Timken Reports Second Quarter 2004 Results

The Timken Company (USA) reported financial results for second quarter of 2004. The period marked its first full-quarter to full-quarter results since acquiring Torrington in early 2003, and set a new record for quarterly sales. Analysts following Timken told eBearing they also applaud the company, "taking a baby step back," from its tendency for trumpeting pro forma ("without all the bad stuff," as one said) financial results over actual GAAP results as filed with the U.S. Securities and Exchange Commission. Second quarter 2004 sales hit $1.13 billion, up 14% from $990 million recorded for the same period in 2003. Gross profit also increased, to $205.6 million in the quarter, from $158.1 million in 2003, as overall gross margins improved to 18.2% from 2003's 16%. Jim Griffith, President and CEO, said: "Industrial markets strengthened noticeably in the second quarter, buoying sales across all parts od the company. Our results reflect both this increased demand and improved execution." The Timken - Torrington operating synergies are beginning to develop in earnest, also contributing to the improved results. Across the first half of 2004, Timken said it achieved pretax integration savings of $35 million, primarily through purchasing synergies and workforce reductions, reiterating its intent to achieve $80 million in pretax integration cost savings by the end of 2005. Automotive Group Second quarter sales were $404 million, up 7% over 2003's $377 million. Timken said stronger demand and increased product penetration in light and medium / heavy-duty trucks -- across North American and European manufacturers -- accounted for the majority of the improvement. Timken said light truck production in North America was up 5% in the quarter, while medium and heavy-duty truck production was up 27%. Passenger car production, however, was off 6%. Automotive Group's earnings were lower in the quarter than 2003, primarily due to higher material costs. To address the shrinking margin, Timken said it, "expects to continue to aggressively pursue recovering these costs through surcharges and price increases." Industrial Group Sales in the quarter were $438 million, up 12% over 2003's $390 million. Timken said the Industrial Group's improvement was broad-based, across its customer markets and across its geographic markets. Sales to most market sectors improved by 10% or more over 2003. Strongest among the gainers were sales to construction and agricultural equipment customers. The group's operating results also improved, reflecting not just sales increases, but the ability to put through some price increases while still working to lower operating costs. Steel Group Sales were up more than 29%, hitting a new record at $330 million, from $257 million in second quarter 2003. The dramatic improvement, said Timken, reflected strong demand from both automotive and industrial customers -- double-digit increases across nearly all market sectors. Adding to the strength was the fact that half the top-line sales growth resulted from successfully implementing scrap surcharges and price increases more in line with increased costs of raw materials. The Faircrest Steel plant was shut down for approximately 10 days to clean up a low-level radioactive material contamination. There was no exposure to the environment, employees or products.