume, partially offset by pricing and cost reduction initiatives.
For the first nine months of 2009, Process Industries sales were $619.1
million, down 31 percent from the same period a year ago. EBIT for the
first nine months was $94.6 million, or 15.3 percent of sales, compared
with EBIT of $180.9 million, or 20.2 percent of sales, in the same
period a year ago.
Aerospace and Defense Segment Results
Aerospace and Defense had third-quarter sales of $100.3 million, down 4
percent from $104.7 million for the same period last year. The decrease
was driven by reduced demand across commercial and civil aerospace
markets, partially offset by pricing and acquisitions.
Third-quarter EBIT was $19.1 million, up 95 percent from $9.8 million in
the same period a year ago. Performance benefited primarily from
cost-reduction initiatives and pricing.
For the first nine months of 2009, Aerospace and Defense sales were
$318.8 million, up 5 percent from the same period a year ago. The EXTEX
acquisition accounted for approximately one-half of the sales increase.
EBIT for the first nine months of 2009 was $56.0 million, or 17.6
percent of sales, compared with EBIT of $24.0 million, or 8.0 percent of
sales, in the first nine months of 2008.
Steel Group Results
Sales for the Steel Group, including inter-group sales, were $157.9
million during the third quarter, a decrease of 71 percent from $536.5
million for the same period last year, with 53 percent fewer shipped
tons. The greatest market declines were from the industrial and energy
sectors, while light vehicle demand was up slightly compared with a year
ago due to consumer stimulus programs in the U.S. Surcharges declined
approximately $215 million from the third quarter last year.
The Steel Group incurred an EBIT loss of $20.3 million compared with
EBIT of $133.8 million for the same period a year ago. The decline
primarily resulted from lower demand and underutilization of
manufacturing capacity, which affected EBIT by roughly $100 million. The
remaining decline in EBIT resulted from lower surcharges and reduced
LIFO income, partially offset by favorable material and energycosts and
cost-reduction actions.
For the first nine months of 2009, Steel Group sales were $541.4
million, down 63 percent from the same period a year ago. Year-to-date,
the Steel Group incurred an EBIT loss of $60.4 million, or 11.2 percent
of sales, compared with EBIT of $267.5 million, or 18.1 percent of sales
in the same period last year.
Outlook
Timken's sales for the full year 2009, excluding discontinued
operations, are expected to be down approximately 35 to 40 percent from
the prior year, principally due to weak end-market demand. Mobile
Industries sales are expected to be down approximately 30 to 35 percent
for the year, driven by lower North American light-vehicle production,
and significant declines in heavy-truck builds in North America and
Europe. Process Industries sales are expected to be down by about 30 to
35 percent in 2009, with broad-based volume declines in most end
markets, especially heavy industrial equipment. Sales in the Aerospace
and Defense segment are expected to be up modestly for 2009, driven by a
strong defense sector, offsetting softer commercial and civil sectors.
Steel Group sales are expected to decline approximately 60 to 65 percent
for the year due to lower demand across all market sectors and reduced
surcharges.
The company is raising its full-year earnings estimate (including
discontinued operations and excluding special items), to a loss of
$(0.10) to $(0.30) per share, compared with its prior estimate of a loss
of $(0.40) to $(0.90) per share. The company expects to deliver strong
free cash flow in 2009, driven by effective working capital management
and reduced spending.
Conference Call Information
The company will host a conference call for investors and analysts today
to discuss financial results.
Conference Call: Thursday, Oct. 29, 2009
11:00 a.m. Eastern Time
All Callers: Live Dial-In: 800-344-0593 or 706-634-0975
(Call in 10 minutes prior to be included.)
Conference ID: 68492845
Replay Dial-In through Nov. 6, 2009:
800-642-1687 or 706-645-9291
Live Webcast: www.timken.com/investors
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About The Timken Company
The Timken Company keeps the world turning, with innovative friction
management and power transmission products and services, enabling our
customers' machinery to perform more efficiently and reliably. With
sales of $5.7 billion in 2008 and operations in 26 countries, 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 and timing of the closing of the
Needle Roller Bearings transaction, 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 third quarter of 2009; the inability to complete the sale of the
Needle Roller Bearings business due to either the failure to satisfy any
condition to the closing of the transaction, including receipt of
regulatory approval, or the occurrence of any event, change or other
circumstance that could give rise to the termination of the purchase agreement;
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,
including any disruptions or bankruptcies in the automotive industry
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; continued weakness
in global economic conditions and financial markets; changes in the
expected costs associated with product warranty claims; the inability to
obtain the union members' ratification of the tentative agreement
covering the company's associates at the Canton area manufacturing
facilities; the impact on operations of general economic conditions,
higher or lower 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, without limitation, the
initiative to reduce its employment levels and other costs, the
implementation of its Mobile Industries Segment restructuring program
and initiatives and the rationalization of the company's Canton bearing
operations. 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,
2008, page 44 and in the company's Form 10-Q for the quarter ended June
30, 2009.
