Timken Sales Drop 23% in First Quarter
CANTON, Ohio -- The Timken Co. reports sales of $1.1 billion for the first quarter, a decrease of 23% from the same quarter a year ago. The decline reflects lower demand across most of the company's end markets led by oil and gas, industrial distribution and off-highway market sectors, partially offset by acquisitions and improved pricing.
In addition, steel surcharges declined $72 million from the first quarter of 2012.
Timken generated income in the first quarter of $75.1 million, or 77 cents per diluted share, compared with $155.7 million, or $1.58 per diluted share the same period a year ago. Included in the results were costs related to previously announced plant closings of three cents per diluted share. The decrease in first-quarter earnings was driven by lower demand, mix and higher manufacturing costs, partially offset by improved pricing and lower selling and administrative expenses.
"First-quarter results were in line with our expectations, reflecting difficult comparisons from record first-quarter 2012 results," said James W. Griffith, president and CEO, in a prepared statement. "Our integrated business model, along with our continued focus on driving efficiencies across our business, enabled us to sustain double-digit operating margins while the company experienced low levels of capacity utilization. We saw orders increase as the quarter unfolded, and we remain confident in our ability to drive improved profitability throughout the remainder of the year."
At March 31, total debt was $472.5 million, or 16.9% of capital. As of that date, the company had $457.9 million in cash, resulting in net debt of $14.6 million, of net debt, compared with a net cash position of $107.4 million as of Dec. 31, 2012.
Highlights of the quarter Timkin cited:
Completion of three previously disclosed capital investment projects totaling $85 million that increase capacity and manufacturing effectiveness in its steel segment. The investments include an open-die in-line forge press, an intermediate finishing line and a second induction-thermal-treatment line at steel mills here.
Expansion of service and product offerings across key end markets through two acquisitions: Smith Services Inc., a provider of electric motor rewind and repair, and Interlube Systems Ltd., a U.K.-based provider of automated lubrication delivery systems and services.
Entering into a strategic asset purchase agreement with The Greenbrier Companies Inc., expanding the Mobile Industries' rail bearing reconditioning activities.
Earning recognition as one of the World's Most Ethical Companies for the third time since 2010 by Ethisphere, an international organization focused on the advancement of best practices in corporate governance, risk, sustainability, compliance and ethics.
The company reaffirmed its outlook for the full year based on its continued expectation of improved demand during the latter half of 2013. Sales are expected to be down around 5% compared to 2012, while operating performance is expected to remain strong, with all four segments maintaining double-digit operating margins for the full year.
Timken projects 2013 annual earnings per diluted share to range from $3.75 to $4.05, which includes costs for previously announced plant closures totaling approximately 20 cents. The company expects to generate cash from operations of approximately $330 million this year. Free cash flow is projected to be a use of $120 million after making capital expenditures of about $360 million and paying about $90 million in dividends.
Published by The Business Journal, Youngstown, Ohio.
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