News Column

Timken First-Quarter Results Reflect Solid Start to 2014

April 29, 2014



ENP Newswire - 29 April 2014

Release date- 25042014 - CANTON, Ohio - The Timken Company (NYSE: TKR) today reported first-quarter 2014 sales of $1.1 billion, up 1 percent from the prior-year quarter.

Stronger demand in the company's Steel and Process Industries segments, higher raw material surcharges and the benefit of acquisitions drove the increase, which was offset largely by lower shipments in the Mobile Industries segment and the impact of currency.

For the first quarter, the company generated net income of $83.5 million, or $0.90per diluted share, compared with $75.1 million, or $0.77 per diluted share, during the same period a year ago.

Adjusted net income was $82.2 million, or $0.88 per diluted share, which compares with adjusted net income of $77.2 million, or $0.80 per diluted share, a year ago. Strong manufacturing performance and higher raw material surcharges drove the increase, which more than offset the impact of higher material costs and higher selling and administrative expenses.

'Our results reflect a solid start to the year,' said James W. Griffith, Timken president and chief executive officer. 'We are encouraged by the rebound in our steel bookings, which historically have been a positive early indicator for the rest of the business.

'With the benefit of recent investments, manufacturing execution and our more robust portfolio of products and services, we are well-positioned to capitalize on the opportunities developing in our target markets,' Griffith added. 'We remain on pace to achieve our performance objectives for 2014.'

As of March 31, 2014, total debt was $479.3 million, or 15.5 percent of capital. Including $263.4 million of cash on hand, net debt was $215.9 million, or 7.6 percent of capital, compared with net debt of $76.2 million, or 2.8 percent of capital as of December 31, 2013. Share repurchases in the quarter largely drove the increase in net debt.

Among recent developments, The Timken Company:

Returned a total of $141 million in capital to shareholders through dividends and the repurchase of approximately 2 million common shares. In February, the company increased its dividend by 9 percent to 25 cents per share;

Was awarded $55 million in new business from the U.S. Department of Defense for additional main reduction gear propulsion ship sets for the Arleigh Burke DDG 51 class ships;

Filed TimkenSteel Corporation's initial Form 10 Registration Statement for the planned separation from Timken in a tax-free spinoff, which is expected to be completed June 30, 2014;

Announced two strategic joint ventures to pursue growth opportunities in emerging markets, including an agreement with United Wagon Company (UWC) to manufacture rail bearings and an agreement with European Bearing Corporation (EPK) to design and manufacture bearings aimed at serving industrial markets and

Earned recognition for the fourth time as one of the World's Most Ethical Companies by Ethisphere, an international organization focused on the advancement of best practices in corporate governance, risk, sustainability, compliance and ethics.

Mobile Industries Segment Results

In the first quarter, Mobile Industries' sales of $344.7 million decreased 13 percent compared to last year's first-quarter sales of$397.1 million. The decrease was driven primarily by $45 million in lower volume due to program exits in the light vehicle sector, which concluded at the end of 2013. In addition, improved demand from the rail and automotive aftermarket sectors and acquisitions was more than offset by lower demand in the mining and heavy truck market sectors and the impact of currency.

EBIT for the segment was $56.1 million for the first quarter, or 16.3 percent of sales, compared to $51.2 million, or 12.9 percent of sales, for the same period a year ago.

When adjusted to eliminate the gain on the sale of land in Brazil and charges related to cost-reduction initiatives and plant rationalizations, EBIT was $36.7 million, or 10.6 percent of sales for the first quarter, compared to adjusted EBIT of $55.8 million, or 14.1 percent of sales, for the same period a year ago. The decrease was driven primarily by lower light vehicle volume.

Process Industries Segment Results

Process Industries' first-quarter sales were $310.2 million, up 9 percent from $285.2 million for the same period a year ago. The increase reflects higher industrial original equipment demand, primarily in the wind energy market sector, and the benefit of acquisitions.

Process Industries' first-quarter EBIT was $51.8 million, or 16.7 percent of sales, compared to $42.6 million, or 14.9 percent of sales, for the same period a year ago.

When adjusted to eliminate charges related to cost-reduction initiatives and plant rationalizations, EBIT was $52.9 million, or 17.1 percent of sales, compared to adjusted EBIT of $42.7 million, or 15.0 percent of sales, for the same period a year ago. The increase reflects improved demand and lower manufacturing and material costs, partially offset by higher selling and administrative expenses and the impact of currency.

Aerospace Segment Results

Aerospace posted first-quarter sales of $82.7 million, essentially unchanged from $82.5 million for the same period last year. Improved demand from the defense rotorcraft market sector largely offset a decline from the general aviation and commercial market sectors compared to a year ago.

First-quarter EBIT was $6.5 million, or 7.9 percent of sales, compared to $8.6 million, or 10.4 percent of sales, for the same period a year ago. When adjusted to eliminate charges related to cost-reduction initiatives and plant rationalizations in the current quarter, EBIT was $7.0 million, or 8.5 percent of sales. The decline in EBIT reflects unfavorable mix, partially offset by lower manufacturing costs.

Steel Segment Results

Sales for Steel, including inter-segment sales, were $390.1 million in the first quarter, 13 percent higher than the $346.1 million posted in the first quarter last year. The results reflect improved shipments to the oil and gas and industrial market sectors along with increased raw-material surcharges of approximately $15 million.

First-quarter EBIT was $54.4 million, or 13.9 percent of sales, up from $35.8 million, or 10.3 percent of sales, for the same period a year ago. The increase in EBIT was driven by higher volume, favorable mix, surcharges and improved manufacturing performance, partially offset by higher material costs and the impact of LIFO.

Outlook

The company's outlook reflects its current business structure with all four operating segments in place for the full 12 months of 2014. Timken now expects 2014 sales to be up approximately 7 percent compared to 2013, driven by higher demand in industrial, off-highway, energy, defense and rail end-market sectors.

For the full year 2014, The Timken Company expects:

Mobile Industries' sales to be down 3 to 8 percent, primarily driven by $110 million in reduced revenue resulting from planned program exits in the light vehicle sector, which concluded at the end of 2013. Offsetting this decline is anticipated improvement in rail and off-highway demand;

Process Industries' sales to be up 7 to 12 percent, driven by economic recovery across most industrial end markets, the impact of acquisitions and improved penetration in targeted original equipment sectors;

Aerospace sales to be up 5 to 10 percent, due to increased demand across most end markets, led by defense and

Steel sales up 15 to 20 percent, driven by improved demand in the oil and gas and industrial end-market sectors.

Timken projects 2014 annual earnings per diluted share to range from $3.15 to $3.45, which includes $0.45 per diluted share of net expense related to costs of approximately $0.50 per share for the proposed spinoff of TimkenSteel; approximately $0.15per share of costs associated with the company's cost-reduction initiatives and plant rationalizations and a $0.20 per share gain on the sale of land in Brazil. Excluding these items, adjusted earnings per diluted share would range from $3.60 to $3.90.

The company expects to generate cash from operations of approximately $500 million in 2014. Free cash flow is projected to be $110 million after making capital expenditures of $300 million and paying $90 million in dividends.

Conference Call Information

Timken will host a conference call today at 1:00 p.m. Eastern Time to review its financial results. The company will make presentation materials available online in advance of the call for interested investors and securities analysts.

Conference Call:

Thursday, April 24, 2014

1:00 p.m. Eastern Time

All Callers:

Live Dial-In: 888-256-1007 or 913-312-1517

(Call 10 minutes prior to be included.)

Conference ID: Timken Earnings Call

Replay Dial-In available through May 8, 2014:

888-203-1112 or 719-457-0820

Replay Passcode: 1629379

Live Webcast: www.timken.com/investors

About The Timken Company

The Timken Company (NYSE: TKR; www.timken.com), a global industrial technology leader, applies its deep knowledge of materials, friction management and power transmission to improve the reliability and efficiency of industrial machinery and equipment all around the world. The company engineers, manufactures and markets mechanical components and high-performance steel.

Timken bearings, engineered steel bars and tubes-as well as transmissions, gearboxes, chain, related products and services-support diversified markets worldwide. With sales of $4.3 billion in 2013 and approximately 19,000 people operating from 28 countries, Timken makes the world more productive and keeps industry in motion.

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, 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 first quarter of 2014; 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, 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; weakness in global or regional economic conditions and financial markets; changes in the expected costs associated with product warranty claims; the ability to achieve satisfactory operating results in the integration of acquired companies; the impact on operations of general economic conditions; higher or lower raw material and energy costs; fluctuations in customer demand; the impact on the company's pension obligations due to changes in interest rates or investment performance; the company's ability to complete and achieve the benefits of announced plans, programs, initiatives, and capital investments; the taxable nature of the spinoff and the company's ability to successfully complete the spinoff within the expected timeframe and at the expected cost.

Additional factors are discussed in the company's filings with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K for the year ended Dec. 31, 2013, quarterly reports on Form 10-Q and current reports on Form 8-K. Except as required by the federal securities laws, the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Media Contact:

Pat Burnham

Tel: (330)471-3514

Email: pat.carlson@timken.com

Investor Contact:

Steve Tschiegg

Director

Tel: (330)471-7446

Email: steve.tschiegg@timken.com


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Source: ENP Newswire


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