Although many analysts point to a slowdown in the North American economy, global industrial demand remains strong — a fact that boosted the Timken Company's sales and earnings for the second quarter of 2008. The company's performance also has executives predicting record full-year earnings as global industrial markets continue to offset the impact of weaker North American automotive demand. Second-quarter income from continuing operations was $88.9 million, or $0.92 per diluted share, compared to $55.6 million, or $0.58 per diluted share, in the second quarter a year ago. Excluding special items, income from continuing operations increased 33 percent to $92.4 million, or $0.96 per diluted share, for the second quarter of 2008, compared to $69.7 million, or $0.73 per diluted share, in the second quarter of 2007. Record second-quarter earnings benefited from favorable pricing, surcharges, volume and currency, which were partially offset by higher material costs and related LIFO charges. Second-quarter special items, net of tax, included manufacturing rationalization, impairment and restructuring charges totaling $3.5 million, compared to $14.1 million of similar charges in the second quarter of 2007. "The company has pursued a deliberate strategy to transform Timken's portfolio where we see a significant opportunity to drive profitable growth," says James W. Griffith, Timken's president and chief executive officer. "This strategy is allowing us to create higher levels of customer and shareholder value over time and contributed to record sales and earnings during the second quarter despite continued weakness in automotive markets. We are on pace to achieve record performance for the year as our strategic initiatives to add capacity and strengthen execution continue to take hold." During the quarter, the company:
- Completed another significant phase of Project O.N.E., Timken's business process improvement and global systems initiative, now covering most of the company's U.S. and European Bearing and Power Transmission operations.
- Began production at its new aerospace and precision products facility in Chengdu, China, and started shipping products from its new industrial bearing manufacturing plant in Chennai, India. Timken continued to strengthen its balance sheet during the quarter. Total debt at June 30, 2008, was $861.4 million, or 28.3 percent of capital. Net debt at June 30, 2008, was $786.6 million, or 26.5 percent of capital, compared to $805.1 million, or 28.0 percent of capital, at March 31, 2008. The company expects to generate strong free cash flow for the remainder of the year and to end 2008 with lower net debt and leverage than last year, providing additional financial capacity to pursue strategic investments. For the first half of 2008, sales were $2.97 billion, an increase of 13 percent from the same period in 2007. Income from continuing operations per diluted share for the first six months of 2008 was $1.80, compared to $1.36 last year. Special items, net of tax, in the first half of 2008 totaled $2.1 million of income compared to $2.3 million of expense in the prior-year period. These special items included a gain on a real estate divestment associated with a prior plant closure, partially offset by charges related to restructuring, rationalization and impairment. Excluding special items, income from continuing operations per diluted share in the first half of 2008 increased 28 percent to $1.78, versus $1.39 in the first half of 2007. During the first six months of 2008, the company benefited from strong industrial market demand, pricing, surcharges, mix and currency, which were partially offset by higher raw-material costs and related LIFO charges and the impact of lower automotive demand. The company expects earnings per diluted share for 2008, excluding special items, to be $2.95 to $3.10 for the year and $0.65 to $0.75 for the third quarter, compared to $2.40 and $0.51, respectively, for the same periods in 2007. Industrial demand is expected to remain strong in 2008 as additional capacity comes online in key growth markets, while North American automotive demand is anticipated to decline. Timken will continue to pursue execution initiatives and portfolio optimization, as well as pricing and better working capital management to improve operating results and cash flow. The company expects these initiatives to contribute to record performance in 2008. For more information about Timken, visit the company's Web site. |
