The Timken Company Reports Increased Sales and Profits in 2nd Quarter, 1st Half
20 July 2000
The Timken Company Reports Increased Sales and Profits in Second Quarter, First Half
CANTON, Ohio, July 20 The Timken Company
reported increased sales and earnings for both the second quarter and first
six months ended June 30.
"For the second quarter, earnings per share doubled from a year ago,
excluding special charges. This reflects improved markets as well as cost
reductions. Margins improved and administrative expenses as a percentage of
sales decreased over the past year, as we began to see the results from cost-
cutting initiatives," said W.R. Timken, Jr., chairman and chief executive
officer. "We are increasing earnings, while managing our transformation to
more globally based businesses."
For the second quarter of 2000, sales increased 9 percent to
$693.3 million from $636.1 million in 1999's second quarter. For the first
six months, sales were also up 9 percent to $1.38 billion from $1.26 billion
in the first half of 1999.
In the second quarter, net income, after restructuring charges, increased
72 percent to $21.2 million from $12.3 million a year ago. Earnings per
diluted share were $0.35, up from $0.20 in the year-ago period.
The second quarter of 2000 included pretax charges of $4.8 million,
related to the company's restructuring announced in the first quarter.
Excluding these charges, net income for the second quarter would have more
than doubled to $24.7 million from the year-ago period. Earnings per diluted
share, excluding the charges, would have been $0.40, double the 1999 second
quarter.
The pretax charges included $3.3 million primarily for severance costs in
Europe, the U.S. and Australia and $1.5 million in fees related to global
realignment of businesses, project costs for consolidating the European
distribution network and refocusing European manufacturing operations.
After restructuring charges, net income for the first six months of 2000
was $37.3 million versus $28.8 million in the first half of 1999, a 30 percent
increase. The first half of 2000 included $21.6 million in pretax charges,
related to the company's restructuring. 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.
For the first six months, earnings per share, assuming dilution, were
$0.61 up 33 percent from $0.46 in 1999. Excluding the charges, first half
earnings per share, assuming dilution, would have totaled $0.83.
Bearings' Results
Bearings' second-quarter net sales were $466.0 million, up 3 percent from
$451.4 million one year ago. For the first half, sales rose 5 percent to
$936.4 million from $890.2 million in the 1999 period. North American
passenger car and light truck markets remained strong through the quarter,
while markets for heavy trucks showed signs of weakening. Strengthening
demand in North American industrial markets, increased sales in Latin America
and the strengthening recovery in Asian markets also contributed to the higher
net sales. North American rail markets remained weak relative to 1999's sales
levels, while weak global aerospace markets improved from the first quarter.
Earnings before interest and taxes (EBIT) in the 2000 second quarter
increased 32 percent to $26.6 million from $20.1 million a year ago. Bearings'
results in the second quarter of 2000 included restructuring charges
consisting of $4.6 million in severance costs, fees and project expenses
related to the global reorganization of businesses, consolidation of the
European distribution network and refocusing of manufacturing operations.
Excluding these charges, EBIT would have been $31.2 million. Second-quarter
EBIT was negatively impacted by the strength of the dollar and British pound,
which are continuing to hurt European profitability. Another factor was
increased employment and training costs in the Canton Bearing facilities in
anticipation of an unusually large number of pending retirements. The company
increased prices on its bearing products in July to help mitigate the impact
of these factors.
For the first six months, EBIT increased 36 percent to $58.8 million from
$43.3 million last year. The first half of 2000 included restructuring charges
of $8.1 million.
Steel's Results
Steel's net sales, including intersegment sales, for the second quarter
increased 20 percent to $278.6 million from $232.9 million a year ago. The
second quarter reflected the continued strength in the automotive and bearings
industries and stronger sales in the industrial, oil, aerospace and service
center markets. For the first half, net sales were up 16 percent to
$549.6 million from $475.0 million a year ago.
Steel second quarter earnings before interest and taxes (EBIT) were
$16.7 million compared with $7.3 million for the same period a year ago.
Production interruptions from equipment problems for several days in late June
dampened EBIT performance. EBIT in the second quarter of 2000 included $0.2
million in restructuring charges. For the first six months of 2000, EBIT was
$19.5 million, compared to $18.3 million in the first half of 1999. EBIT in
the first half of 2000 included $13.5 million in restructuring charges.
Excluding these charges, EBIT would have been $33.0 million or 80 percent
higher than the first half of 1999.
The Timken Company 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.
CONSOLIDATED STATEMENT OF INCOME
(Thousands of U.S. dollars, except share data)
2Q 00 2Q 99 1Q 00 4Q 99 3Q 99
Net sales $693,263 $636,099 $685,791 $631,862 $601,703
Cost of products
sold 550,787 516,498 540,826 501,695 485,362
Gross Profit $142,476 $119,601 $144,965 $130,167 $116,341
Selling, administrative
& general expenses 91,115 87,781 94,145 93,639 89,160
Impairment and
restructuring 3,322 0 14,759 0 0
Operating Income $48,039 $31,820 $36,061 $36,528 $27,181
Other income
(expense) (3,585) (2,748) (2,655) (1,169) (2,306)
Earnings Before
Interest and
Taxes (EBIT) $44,454 $29,072 $33,406 $35,359 $24,875
Interest expense (7,471) (6,869) (7,222) (6,847) (6,853)
Interest income 560 721 549 1,344 604
Income Before
Income Taxes $37,543 $22,924 $26,733 $29,856 $18,626
Provision for income
taxes 16,303 10,660 10,693 8,517 6,184
Net Income $21,240 $12,264 $16,040 $21,339 $12,442
Earnings Per Share $0.35 $0.20 $0.26 $0.35 $0.20
Earnings Per
Share-assuming
dilution $0.35 $0.20 $0.26 $0.35 $0.20
Average Shares
Outstanding 60,837,740 61,906,626 61,099,962 61,572,124 61,929,197
Average Shares
Outstanding-assuming
dilution 61,103,848 62,224,795 61,237,143 61,823,990 62,122,909
BUSINESS SEGMENTS
(Thousands of U.S. dollars)
2Q 00 2Q 99 1Q 00 4Q 99 3Q 99
Bearings
Net sales to
external customers $466,034 $451,438 $470,374 $446,036 $423,680
Impairment and
restructuring 3,225 0 1,909 0 0
Earnings before interest
and taxes (EBIT)* $26,636 $20,070 $32,133 $12,447 $24,782
EBIT Margin 5.7% 4.4% 6.8% 2.8% 5.8%
Steel
Net sales to external
customers $227,229 $184,661 $215,417 $185,826 $178,023
Intersegment sales 51,332 48,265 55,582 54,086 54,141
Total net sales $278,561 $232,926 $270,999 $239,912 $232,164
Impairment and
restructuring 97 0 12,850 0 0
Earnings before interest
and taxes (EBIT)* $16,735 $7,250 $2,791 $22,994 $2,766
EBIT Margin 6.0% 3.1% 1.0% 9.6% 1.2%
CONSOLIDATED STATEMENT OF INCOME
(Thousands of U.S. dollars, except share data)
Six Months 00 Six Months 99
Net sales $1,379,054 $1,261,469
Cost of products sold 1,091,613 1,015,309
Gross Profit $287,441 $246,160
Selling, administrative & general expenses 185,260 177,111
Impairment and restructuring 18,081 0
Operating Income $84,100 $69,049
Other income (expense) (6,240) (6,163)
Earnings Before Interest and Taxes (EBIT) $77,860 $62,886
Interest expense (14,693) (13,525)
Interest income 1,109 1,148
Income Before Income Taxes $64,276 $50,509
Provision for income taxes 26,996 21,666
Net Income $37,280 $28,843
Earnings Per Share $0.61 $0.47
Earnings Per Share-assuming dilution $0.61 $0.46
Average Shares Outstanding 60,969,469 61,884,046
Average Shares Outstanding-assuming
dilution 61,171,114 62,122,559
BUSINESS SEGMENTS
(Thousands of U.S. dollars)
Six Months 00 Six Months 99
Bearings
Net sales to external customers $936,408 $890,155
Impairment and restructuring 5,134 0
Earnings before interest and taxes (EBIT) * $58,769 $43,319
EBIT Margin 6.3% 4.9%
Steel
Net sales to external customers $442,646 $371,314
Intersegment sales 106,914 103,643
Total net sales $549,560 $474,957
Impairment and restructuring 12,947 0
Earnings before interest and taxes (EBIT) * $19,526 $18,279
EBIT Margin 3.6% 3.8%
CONSOLIDATED STATEMENT OF INCOME
(Thousands of U.S. dollars, except share data)
00:'99 2Q 00 2Q 99
Net sales 9.00% $693,263 100.0% $636,099 100.0%
Cost of products sold 6.60% 550,787 79.4% 516,498 81.2%
Gross Profit 19.10% $142,476 20.6% $119,601 18.8%
Selling, administrative
& general expenses 3.80% 91,115 13.1% 87,781 13.8%
Impairment and
restructuring 0.00% 3,322 0.5% 0 0.0%
Operating Income 51.00% $48,039 6.9% $31,820 5.0%
Other income
(expense) 30.50% (3,585) -0.5% (2,748) -0.4%
Earnings Before
Interest and
Taxes (EBIT) 52.90% $44,454 6.4% $29,072 4.6%
Interest expense 8.80% (7,471) -1.1% (6,869) -1.1%
Interest income -22.30% 560 0.1% 721 0.1%
Income Before
Income Taxes 63.80% $37,543 5.4% $22,924 3.6%
Provision for income
taxes 52.90% 16,303 2.4% 10,660 1.7%
Net Income 73.20% $21,240 3.1% $12,264 1.9%
CONSOLIDATED STATEMENT OF INCOME
(Thousands of U.S. dollars,
except share data)
1Q 00 4Q 99 3Q 99
Net sales $685,791 100.0% $631,862 100.0% $601,703 100.0%
Cost of products
sold 540,826 78.9% 501,695 79.4% 485,362 80.7%
Gross Profit $144,965 21.1% $130,167 20.6% $116,341 19.3%
Selling, administrative
& general
expenses 94,145 13.7% 93,639 14.8% 89,160 14.8%
Impairment and
restructuring 14,759 2.2% 0 0.0% 0 0.0%
Operating
Income $36,061 5.3% $36,528 5.8% $27,181 4.5%
Other income
(expense) (2,655) -0.4% (1,169) -0.2% (2,306) -0.4%
Earnings Before
Interest and
Taxes (EBIT) $33,406 4.9% $35,359 5.6% $24,875 4.1%
Interest expense (7,222) -1.1% (6,847) -1.1% (6,853) -1.1%
Interest income 549 0.1% 1,344 0.2% 604 0.1%
Income Before
Income Taxes $26,733 3.9% $29,856 4.7% $18,626 3.1%
Provision for
income taxes 10,693 1.6% 8,517 1.3% 6,184 1.0%
Net Income $16,040 2.3% $21,339 3.4% $12,442 2.1%
CONSOLIDATED STATEMENT OF INCOME
(Thousands of U.S. dollars,
except share data)
00:'99 Six Months 00 Six Months 99
Net sales 9.30% $1,379,054 100.0% $1,261,469 100.0%
Cost of products
sold 7.50% 1,091,613 79.2% 1,015,309 80.5%
Gross Profit 16.80% $287,441 20.8% $246,160 19.5%
Selling,
administrative
& general
expenses 4.60% 185,260 13.4% 177,111 14.0%
Impairment and
restructuring 0.00% 18,081 1.3% 0 0.0%
Operating
Income 21.80% $84,100 6.1% $69,049 5.5%
Other income
(expense) 1.20% (6,240) -0.5% (6,163) -0.5%
Earnings
Before
Interest
and Taxes
(EBIT) 23.80% $77,860 5.6% $62,886 5.0%
Interest
expense 8.60% (14,693) -1.1% (13,525) -1.1%
Interest
income -3.40% 1,109 0.1% 1,148 0.1%
Income Before
Income
Taxes 27.30% $64,276 4.7% $50,509 4.0%
Provision for
income taxes 24.60% 26,996 2.0% 21,666 1.7%
Net Income 29.30% $37,280 2.7% $28,843 2.3%
CONSOLIDATED
BALANCE SHEET June 30 Mar 31 Dec 31 Sept 30 June 30
(Thousands of
U.S. dollars) 2000 2000 1999 1999 1999
ASSETS
Cash & cash
equivalents $6,450 $9,620 $7,906 $18,379 $19,577
Accounts
receivable 406,157 394,033 339,326 358,873 356,619
Deferred
income taxes 38,929 39,901 39,706 39,276 43,712
Inventories 484,376 478,387 446,588 422,908 415,637
Total Current
Assets $935,912 $921,941 $833,526 $839,436 $835,545
Property, plant &
equipment 1,344,491 1,349,779 1,381,474 1,373,079 1,369,316
Deferred
income
taxes 0 0 0 13,641 27,209
Other assets 229,569 220,562 226,318 233,131 239,446
Total
Assets $2,509,972 $2,492,282 $2,441,318 $2,459,287 $2,471,516
LIABILITIES
Accounts payable
& other
liabilities $248,285 $241,101 $236,602 $210,609 $220,990
Short-term debt
& commercial
paper 181,620 141,288 122,547 178,730 148,169
Accrued
expenses 176,514 205,823 198,512 117,744 149,357
Total Current
Liabilities $606,419 $588,212 $557,661 $507,083 $518,516
Long-term
debt 305,908 326,302 327,343 327,645 327,978
Accrued
pension
cost 115,087 101,456 76,005 138,273 146,654
Accrued
postretirement
benefits 396,705 395,531 394,084 393,977 393,710
Deferred
income
taxes 19,279 5,453 6,147 0 0
Other non-
current
liabilities 31,343 32,643 34,097 36,165 36,626
Total
Liabilities $1,474,741 $1,449,597 $1,395,337 $1,403,143 $1,423,484
SHAREHOLDERS'
EQUITY 1,035,231 1,042,685 1,045,981 1,056,144 1,048,032
Total
Liabilities
and
Shareholders'
Equity $2,509,972 $2,492,282 $2,441,318 $2,459,287 $2,471,516