The Timken Company Reports Q2 Results
23 July 1997
The Timken Company Tops Previous Highs for Both Second Quarter and First Half
Continuous Improvement Initiatives Exceed Target
CANTON, Ohio, July 23 -- The Timken Company again
scored new highs in both sales and earnings for the second quarter ended June
30 and the first half. Successful growth and cost reduction initiatives
fueled the continuing strong financial performance.
"Our entire organization has mobilized to emphasize bringing greater value
to our shareholders and customers," said Joseph F. Toot, Jr., president and
chief executive officer. "We have a wealth of talented and dedicated
associates, and this quarter's financial performance is proof positive that
their efforts are translating into significant contributions to the bottom
line. We achieved a percentage increase in sales that was high and an
earnings increase that was higher still."
For the second quarter, net sales were $676 million, or 12.4 percent
higher than the $601.6 million in the year-earlier period. For the first six
months of 1997, the company achieved net sales of $1.317 billion, an increase
of 9.9 percent from the $1.198 billion in 1996's first six months.
Second quarter net income totaled $44.9 million, a 30.1 percent gain over
the year-earlier net income of $34.5 million. Net income for the first six
months of 1997 totaled $86 million, a 26.3 percent increase over the year-
earlier period's $68.1 million. For the quarter, earnings per share were $.72
compared to $.55 in 1996. Earnings per share for the first six months were
$1.37 compared to $1.08 the previous year.
"We are benefitting from our ongoing continuous improvement efforts,
particularly as they relate to our objective of reducing overall costs," said
Mr. Toot. "Toward that end, we have more than met our stated goal of $200
million in annual manufacturing cost savings based on 1993 volume levels.
This is contributing to faster growth as well as better performance for
shareholders and customers.
"In fact, continued growth is an imperative," Mr. Toot said, "and our
recent acquisitions and joint venture -- which total seven since early last
year -- are contributing to that growth.
"As we look ahead, our product mix and our markets look promising for the
remainder of the year," said Mr. Toot. "In spite of fluctuating passenger car
schedules and softening markets in certain geographic areas, we remain
optimistic."
Bearing Business Results
Within the Bearing Business, our performance in the North American truck
and industrial markets generated very strong second quarter sales.
Specifically, strong aerospace, construction, agriculture, industrial power
transmission, truck and trailer markets -- along with modest gains in Europe,
where industrial production has grown slightly -- accounted for the robust
sales increase.
Net sales for the quarter were $444.9 million, a 10.3 percent increase
from the year-earlier period's $403.5 million. For the first half, net sales
were $867.8 million compared to $811 million a year ago.
Productivity gains in both operations and administrative areas have
contributed to strong operating income improvement. In the second quarter,
operating income increased 36.1 percent to $49 million from $36 million in
1996's second period. In the first half, operating income totaled $94.1
million versus $76.4 million in last year's first half.
The Bearing Business is continuing to integrate recent acquisitions in
Poland and Italy as well as its joint venture in China. During the quarter,
the Bearing Business also announced that it would establish a railroad bearing
reconditioning facility as part of Timken de Mexico as well as invest $20
million to meet demand for industrial bearings made at its Asheboro Plant in
North Carolina.
Steel Business Results
The Steel Business hit new records for both sales and operating income.
Markets are stronger than a year ago, particularly for oil and gas drilling
and industrial products, and bar and tube production are at record levels.
The company's Steel Parts Business is continuing to generate substantial
growth, with a year-to-date increase in sales of approximately 25 percent.
The company's new rolling mill, being built at the Harrison Steel Plant in
Canton, is proceeding on schedule, with operations to begin in mid-1998.
For the second quarter, net sales for the Steel Business increased 16.7
percent to $231.1 million from $198 million in the year-earlier period. Net
sales in the first half totaled $448.8 million, compared to $386.5 million
last year.
For the second quarter, operating income increased to $34.3 million from
$28.2 million in 1996. Operating income in the first half totaled $64.7
million, up compared to $48.1 million in last year's corresponding period.
These results were achieved, in part, due to the higher volume levels and
lower scrap costs. They were offset, to some degree, by additional planned
investments in research for new products and processes.
The Timken Company is a leading international manufacturer of
highly engineered bearings and alloy steels. The company employs some 19,000
people worldwide and reported 1996 sales of about U.S. $2.4 billion.
The Timken Company and Subsidiaries
Consolidated Statements of Income
Second Quarter First Quarter Six Months
Ended June 30 Ended Mar 31 Ended June 30
(Thousands of dollars, 1997 1996 1997 1997 1996
except share data)
Net sales $676,003 $601,553 $640,584 $1,316,587 $1,197,507
Cost of products sold 508,484 459,164 487,372 995,856 915,903
Gross profit $167,519 $142,389 $153,212 $320,731 $281,604
Selling, admin. &
general expenses 84,220 78,217 77,754 161,974 157,134
Operating income $83,299 $64,172 $75,458 $158,757 $124,470
Other income (expense):
Interest expense (5,588) (4,059) (5,465) (11,053) (7,734)
Other income (expense)
- net (3,710) (2,281) (3,001) (6,711) (5,061)
Income before income
taxes $74,001 $57,832 $66,992 $140,993 $111,675
Provision for income
taxes 29,061 23,308 25,926 54,987 43,553
Net income $44,940 $34,524 $41,066 $86,006 $68,122
Net income per share $0.72 $0.55 $0.66 $1.37 $1.08
Average shares
outstanding 62,751,517 62,961,224 62,448,532 62,616,397 62,866,576
Consolidated Balance Sheets June 30 Dec 31 Mar 31
(Thousands of dollars) 1997 1996 1997
ASSETS
Cash & cash equivalents $9,906 $5,342 $10,974
Accounts receivable 363,684 313,932 345,999
Deferred income taxes 55,307 54,852 55,916
Inventories 425,597 419,507 425,182
Total current assets $854,494 $793,633 $838,071
Property, plant & equipment 1,120,079 1,094,329 1,121,546
Deferred income taxes 13,578 3,803 11,495
Other assets 190,494 179,573 186,464
Total assets $2,178,645 $2,071,338 $2,157,576
LIABILITIES
Accounts payable & other liabilities $242,985 $237,020 $235,087
Short-term debt & commercial paper 185,695 136,830 198,164
Accrued expenses 138,565 154,098 158,801
Total current liabilities $567,245 $527,948 $592,052
Long-term debt 142,688 165,835 142,806
Accrued pension cost 82,918 56,568 78,570
Accrued postretirement benefits 400,594 398,759 401,396
Total liabilities $1,193,445 $1,149,110 $1,214,824
SHAREHOLDERS' EQUITY 985,200 922,228 942,752
Total liabilities & equity $2,178,645 $2,071,338 $2,157,576
BEARING BUSINESS SEGMENT FINANCIAL RESULTS
(Dollars in millions)
Second Quarter First Quarter Six Months
Ended June 30 End Mar 31 Ended June 30
1997 1996 1997 1997 1996
Net Sales $444.9 $403.5 $422.9 $867.8 $811.0
Operating Income $49.0 $36.0 $45.1 $94.1 $76.4
Operating Margin 11.0% 8.9% 10.7% 10.8% 9.4%
STEEL BUSINESS SEGMENT FINANCIAL RESULTS
(Dollars in millions)
Second Quarter First Quarter Six Months
Ended June 30 End Mar 31 Ended June 30
1997 1996 1997 1997 1996
Net Sales $231.1 $198.0 $217.7 $448.8 $386.5
Operating Income $34.3 $28.2 $30.4 $64.7 $48.1
Operating Margin 14.8% 14.2% 14.0% 14.4% 12.4%
SOURCE The Timken Company