CANTON, Ohio -- Timken today reported sales of $913.7 million during the first quarter of 2010, an increase of 5 percent over the same period a year ago. Despite weaker demand in certain aerospace and industrial market sectors, higher volume in the company's mobile end markets drove the overall sales improvement, the company said, with contributions from surcharges and currency.

Income from the company's continuing operations, net of non-controlling interest, in the first quarter was $28.3 million, or 29 cents per diluted share, compared with $4.5 million, or 5 cents per share, a year ago. Excluding special items, income from continuing operations, net of noncontrolling interest, was $55.2 million, or 57 cents per diluted share, compared with $20.7 million, or 22 cents per diluted share, a year ago.

The improvement in first-quarter earnings primarily reflects increased demand, improved manufacturing performance, cost reduction initiatives and the timing effect of the company's material surcharge-recovery mechanism, Timken said. Partially offsetting these benefits were lower aerospace and industrial demand, LIFO expense (last-in, first-out inventory accounting) and higher selling, general and administrative costs related to incentive compensation plans.

"We have increased our profitability with structural improvements and operating efficiencies throughout the company," said James Griffith, Timken president and CEO. "In addition to our improved performance this quarter, we are positioned for greater value creation as we leverage the recovery expected in our industrial markets."

Total debt at March 31 was $515.9 million, or 24 percent of capital, essentially unchanged from year-end, 2009. As of March 31, the company's cash position was $709 million, or $193 million in excess of total debt. This compares with a net cash position of $243 million as of Dec. 31, 2009. The change reflects strong cash flow from earnings, which was more than offset by working-capital requirements and pension contributions, including a discretionary payment of $100 million in the quarter. The company expects to generate positive free cash flow for full year driven by improved earnings.

The company's outlook for 2010 reflects a general improvement in the global economy that varies by end-market and geographic region. Timken anticipates an increase in sales of approximately 20 to 25 percent over 2009, driven primarily by stronger demand in the Steel and Mobile Industries segments. Steel Group sales are expected to increase 65 to 75 percent from 2009, due to improved demand across all market sectors, as well as surcharges. Mobile Industries segment sales are expected to be up approximately 15 to 20 percent, as increased demand across most market sectors is expected to be partially offset by lost business resulting from the company's initiatives to re-price low-margin business. Sales in the Process Industries segment are expected to be up slightly, as growth initiatives in energy and Asia and new product introductions offset declines in other industrial market sectors. Aerospace and Defense segment sales are expected to decline slightly due to decreases in commercial and general aviation, but are expected to improve in the second half.

The company is raising its 2010 full-year earnings estimate, excluding special items, to a range from $1.60 to $1.80 per diluted share, compared with its prior estimate of $0.85 to $1.15 per diluted share. The company expects to deliver strong free cash flow in 2010, driven by improved earnings and effective working capital management and cost controls.