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Timken Earnings Fall; Will Spin Off Steel Business
CANTON, Ohio -- The Timken Co. Thursday reported third-quarter net income of $52.2 million, or 54 cents per diluted share. This compares with net income of $80.9 million, or 83 cents per filuted share, the same period a year ago.
Third-quarter sales were $1.1 billion, down 7% from a year ago, attributed primarily to weaker demand in company’s broad-end markets, partially offset by acquisitions.
Lower earnings primarily reflect lower volume and manufacturing use as well as an unfavorable sales mix. "On a macro basis, economic growth across the world has been much slower than we and our customers envisioned, and our third-quarter results were below our expectations," said James W. Griffith, president and CE, in a prepared statement. "As a result, we've implemented and are continuing to take additional actions to allow us to enhance margins despite the lower demand levels. These include leveraging our strategic investments as well as implementing tactics to rationalize capacity levels and taking further actions to reduce costs."
In the first nine months, the company generated net income of $210.1 million, or $2.18 per diluted share.
Recent developments:
- Expansion of the company's product portfolio, launching new Timken SNT plummer blocks and seals; introducing new Timken encoders that use the latest magnetic encoder technology; and designing two new high-performance Timken alloy steels to meet the specific needs of the oil and gas industry.
- Approval of a plan to pursue severing the company's steel business from its bearings and power transmission business through a tax-free spinoff, creating a new independent publicly traded steel company in 2014.
- Further aligning operations with market needs, which includes capacity rationalizations, supply chain improvements and workforce reductions.
- Returning $47 million in capital to shareholders through dividends and repurchases of company shares in the quarter, bringing the total capital returned through Sept. 30 to approximately $175 million. The company has some 5.6 million shares remaining under its board-approved share repurchase program.
As of Sept. 30, total debt was $476.6 million, or 16.8% of capital. The company had cashon hand of $418.1 million, resulting in $58.5 million of net debt, compared with a net cash position of $107.4 million at the end of 2012.
The company has revised its outlook for the full year based on a slower-than-expected economic recovery. Timken expects 2013 sales to be 13% lower than last year, with steel sales posting the largest drop of 20% to 22% driven by lower industrial and oil and gas end-market demand and lower surcharges, partially offset by growth in mobile on-highway.
Timken projects 2013 annual earnings per diluted share to range between $2.70 and $2.90, which includes 13 cents per share for previously announced plant closing costs and seven cents associated with one-time implementation costs related to its planned separation of the steel business.
The company expects to generate cash from operations of approximately $415 million for the year. Free cash flow is projected to be $5 million after making capital expenditures of about $320 million and paying some $90 million in dividends. The company does not anticipate making further discretionary pension contributions this year beyond the $66 million, net of tax, made in the first quarter because it expects its pension plans to be essentially fully funded by yearend given the recent increase in interest rates. Excluding discretionary pension contributions, the company forecasts free cash flow of $70 million in 2013. In addition, the company has repurchased $107 million of its shares and expects to continue to repurchase shares under its current board-authorized program.
The Timken Co. engineers, manufactures and markets mechanical components and high-performance steel.
SOURCE: The Timken Co.
Published by The Business Journal, Youngstown, Ohio.
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