The Timken Company Reports First Quarter Results
18 April 2000
The Timken Company Reports First Quarter Results
Sales Volume Increases; Earnings Up, Excluding Special Charges
CANTON, Ohio, April 18 The Timken Company (NYSE: TKR)
reported today that increased demand in North American industrial markets, a
slight increase in already strong automotive markets and modest strengthening
in Asia and Europe boosted sales and earnings, excluding special charges, in
the first quarter of 2000.
"We are off to a good start this year, and it shows in our first quarter
results. Earnings, excluding special charges, increased 57 percent compared
to one year ago which reflects improving international markets, continued
strength in the automotive industry and exceptional North American demand late
in the quarter in both the bearings and steel businesses. Another key to our
financial performance is our ongoing rationalization work," said W.R. Timken,
Jr., chairman and chief executive officer. "With the $55 million pretax
restructuring announced in March, we are continuing our aggressive actions to
fuel profitable growth, streamline operations, reduce costs and align our
businesses with customers on a global basis."
For the first quarter of 2000, sales were up 9.7 percent to $685.8 million
from $625.4 million in 1999's first quarter. In the first quarter of 2000,
the company incurred total pretax charges of $16.8 million related to the
restructuring efforts. Excluding these special charges, net income for the
first quarter of 2000 was $26.1 million, or $.43 per share, assuming dilution.
Including these charges, net income was $16.0 million, or $.26 per share,
assuming dilution. This compares to net income of $16.6 million, or $0.27 per
share fully diluted, in the 1999 first quarter.
The special charges of $16.8 million include $14.8 million for the write-
off of certain assets in the company's steel business, costs associated with
abandoned acquisition, affiliation and divestiture efforts and consolidation
of the company's distribution network in Europe, plus $2 million in costs
related to the company's realignment of businesses into global units. The
restructuring charges are increasing the company's annualized income tax rate
above 1999 levels due to the non-deductibility of these charges in certain
geographic areas.
During the quarter, the company announced a new five-year labor agreement
with the United Steelworkers of America. It also announced it would retain
its Timken Latrobe Steel subsidiary. The company had been exploring strategic
alternatives for the business, including possible divestiture.
Bearings' Results
New products in the marketplace, recovering North American industrial
markets, modest strengthening in Asia and Europe and continued strong demand
in North American automotive markets all combined to drive Bearings' net sales
to a record level. Bearings first-quarter net sales were $470.4 million
compared to $438.7 million one year ago. Earnings before interest and taxes
(EBIT) also increased to their highest level since the first half of 1998.
EBIT was $32.1 million, compared to $23.2 million in the 1999 first quarter.
Bearings' results included $3.5 million in restructuring charges primarily
related to the consolidation of its distribution network in Europe, which was
announced in January, and its realignment into global business units.
Steel's Results
Steel shipments increased sharply in oil country and service center
markets, while demand in automotive markets remained strong. Shipments to
industrial markets also increased from a weak base. The precision steel
components business continued its strong growth. The company's specialty steel
business -- Timken Latrobe Steel -- also saw significant volume improvement
quarter to quarter in tool steels, while total aerospace steel shipments
decreased slightly. Net sales, including intersegment sales, for the first
quarter were $271.0 million, compared to $242.0 million a year ago. During the
quarter, the steel business announced price increases on bar and tubing for
new orders, beginning April 1.
Steel's first quarter earnings before interest and taxes (EBIT) were
$2.8 million. Excluding the special charges, EBIT would have been
$16.1 million compared to $11.0 million one year ago. The special charges were
related primarily to asset impairment and costs associated with abandonment of
certain acquisition, affiliation and divestiture efforts.
The Timken Company (NYSE: TKR) ( http://www.timken.com ) is a leading
international manufacturer of highly engineered bearings and alloy steels with
operations in 24 countries. The company employs 21,000 people worldwide and
reported 1999 sales of U.S. $2.5 billion.
NOTE: Certain statements in this news release are or could be construed as
forward-looking. Factors that could cause actual results to differ materially
from these forward-looking statements include the ability to achieve the
benefits from the company's ongoing continuous improvement and rationalization
programs, changes in customer demand and possible revocation of U.S. anti-
dumping orders. Additional factors are described in the company's 1999 annual
report, page 17, and the 1999 10-K. The company undertakes no obligation to
update any forward-looking statement.
CONSOLIDATED STATEMENT OF INCOME
(Thousands of U.S. dollars, except share data)
1Q 00 1Q 99 4Q 99 3Q 99 2Q 99
Net sales $685,791 $625,370 $631,862 $601,703 $636,099
Cost of
products
sold 540,826 498,811 501,695 485,362 516,498
Gross Profit $144,965 $126,559 $130,167 $116,341 $119,601
Selling,
administrative
& general
expenses 94,145 89,330 93,639 89,160 87,781
Impairment
and
restructuring 14,759 0 0 0 0
Operating
Income $36,061 $37,229 $36,528 $27,181 $31,820
Other income
(expense) (2,655) (3,415) (1,169) (2,306) (2,748)
Earnings
Before
Interest and
Taxes (EBIT) $33,406 $33,814 $35,359 $24,875 $29,072
Interest
expense (7,222) (6,656) (6,847) (6,853) (6,869)
Interest income 549 427 1,344 604 721
Income Before
Income
Taxes $26,733 $27,585 $29,856 $18,626 $22,924
Provision
for income
taxes 10,693 11,006 8,517 6,184 10,660
Net Income $16,040 $16,579 $21,339 $12,442 $12,264
Earnings Per
Share $0.26 $0.27 $0.35 $0.20 $0.20
Earnings Per
Share-assuming
dilution $0.26 $0.27 $0.35 $0.20 $0.20
Average Shares
Outstand-
ing 61,099,962 61,859,612 61,572,124 61,929,197 61,906,626
Average Shares
Outstanding
-assuming
dilution 61,237,143 62,018,468 61,823,990 62,122,909 62,224,795
BUSINESS SEGMENTS
(Thousands of U.S. dollars)
1Q 00 1Q 99 4Q 99 3Q 99 2Q 99
Bearings
Net sales
to external
customers $470,374 $438,717 $446,036 $423,680 $451,438
Impairment
and
restructuring 1,909 0 0 0 0
Earnings before
interest and
taxes
(EBIT)* $32,133 $23,249 $12,447 $24,782 $20,070
EBIT Margin 6.8% 5.3% 2.8% 5.8% 4.4%
Steel
Net sales to
external
customers $215,417 $186,653 $185,826 $178,023 $184,661
Intersegment
sales 55,582 55,378 54,086 54,141 48,265
Total net
sales $270,999 $242,031 $239,912 $232,164 $232,926
Impairment
and
restructuring 12,850 0 0 0 0
Earnings before
interest and
taxes (EBIT)* $2,791 $11,029 $22,994 $2,766 $7,250
EBIT Margin 1.0% 4.6% 9.6% 1.2% 3.1%
* Bearings and Steel EBIT do not equal Consolidated EBIT due to
intersegment adjustments which are eliminated upon consolidation.
CONSOLIDATED BALANCE SHEET
(Thousands of U.S. dollars)
Mar 31 Dec 31 Sept 30 June 30 Mar 31
2000 1999 1999 1999 1999
ASSETS
Cash & cash
equivalents $9,620 $7,906 $18,379 $19,577 $11,012
Accounts
receivable 394,033 339,326 358,873 356,619 373,814
Deferred income
taxes 39,901 39,706 39,276 43,712 41,444
Inventories 478,387 446,588 422,908 415,637 456,220
Total Current
Assets $921,941 $833,526 $839,436 $835,545 $882,490
Property,
plant &
equipment 1,349,779 1,381,474 1,373,079 1,369,316 1,368,014
Deferred income
taxes 0 0 13,641 27,209 25,079
Other assets 220,562 226,318 233,131 239,446 248,400
Total
Assets $2,492,282 $2,441,318 $2,459,287 $2,471,516 $2,523,983
LIABILITIES
Accounts payable
& other
liabilities $241,101 $236,602 $210,609 $220,990 $226,176
Short-term
debt & commercial
paper 141,288 122,547 178,730 148,169 183,865
Accrued
expenses 205,823 198,512 117,744 149,357 149,845
Total Current
Liabilities $588,212 $557,661 $507,083 $518,516 $559,886
Long-term debt 326,302 327,343 327,645 327,978 327,076
Accrued pension
cost 101,456 76,005 138,273 146,654 155,524
Accrued
postretirement
benefits 395,531 394,084 393,977 393,710 391,897
Deferred
income taxes 5,453 8,526 0 0 0
Other
non-current
liabilities 32,643 34,097 36,165 36,626 38,994
Total
Liabilities $1,449,597 $1,397,716 $1,403,143 $1,423,484 $1,473,377
SHAREHOLDERS'
EQUITY 1,042,685 1,043,602 1,056,144 1,048,032 1,050,606
Total
Liabilities
and
Shareholders'
Equity $2,492,282 $2,441,318 $2,459,287 $2,471,516 $2,523,983