CANTON, Ohio – The Timken Co. has reported sales of $5 billion for 2012, a decrease of 4 percent from the prior year. The decline reflects lower demand from the light vehicle, heavy truck, industrial machinery and oil and gas sectors in the second half of the year. Lower surcharges and the impact of currency also contributed to the decrease in sales. The company said it benefited from improved pricing, the favorable impact of its Philadelphia Gear and Drives acquisitions, and strength in the company’s rail and aerospace and defense end-markets.
In 2012, the company generated net income of $495.5 million, or $5.07 per diluted share, compared with $454.3 million, or $4.59 per diluted share, a year ago. The increase in earnings reflects favorable pricing, lower material costs, LIFO income and acquisitions, partially offset by weaker sales volume, mix, material surcharges and manufacturing costs. The 2012 results also included two significant items, net of tax: the benefit of Continued Dumping and Subsidy Offset Act (CDSOA) receipts in the amount of $68 million, or 69 cents per diluted share, and charges related to the announced closure of a bearing plant in Canada, totaling $28.1 million, or 28 cents per diluted share.
"Over the course of the year, we responded quickly and effectively to slowing demand across our end-markets and maintained our focus on driving value for our customers and shareholders," said James Griffith, Timken president and CEO. "Our strategy of continuing to evolve in key markets and further diversifying our product portfolio with new products and additional repair services enabled us to achieve double-digit operating margins in all four segments, even in the face of lower volumes. Our diversification strategy was reinforced by the positive impact that the Drives and Philadelphia Gear acquisitions are having on our performance.
"The fundamental changes we’ve made to improve the structural performance in our business led to strong operating results and free cash flow generation," said Griffith, "as well as a strengthened balance sheet. Our strategic plan continues to serve us well in the face of uncertainty in the global economy."
Timken posted sales of $1.1 billion in the fourth quarter of 2012, down 15 percent from the same period in 2011. The sales decrease primarily reflects lower demand in the company’s light vehicle, heavy truck, mining and energy-related end-market sectors, as well as lower surcharges. This decrease was partially offset by favorable pricing. From a geographic perspective, the decline also reflects lower demand in North America and Europe, partially offset by growth in Asia.
For the fourth quarter, the company generated net income of $75.3 million, or 78 cents per diluted share. That compares with $109.1 million, or $1.11 per diluted share, earned in the same period last year. The decrease in earnings was primarily the result of lower volume, mix, lower material surcharges and higher manufacturing costs, partially offset by favorable pricing, lower material costs, LIFO income and a lower tax rate.
Outlook
"We expect to deliver solid operating results in 2013 as we continue to take actions to reduce costs and drive efficiencies in response to the environment," said Griffith. "Our outlook for the year reflects our expectation that we will continue to see inventory reduction by our customers in the first half of the year, and anticipate an improving economy in the second half with customer demand matching consumption."
The company expects sales to be down around 5 percent compared to 2012, driven primarily by continued lower demand. Operating performance is expected to remain strong, with all four segments maintaining double-digit operating margins.
Timken projects 2013 annual earnings per diluted share to range from $3.75 to $4.05, which includes restructuring costs for previously announced plant closures totaling approximately 20 cents.
