The Timken Company Announces Q1 Sales and Earnings
21 April 1998
The Timken Company Ushers in 1998 with Vigorous Growth; Sets Sales and Earnings Records
CANTON, Ohio, April 21 -- The Timken Company's
performance for the first quarter period ended March 31 shows that the bearing
and steel manufacturer continues to generate strong financial results. Sales
grew by more than 10 percent above the year-earlier period; net income was up
nearly 20 percent.
"Results for this first quarter clearly indicate that we are being
successful in concentrating our energy on initiatives that offer strong
investor returns," said W. R. Timken, Jr., chairman, president and chief
executive officer. "We are developing new products and entering markets that
offer profitable growth, expanding geographically with strategic acquisitions
and capital investments, and focusing on continuous improvement to meet our
margin improvement objectives."
Net sales for the first quarter of 1998 grew to $707.4 million, the first
time quarterly sales have topped $700 million. This was up from $640.6
million reported a year earlier. First quarter net income totaled $49.1
million, a 19.5 percent gain over 1997's net income of $41.1 million. This is
another new record for the company. In the first quarter, earnings per share,
assuming dilution, were $.78 compared to $.64 last year.
"We are on an aggressive course in a demanding competitive environment,"
Mr. Timken said. "These latest records -- higher sales, improved gross margin
and net income -- show that our strategies are proving effective. At the same
time, however, these records become incentives to achieve even higher levels.
Our associates have been demonstrating consistently their ability to achieve
higher levels of performance, and they are realizing the rewards that come
from increased competitiveness."
In April, the company completed its purchase of two million shares under
the 1996 common stock purchase plan. At today's Board of Directors meeting, a
new share purchase plan will be considered.
Bearing Business Results
"Within the Bearing Business, sales from North America and Europe
increased at double-digit percentages when compared to the first quarter of
last year. Elsewhere in the world, Latin American markets remain strong, with
Mexico growing at a particularly rapid rate," said Mr. Timken. "Although the
Asia Pacific weakness continues, the impact of economic problems there has not
been felt strongly in our markets. The impact on our financial results has
been minor."
During the first quarter, net sales in the Bearing Business were $462.8
million, a new quarterly record and an increase from the year-earlier total of
$422.9 million. The increase in sales is attributed to continued strong
demand from the North American industrial original equipment, light truck and
heavy truck markets, as well as an increase in demand from the North American
rail market to fulfill car building schedules. The aerospace business also
continued at high levels. Operating income, another new record achieved by
the Bearing Business, was $50.1 million versus $43.4 million in 1997's first
quarter. The completed quarter included costs associated with bringing on
stream recent acquisitions, the most recent in Ploesti, Romania. It also was
affected by increased spending to support aggressive worldwide growth plans.
Steel Business Results
The Steel Business established a new quarterly record with net sales of
$244.6 million, compared to $217.7 million in 1997. "Steel sales to all
market segments are stronger than a year ago," Mr. Timken said. "Our Steel
Business also achieved double-digit percentage sales increases of precision
steel components, tubes and bars, with the automotive, aerospace and steel
service center distribution segments particularly strong. The business has
been able to meet customer needs using existing capacity more efficiently and
effectively. Evidence of the success of our ongoing continuous improvement
programs is even more striking when you consider that in the past 5 years,
steel sales have nearly doubled."
Operating income of $36.1 million in the first quarter was a new record
for the Steel Business. It compared to $29.6 million in last year's
corresponding period. This increase was achieved in spite of increased scrap
metal prices.
The Timken Company (http://www.timken.com) is a leading international
manufacturer of highly engineered bearings and alloy steels. The company
employs 21,000 people worldwide and reported 1997 sales of more than U.S.
$2.6 billion.
The Timken Company and Subsidiaries
First Quarter Fourth Quarter
Consolidated Statements of Income Ended Mar 31 Ended Dec 31
(Thousands of dollars, except share data) 1998 1997 1997
Net sales $707,381 $640,584 $671,075
Cost of products sold 533,015 489,155 516,498
Gross Profit $174,366 $151,429 $154,577
Selling, administrative and
general expenses 88,141 78,403 87,336
Operating Income $86,225 $73,026 $67,241
Interest expense (5,863) (5,465) (5,137)
Other income (expense) (854) (569) 9,545
Income Before Income Taxes $79,508 $66,992 $71,649
Provision for income taxes 30,372 25,926 24,026
Net Income $49,136 $41,066 $47,623
Earnings Per Share $0.79 $0.66 $0.76
Earnings Per Share - assuming dilution $0.78 $0.64 $0.74
Average Shares Outstanding 62,481,627 62,448,532 62,982,762
Average Shares Outstanding -
assuming dilution 63,331,559 63,383,258 63,943,257
Consolidated Balance Sheets Mar 31 Dec 31
(Thousands of dollars) 1998 1997
ASSETS
Cash and cash equivalents $15,985 $9,824
Accounts receivable 395,105 357,423
Deferred income taxes 49,389 42,071
Inventories 480,106 445,853
Total Current Assets $940,585 $855,171
Property, plant and equipment 1,244,802 1,220,516
Deferred income taxes 15,645 26,605
Other assets 224,000 224,258
Total Assets $2,425,032 $2,326,550
LIABILITIES
Accounts payable and other liabilities $234,116 $253,033
Short-term debt and commercial paper 204,869 156,585
Accrued expenses 170,587 157,343
Total Current Liabilities $609,572 $566,961
Long-term debt 239,814 202,846
Accrued pension cost 112,225 103,061
Accrued postretirement benefits 390,161 389,749
Other non-current liabilities 35,140 31,857
Total Liabilities $1,386,912 $1,294,474
SHAREHOLDERS' EQUITY 1,038,120 1,032,076
Total Liabilities and Shareholders' Equity $2,425,032 $2,326,550
BEARING BUSINESS SEGMENT FINANCIAL RESULTS
(Dollars in millions)
First Quarter Fourth Quarter
Ended Mar 31 Ended Dec 31
1998 1997 1997
Net Sales $462.8 $422.9 $442.3
Operating Income $50.1 $43.4 $40.4
Operating Margin 10.8% 10.3% 9.1%
STEEL BUSINESS SEGMENT FINANCIAL RESULTS
(Dollars in millions)
First Quarter Fourth Quarter
Ended Mar 31 Ended Dec 31
1998 1997 1997
Net Sales $244.6 $217.7 $228.8
Operating Income $36.1 $29.6 $26.8
Operating Margin 14.8% 13.6% 11.7%
Certain amounts reported in the 1997 financials have been re-classified to
conform to the 1998 presentation.
SOURCE The Timken Company