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The eBearing News
February 2, 2006
Timken Reports Fourth Quarter 2005 Results
copyright © 2005 eBearing Inc.
The Timken Company (USA; NYSE:
TKR)
reported results for fiscal fourth quarter 2005, ended December 31. Much as SKF stock was
punished for failing to meet profit expectations, Timken also surprised with weaker-than-expected
results and has seen its stock pushed down even more sharply.
Sales hit a record USD $1.28 billion, up 8% from the year-ago quarter of $1.19 billion.
Although fourth quarter was flat from third quarter, Timken noted sales across all three
business groups were improved from 2004.
Net income reached $94.9 million, far ahead of 2004's fourth quarter $64.4 million.
Investors also expressed that more than half the quarter's EBIT, $82.4 million of $160.3 million, came from
a government payout under the Continued Dumping and Subsidy Offset Act. Without the
CDSOA payout, several analysts put income from continuing operations at between 2% to 3% of net sales.
Jim Griffith, President and CEO, said: "While adjusted fourth quarter earnings per share were
up 23% over the same period last year, they were lower than anticipated due to high manufacturing
costs, a write-off of obsolete and slow-moving inventory and increased reserves for automotive
industry credit exposure."
Analysts, however, focused on unadjusted quarterly results. Those indicated Timken earned only $0.54 per
share, a significant miss from Wall Street's consensus expectation of $0.63 per share. Sales of $1.28
billion also came up shy of the consensus expectation of $1.32 billion.
Into 2006, Timken said it expects global industrial markets to remain strong, but that improvements
in the company's operating performance may be constrained by investments needed for Asian manufacturing
growth, stock options expensing, and expenses related to Project ONE.
Project ONE is, "a five-year business transformation initiative to improve its capabilities, processes
and information systems." The project is headed by senior VP, Christopher Coughlin and is expected
to cost in the neighborhood of $90 million. Fully implemented, Project ONE is forecast to save Timken
almost $75 million per year.
Industrial Group
Sales were $491.9 million, up 10% from 2004's $448.5 million.
Timken said the positive impact of improvements in volume and mix were more than offset by
higher manufacturing costs associated with ramping up capacity to meet customer demand, investments
in Asian manufacturing growth, Project ONE investments, and writing off obsolete and slow-moving
inventory.
Automotive Group
Sales were $406.9 million, up 4% from 2004's $391.6 million,
and essentially flat from third quarter 2005.
Automotive group losses were significantly higher than a year ago, even though the
company was able to push through some price increases.
Higher prices in some areas were unable to offset higher manufacturing costs,
an increase in reserves for potentially uncollectible auto industry receivables
(including Delphi), and investments in Project ONE.
When Delphi filed Chapter 11 bankruptcy, it effectively froze payment on just over $3.6 million
owed to Timken, which will stay with the Automotive Group.
Steel Group
Sales in the quarter were $382.7 million, up 8% over 2004's $347.9 million.
Timken had projected fourth-quarter seasonality would hamper results, but steel benefited from
unexpected continued strength in the segment.
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- by Bruce A. Carr
from individual research,
tips and commercial sources.
Unauthorized reproduction is prohibited.
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eBearing.com ... for everything that moves™
Entire contents Copyright 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered
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eBearing.com ... for everything that moves™
Entire contents Copyright © 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered trademarks of eBearing Inc.
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