The Timken Company Reports Results for Second Quarter and
First Half
CANTON, Ohio, July 18 Continuing weakness in global
automotive and industrial markets and the U.S. manufacturing recession caused
The Timken Company to report decreased sales and profits for the
second quarter and first half of 2001. Earnings were in line with the
estimates the company provided in an announcement last month.
"U.S. factories are operating at their lowest capacity levels since the
recession period of 1982-83. This reflects the steep drop in demand in most
markets. While some economists see growth rebounding in the fourth quarter, a
large question remains for the manufacturing sector. It has been hit much
harder than the rest of the economy and could take longer to recover," said
W.R. Timken, Jr., chairman and chief executive officer. "Generally, third
quarters tend to be weak, and there are no indications that this next one will
be any different. We have yet to see evidence of a rebound for manufacturing
in the broad indicators. The continuing strong dollar and resulting trade
deficit further cloud the picture."
In view of the market weakness in the second quarter, the company has
stepped up the strategic refocusing of its manufacturing operations, which
should accelerate the previously announced closings of its bearing
manufacturing facilities in Columbus, Ohio and Duston, England. "As the
economy weakened, we have stayed focused and are hitting our targets for
rationalizing operations and reducing fixed assets. Borrowing was reduced by
$20 million during the quarter, and inventory was reduced by about $22
million," Mr. Timken said.
Second-quarter net sales were $634.4 million, down 8.5 percent from $693.3
million in 2000's second quarter.
The company had restructuring and reorganization charges in the second
quarters of both 2001 and 2000. Excluding these pretax charges, second
quarter net income in 2001 was $1.6 million, or $0.03 per diluted share,
compared with $24.7 million, or $0.40 per diluted share a year ago.
Pretax restructuring and reorganization charges of $17.3 million taken in
the second quarter of 2001 were on target with the company's initial estimates
and these charges related primarily to the previously announced closing of the
company's rail bearing manufacturing plant in Columbus, Ohio. The second
quarter of 2000 included pretax restructuring and reorganization charges of
$4.8 million. Including these charges, the company reported a loss of $14.6
million, or a loss of $0.24 per diluted share for the second quarter of 2001
versus net income of $21.2 million, or $0.35 per diluted share a year ago.
Net income in the second quarter of 2001 included a pretax amount of $2.5
million attributable to a reduction in the amounts accrued during the first
quarter for pension and postretirement benefits.
For the first six months, sales fell 7.1 percent to $1.3 billion from $1.4
billion in the first half of 2000. The first half of 2001 included pretax
restructuring and reorganization charges of $29.8 million, and the first half
of 2000 included pretax restructuring charges of $21.6 million. Excluding
these charges, net income for the first half of 2001 was $11.4 million, or
$0.19 per diluted share, versus $50.8 million, or $0.83 per diluted share, a
year ago. Including these charges, the company reported a loss for the first
six months of 2001 of $12.4 million or $0.21 per diluted share. This compares
with net income of $37.3 million, or $0.61 per diluted share, for the first
half of 2000.
Automotive Bearings Business Results
The Automotive Bearings Business, which provides products for passenger
cars, light and heavy trucks and trailers, reported net sales of $195.0
million, down 14.3 percent from last year's second quarter, but about equal to
the first quarter of this year. Global automotive and truck production has
fallen well below last year's levels. While seeing some improvement in
production rates in the second quarter versus the first quarter in North
America, demand for domestically produced vehicles in North America, Latin
America and Europe remains weak.
In the second quarter of 2001, reduced sales volume and the impact of
exchange rates hurt automotive segment profitability versus last year. The
second quarters of 2001 and 2000 included restructuring and reorganization
charges of $0.3 million and $1.7 million respectively. Before these charges
and before interest and taxes, the Automotive Business recorded a profit of
$0.1 million in the second quarter of 2001 compared with earnings of $13.1
million a year ago. After restructuring and reorganization charges, the
business had a loss of $0.2 million versus earnings before interest and taxes
(EBIT) of $11.4 million in last year's second quarter.
For the first six months of 2001, Automotive Bearings' net sales fell 16.3
percent to $389.2 million from $465.1 million in the same period last year.
First-half results included restructuring and reorganization charges of $0.7
million in 2001, and $1.8 million in 2000. Before these charges and before
interest and taxes, the Automotive Business had a loss for the first half of
2001 of $1.5 million versus earnings of $29.7 million in the same period a
year ago. Including the charges, the Automotive Business had a loss of $2.2
million before interest and taxes compared with earnings of $27.9 million a
year ago.
Industrial Bearings Business Results
In the second quarter, demand weakened in every sector served by the
Industrial Bearings Business segment, except aerospace and markets in Central
and Eastern Europe. The segment provides bearings and related products and
services for industrial, rail, aerospace and super precision markets and also
includes all sales into emerging markets in Asia, Central and Eastern Europe.
Industrial Bearings' second-quarter net sales were $221.9 million versus
$238.5 million in the same period last year -- a decrease of 7 percent. Sales
to North American original-equipment manufacturers remained weak in the second
quarter, and poor demand in the industrial aftermarket diminished the
segment's profitability. North American railcar build rates dropped sharply
during the second quarter, also hurting the segment's profits. Aerospace and
super precision sales increased, but some weakness has appeared in
semiconductor markets. Increased demand for bearing products in Central and
Eastern Europe partially offset weak demand in China and India. The second
quarter of 2001 included $16.6 million in restructuring and reorganization
charges primarily for pension costs associated with closing the Columbus rail
bearing plant. Last year's second quarter included $2.9 million in
restructuring and reorganization charges. Earnings before interest and taxes
(EBIT) and restructuring and reorganization charges were $10.1 million, down
from $18.1 million in the second quarter of last year. Including
restructuring charges, the Industrial Bearing Business had a loss of $6.5
million in the second quarter, versus earnings before interest and taxes of
$15.2 million a year ago.
For the first half of 2001, Industrial Bearings had net sales of $463.9
million compared to $471.3 million in the same period last year-- about a 2
percent decline. Results for the first six months of 2001 and 2000 included
restructuring and reorganization charges of $27.3 million and $6.3 million
respectively. EBIT before these charges was $25.5 million for the first six
months of 2001, down from $37.2 million in the first half of last year.
Including restructuring charges, the segment had a loss of $1.8 million in the
first half of this year compared to $30.9 million in earnings before interest
and taxes in last year's first half.
Steel Business Results
Steel's second-quarter net sales, including intersegment sales, fell 8.6
percent to $254.5 million from $278.6 million a year ago. All steel markets
were weak, except aerospace and oil country. There were steep declines in
demand for automotive, bearing and tool steels. Imports have lowered market
prices in the U.S. and negatively affected the steel business. In addition,
the strong U.S. dollar has hurt steel business competitiveness in worldwide
markets. In response to market conditions, the steel business reduced
operating levels and inventories during the quarter, lowering EBIT
performance, and reduced capital spending. Steel's second-quarter EBIT was
$6.3 million, versus $16.7 million a year ago.
For the first half, Steel's net sales were $522.2 million, down 5 percent
from $549.6 million a year ago. First-half results included restructuring and
reorganization charges of $1.8 million in 2001 and $13.5 million in 2000.
Excluding these charges, Steel's EBIT was $17.4 million in the first half of
2001, compared to $33.0 million a year ago. After the charges, Steel's EBIT
was $15.6 million, versus $19.5 million for the first half of 2000.
The Timken Company ( http://www.timken.com ) is a leading
international manufacturer of highly engineered bearings, alloy and specialty
steels and components, as well as related products and services. With
operations in 24 countries, the company employs about 20,000 people worldwide
and recorded 2000 sales of U.S. $2.6 billion.
The company will conduct a teleconference on July 19 at 10 a.m. Eastern
Time on its second-quarter earnings. Dial (706) 634-0975 (access code:
Timken) or link to http://www.timken.com for the Webcast. Replay will be available
at (706) 645-9291 from noon on July 19 through 11:59 p.m. Eastern Time on July
31.
CONSOLIDATED STATEMENT OF INCOME
(Thousands of U.S. dollars, except share data) 2Q 01 2Q 00
Net sales $634,389 $693,263
Cost of products sold 523,306 550,787
Gross Profit $111,083 $142,476
Selling, administrative & general
expenses 93,289 91,115
Impairment and restructuring 16,859 3,322
Operating Income $935 $48,039
Other income (expense) (1,685) (3,585)
Earnings Before Interest and
Taxes (EBIT) ($750) $44,454
Interest expense (8,487) (7,471)
Interest income 608 560
Income Before Income Taxes ($8,629) $37,543
Provision for income taxes 5,945 16,303
Net (Loss) Income ($14,574) $21,240
Earnings Per Share -$0.24 $0.35
Earnings Per Share-assuming dilution -$0.24 $0.35
Average Shares Outstanding 60,015,025 60,837,740
Average Shares Outstanding-assuming
dilution 60,276,721 61,103,848
CONSOLIDATED STATEMENT OF INCOME
(Thousands of U.S. dollars, except
share data) 1Q 01 4Q 00 3Q 00
Net sales $661,516 $631,711 $632,243
Cost of products sold 543,502 527,824 522,698
Gross Profit $118,014 $103,887 $109,545
Selling, administrative & general expenses 96,538 93,319 88,920
Impairment and restructuring 7,907 6,220 3,453
Operating Income $13,569 $4,348 $17,172
Other income (expense) (1,210) 1,048 (1,388)
Earnings Before Interest and Taxes
(EBIT) $12,359 $5,396 $15,784
Interest expense (8,894) (9,148) (8,081)
Interest income 489 635 1,735
Income Before Income Taxes $3,954 ($3,117) $9,438
Provision for income taxes 1,732 (4,040) 1,753
Net (Loss) Income $2,222 $923 $7,685
Earnings Per Share $0.04 $0.02 $0.13
Earnings Per Share-assuming dilution $0.04 $0.02 $0.13
Average Shares Outstanding 59,981,237 59,980,285 60,283,189
Average Shares Outstanding-assuming
dilution 60,122,806 60,103,733 60,422,761
CONSOLIDATED STATEMENT OF INCOME
(Thousands of U.S. dollars, except
share data) Six Months 01 Six Months 00
Net sales $1,295,905 $1,379,054
Cost of products sold 1,066,808 1,091,613
Gross Profit $229,097 $287,441
Selling, administrative & general
expenses 189,827 185,260
Impairment and restructuring 24,766 18,081
Operating Income $14,504 $84,100
Other income (expense) (2,895) (6,240)
Earnings Before Interest and
Taxes (EBIT) $11,609 $77,860
Interest expense (17,381) (14,693)
Interest income 1,097 1,109
Income Before Income Taxes ($4,675) $64,276
Provision for income taxes 7,677 26,996
Net (Loss) Income ($12,352) $37,280
Earnings Per Share -$0.21 $0.61
Earnings Per Share-assuming dilution -$0.21 $0.61
Average Shares Outstanding 59,999,194 60,969,469
Average Shares Outstanding-assuming
dilution 60,200,827 61,171,114
BUSINESS SEGMENTS
(Thousands of U.S. dollars) 2Q 01 2Q 00
Automotive Bearings
Net sales to external customers $194,986 $227,508
Impairment and restructuring 179 710
Earnings before interest and taxes (EBIT) * ($220) $11,434
EBIT Margin -0.1% 5.0%
Industrial Bearings
Net sales to external customers $221,917 $238,526
Impairment and restructuring 16,309 2,515
Earnings before interest and taxes (EBIT) * ($6,538) $15,202
EBIT Margin -2.9% 6.4%
Steel
Net sales to external customers $217,486 $227,229
Intersegment sales 37,000 51,332
Total net sales $254,486 $278,561
Impairment and restructuring 371 97
Earnings before interest and taxes (EBIT) * $6,329 $16,735
EBIT Margin 2.5% 6.0%
*Automotive Bearings, Industrial Bearings and Steel EBIT do not equal
Consolidated EBIT due to intersegment adjustments which are eliminated
upon consolidation.
BUSINESS SEGMENTS
(Thousands of U.S. dollars) 1Q 01 4Q 00 3Q 00
Automotive Bearings
Net sales to external customers $194,257 $184,444 $190,315
Impairment and restructuring 82 172 165
Earnings before interest and taxes
(EBIT) * ($1,986) ($763) ($2,556)
EBIT Margin -1.0% -0.4% -1.3%
Industrial Bearings
Net sales to external customers $241,994 $227,968 $224,180
Impairment and restructuring 7,393 4,186 2,985
Earnings before interest and taxes
(EBIT) * $4,774 $13,589 $9,860
EBIT Margin 2.0% 6.0% 4.4%
Steel
Net sales to external customers $225,265 $219,299 $217,748
Intersegment sales 42,477 38,969 50,617
Total net sales $267,742 $258,268 $268,365
Impairment and restructuring 432 1,862 303
Earnings before interest and taxes
(EBIT) * $9,282 ($8,179) $8,002
EBIT Margin 3.5% -3.2% 3.0%
*Automotive Bearings, Industrial Bearings and Steel EBIT do not equal
Consolidated EBIT due to intersegment adjustments which are eliminated
upon consolidation.
BUSINESS SEGMENTS
(Thousands of U.S. dollars) Six Months 01 Six Months 00
Automotive Bearings
Net sales to external customers $389,243 $465,079
Impairment and restructuring 261 806
Earnings before interest and taxes (EBIT) * ($2,206) $27,914
EBIT Margin -0.6% 6.0%
Industrial Bearings
Net sales to external customers $463,911 $471,329
Impairment and restructuring 23,702 4,328
Earnings before interest and taxes (EBIT) * ($1,764) $30,855
EBIT Margin -0.4% 6.5%
Steel
Net sales to external customers $442,751 $442,646
Intersegment sales 79,477 106,914
Total net sales $522,228 $549,560
Impairment and restructuring 803 $12,947
Earnings before interest and taxes (EBIT) * $15,611 $19,526
EBIT Margin 3.0% 3.6%
*Automotive Bearings, Industrial Bearings and Steel EBIT do not equal
Consolidated EBIT due to intersegment adjustments which are eliminated
upon consolidation.
CONSOLIDATED BALANCE SHEET June 30 Mar 31
(Thousands of U.S. dollars) 2001 2001
ASSETS
Cash & cash equivalents $15,652 $18,872
Accounts receivable 388,780 404,343
Deferred income taxes 42,656 44,903
Inventories 466,471 488,396
Total Current Assets $913,559 $956,514
Property, plant & equipment 1,318,740 1,331,867
Other assets 323,870 312,710
Total Assets $2,556,169 $2,601,091
LIABILITIES
Accounts payable & other liabilities $249,725 $246,557
Short-term debt & commercial paper 218,490 259,779
Accrued expenses 152,108 145,223
Total Current Liabilities $620,323 $651,559
Long-term debt 325,455 303,592
Accrued pension cost 212,941 233,633
Accrued postretirement benefits 410,714 399,252
Deferred income taxes 9,636 10,090
Other non-current liabilities 17,276 18,690
Total Liabilities $1,596,345 $1,616,816
SHAREHOLDERS' EQUITY 959,824 984,275
Total Liabilities and
Shareholders' Equity $2,556,169 $2,601,091
CONSOLIDATED BALANCE SHEET Dec 31 Sept 30 June 30
(Thousands of U.S. dollars) 2000 2000 2000
ASSETS
Cash & cash equivalents $10,927 $18,921 $6,450
Accounts receivable 354,972 380,111 406,157
Deferred income taxes 43,094 35,421 38,929
Inventories 489,549 500,599 484,376
Total Current Assets $898,542 $935,052 $935,912
Property, plant & equipment 1,363,772 1,335,307 1,344,491
Other assets 301,791 218,765 229,569
Total Assets $2,564,105 $2,489,124 $2,509,972
LIABILITIES
Accounts payable & other liabilities $239,182 $233,743 $248,285
Short-term debt & commercial paper 209,423 212,693 181,620
Accrued expenses 138,847 164,325 176,514
Total Current Liabilities $587,452 $610,761 $606,419
Long-term debt 305,181 305,624 305,908
Accrued pension cost 237,952 128,892 115,087
Accrued postretirement benefits 394,097 398,039 396,705
Deferred income taxes 11,742 3,780 19,279
Other non-current liabilities 22,999 29,258 31,343
Total Liabilities $1,559,423 $1,476,354 $1,474,741
SHAREHOLDERS' EQUITY 1,004,682 1,012,770 1,035,231
Total Liabilities and
Shareholders' Equity $2,564,105 $2,489,124 $2,509,972
