Timken posts increase in global sales

The Timken company recently reported an increase in global sales, driven in large part by its capacity-expansion initiatives and the favorable impact of pricing, surcharges and currency. The company also reported increased earnings, and has attributed this fact to the timely execution of its strategic initiatives.

The company's first quarter income from continuing operations was $84.5 million, or $0.88 per diluted share, compared to $74.3 million, or $0.78 per diluted share, in the first quarter of 2007. Excluding special items, income from continuing operations increased 26 percent to $78.9 million or $0.82 per diluted share for the first quarter of 2008, compared to $62.5 million or $0.66 per diluted share in the prior-year period. Strong first-quarter earnings benefited from favorable pricing, volume, mix and currency, which were partially offset by higher LIFO charges related to increased material costs. Special items, net of tax, in the first quarter of 2008 totaled $5.6 million of income compared to $11.8 million of income in the same period last year and included a gain on a real estate divestment associated with a prior plant closure, partially offset by charges related to restructuring, rationalization and impairment.

"We achieved record first-quarter earnings as execution of our strategic initiatives and a more efficient operating model allowed us to take better advantage of continued strong global demand for our industrial products," says James W. Griffith, Timken's president and chief executive officer. "We continue to have a positive outlook for 2008 performance as we bring more capacity online in attractive markets and advance our pricing and execution initiatives."

During the quarter, the company implemented the next wave of Project O.N.E., its business process improvement and global systems initiative that covers most of the company's remaining U.S. and European operations; completed construction of a new industrial bearing manufacturing plant in Chennai, India, and a new aerospace and precision products facility in Chengdu, China, which are part of Timken's strategy of driving growth in key global industrial markets; and acquired the assets of Boring Specialties Inc. (BSI), which provides steel components for the oil and gas industry, further expanding Timken's ability to serve the growing market for high-performance energy products.

Total debt was $873.3 million as of March 31, 2008, or 29.7 percent of capital. Net debt at March 31, 2008, was $805.1 million, or 28.0 percent of capital, compared to $693.0 million, or 26.1 percent, as of Dec. 31, 2007. The increase in net debt was due to seasonal working capital requirements and strong demand. In addition, net debt increased due to acquisitions, net of divestments, during the quarter. The company expects to end 2008 with lower net debt and leverage, providing additional financial capacity to pursue strategic investments.

First quarter financial reporting reflects changes to the company's management structure to improve execution and accelerate profitable growth. The company operates under two major business groups, the Steel Group and the Bearings and Power Transmission Group, which includes three reporting segments — Mobile Industries, Process Industries and Aerospace and Defense.

The Bearings and Power Transmission Group had first quarter sales of $1.05 billion, up 13 percent from $0.93 billion for the same period last year, primarily resulting from organic growth in the Process Industries and Aerospace and Defense segments, and the favorable impact of acquisitions and currency. Earnings before interest and taxes (EBIT) for the first quarter were $93.7 million, up 72 percent from $54.5 million in the first quarter of 2007, benefiting from improvements across all three reporting segments.

The company expects earnings per diluted share for 2008, excluding special items, to be $2.75 to $2.95 for the year and $0.73 to $0.83 for the second quarter, compared to $2.40 and $0.73, respectively, for the same periods in 2007. Global industrial demand is expected to remain strong in 2008 as additional capacity comes online in key growth markets. Timken will continue to pursue pricing, portfolio management and better execution to improve operating results, which are expected to contribute to anticipated record performance for the company in 2008.

For more information about Timken, visit the company's Web site.