Timken 1Q Profit Plunges, Plans Job Cuts
The Associated Press
04/27/09 - 01:27 PM EDT
CANTON, Ohio (AP) Bearing maker Timken Co. said Monday its first-quarter profit plunged due to weak demand in most of its markets and the impact of lower surcharges and currency changes.
Timken also said job cuts are expected to exceed 7,000, or more than 25 percent of its work force since the start of 2008, and it doubled targeted cuts in selling and administrative costs. And it said it's reducing performance-based incentive plans.
The Canton, Ohio, company slashed its outlook for the year and cut its quarterly dividend in half to 9 cents per share, as well.
Net income of $870,000, or a penny per share, was down from $84.5 million, or 88 cents per share in the year-ago quarter.
Revenue of $960.4 million was down one-third from $1.43 billion in the same quarter in 2008.
Adjusted earnings that excluded special items such as impairment, restructuring and other charges and credits were $7.1 million, or 7 cents per share, compared with $78.9 million, or 82 cents per share in the year-ago period.
Analysts surveyed by Thomson Reuters expected a loss of 2 cents per share on revenue of $1.08 billion. Analysts typically do not include one-time charges in their estimates.
Special items in the recent quarter were $6.2 million compared with $5.6 million in income in the same period last year.
The company reported a gain on a sale of assets in the first quarter of 2008.
"It's now clear that the impact of the recession on the demand for our products will be deeper and longer lasting than we anticipated," said James W. Griffith, president and Chief Executive.
The company said it has doubled its targeted cuts in selling and administrative costs to about $80 million a year by cutting professional staff, overhead costs and discretionary spending.
In addition, compensation costs are expected to be down about $60 million this year from reductions in performance-based incentive plans.
The company said it expects to record special charges of about $70 million primarily related to work force cuts.
Timken also sharply reduced its 2009 guidance to a range between a loss and a profit of 15 cents per share, down from previous guidance of between $1.30 per share and $1.60 per share. The company said it now expects the impact of the global recession to continue through the rest of the year with sales in most of its markets down significantly from 2008.
Analysts expect Timken to earn 78 cents per share, according to a survey by Thomson Reuters.
Shares fell sharply in afternoon trading, losing $2.26, or 13.4 percent, to $14.59.
