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1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File Number 1-1169
December 31, 1997
THE TIMKEN COMPANY
______________________________________________________
(Exact name of registrant as specified in its charter)
Ohio 34-0577130
________________________________________ ___________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1835 Dueber Avenue, S.W., Canton, Ohio 44706-2798
________________________________________ ___________________
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code (330)438-3000
___________________
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
______________________________ _______________________
Common Stock without par value New York Stock Exchange
Rights to Purchase Common Stock without par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
___ ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
2
The aggregate market value of the voting stock held by all shareholders
other than shareholders identified under item 12 of this Form 10-K as of
February 20, 1998, was $1,670,116,320 (representing 52,191,135 shares).
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of February 20, 1998.
Common Stock without par value --62,520,736 shares (representing a market
value of $2,000,663,552)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended
December 31, 1997 are incorporated by reference into Parts I and II.
Portions of the proxy statement for the annual meeting of shareholders to
be held on April 21, 1998, are incorporated by reference into parts III
and IV.
Exhibit Index may be found on Pages 20 through 23.
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PART I
______
Item 1. Description of Business
________________________________
General
_______
As used herein the term "Timken" or the "company" refers to The Timken
Company and its subsidiaries unless the context otherwise requires.
Timken, an outgrowth of a business originally founded in 1899, was
incorporated under the laws of Ohio in 1904.
Products
________
Timken's products are divided into two industry segments. The first
includes anti-friction bearings; the second industry segment is steel.
Anti-friction bearings constitute Timken's principal industry product.
Basically, the tapered roller bearing made by Timken is its principal
product in the anti-friction industry segment. It consists of four
components (1) the cone or inner race, (2) the cup or outer race, (3)
the tapered rollers which roll between the cup and cone, and (4) the
cage which serves as a retainer and maintains proper spacing between
the rollers. These four components are manufactured or purchased and
are sold in a wide variety of configurations and sizes. Sensing
devices are added to the basic tapered roller bearing and sold to sport
utility vehicle and light truck markets.
Matching bearings to service requirements of customers' applications
requires engineering, and oftentimes sophisticated analytical
techniques. The design of every tapered roller bearing made by Timken
permits distribution of unit pressures over the full length of the
roller. This fact, coupled with its tapered design, high precision
tolerance and proprietary internal geometry and premium quality
material, provides a bearing with high load carrying capacity,
excellent friction-reducing qualities and long life.
Timken also produces super precision ball and roller bearings for use in
aerospace, medical / dental, computer disk drives and other markets
having high precision applications. These bearings are mostly produced
at the company's MPB Corporation subsidiary. They utilize ball and
straight rolling elements and are in the super precision end of the
general ball and straight roller bearing product range in the bearing
industry. A majority of MPB's products are special custom-designed
bearings and spindle assemblies. They often involve specialized
materials and coatings for use in applications that subject the bearings
to extreme operating conditions of speed and temperature.
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Products (cont.)
________________
Other bearing products manufactured by Timken include cylindrical,
spherical, straight and ball bearings for industrial markets. These
bearings feature non-tapered rolling elements. This broadening of
Timken's product line was achieved primarily through the 1997
acquisition of Rulmenti Grei S.A. in Ploesti, Romania. In addition,
Timken produces custom-designed products called SpexxTM performance
Bearings. The product line includes both tapered and cylindrical
roller bearings and provides cost-effective solutions for selective
applications.
Steel products include steels of intermediate alloy, low alloy and some
carbon grades, vacuum processed alloys, tool steel and other custom-made
steel products including parts made from specialty steel. These are
available in a wide range of solid and tubular sections with a variety
of finishes.
In April 1997, the company broke ground for its $55 million bar mill at
the Harrison Steel Plant in Canton, Ohio. The investment will position
the company as a cost and quality leader in continuous cast,
intermediate sized alloy steel bars. The project is on schedule with
full operation expected to begin in mid-1998.
The company strengthened its tool and alloy steel distribution business
in the fourth quarter of 1997 by opening a distribution facility in
Greer, South Carolina. This facility is part of the company's OH&R
distribution business, a wholly owned subsidiary of Timken's Latrobe
Steel Company.
Timken has been increasing the marketing of high volume semifinished
components to major customers produced from its own steel. This value
added activity is a growing portion of the business.
The company's Steel Business produces sub-components for automotive and
industrial customers at its St. Clair Precision Tubing Components Plant
in Eaton, Ohio, its Tryon Peak Plant in Columbus, North Carolina and its
newly constructed Winchester Parts Plant in Winchester, Kentucky. The
development of the precision parts business has provided the company
with the opportunity to further expand its market for tubing and capture
more higher-value steel sales. This also enables the company's
traditional tubing customers in the automotive and bearing industries to
take advantage of higher-performing components that cost less than those
they now use.
In the fourth quarter of 1997, the company enhanced its parts business
production capabilities with the installation of its profile ring mill,
a $15 million investment at its Tryon Peak Plant which employs
proprietary manufacturing processes and advanced process control
technology. The Winchester Parts Plant began operations in May 1997 and
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Products (cont.)
________________
subsequently installed additional equipment to meet the demands for its
products.
Sales and Distribution
______________________
Timken's products in the bearing industry segment are sold principally
by its own sales organization. A major portion of the shipments are
made directly from Timken's plants and the balance from warehouses
located in a number of cities in the United States, Canada, England,
France, Germany, Mexico, Singapore and Argentina. These warehouse
inventories are augmented by authorized distributor and jobber
inventories throughout the world which provide local availability when
service is required.
The company operates an Export Service Center in Atlanta, Georgia, which
specializes in the export of tapered roller bearings for the replacement
markets in the Caribbean, Central and South America and other regions.
Timken's tapered roller bearings and other bearing types are used in
general industry and in a wide variety of products including passenger
cars, trucks, railroad cars and locomotives, machine tools, rolling
mills and farm and construction equipment. MPB's products, which are at
the super precision end of the general ball and straight roller bearing
segment, are used in aircraft, missile guidance systems, computer
peripherals, and medical / dental instruments.
A significant portion of Timken's steel production is consumed in its
bearing operations. In addition, sales are made to other anti-friction
bearing companies and to the aircraft, automotive and truck,
construction, forging, tooling and oil and gas drilling industries. In
addition, sales are made to steel service centers. Timken's steel
products are sold principally by its own sales organization. Most
orders are custom made to satisfy specific customer applications and are
shipped directly to customers from Timken's steel manufacturing plants.
Timken has a number of customers in the automotive industry including
both manufacturers and suppliers. However, Timken feels that because of
the size of that industry, the diverse bearing applications, and the
fact that its business is spread among a number of customers, both
foreign and domestic, in original equipment manufacturing and
aftermarket distribution, its relationship with the automotive industry
is well diversified.
Timken has entered into individually negotiated contracts with some of
its customers in both the bearing and steel segments. These contracts
may extend for one or more years and, if a price is fixed for any period
extending beyond current shipments, customarily include a commitment by
the customer to purchase a designated percentage of its requirements
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Sales and Distribution (cont.)
______________________________
from Timken. Contracts extending beyond one year that are not subject
to price adjustment provisions do not represent a material portion of
Timken's sales. Timken does not believe that there is any significant
loss of earnings risk associated with any given contract.
Industry Segments
_________________
Segment information in Note 13 of the Notes to Consolidated Financial
Statements and Information by Industry and Geographic Area on pages 32
and 33 of the Annual Report to Shareholders for the year ended
December 31, 1997, are incorporated herein by reference. Export sales
from the U.S. and Canada are not separately stated since such sales
amount to less than 10% of revenue. The company's Bearing Business has
historically participated in the worldwide bearing markets while the
Steel Business has concentrated on U.S. markets.
Timken's non-U.S. operations are subject to normal international
business risks not generally applicable to domestic business. These
risks include currency fluctuation, changes in tariff restrictions, and
restrictive regulations by foreign governments including price and
exchange controls.
Competition
___________
Both the anti-friction bearing business and the steel business are
extremely competitive. The principal competitive factors involved, both
in the United States and in foreign markets, include price, product
quality, service, delivery, order lead times and technological
innovation.
Timken manufactures an anti-friction bearing known as the tapered roller
bearing. The tapered principle of bearings made by Timken permits ready
absorption of both radial and axial loads in combination. For this
reason, they are particularly well adapted to reducing friction where
shafts, gears, or wheels are used. Timken also produces super precision
ball and straight roller bearings at its MPB subsidiary. With recent
acquisitions, the company has selectively expanded its product line to
include other bearing types. However, since the invention of the
tapered roller bearing by its founder, Timken has maintained primary
focus in its product and process technology on the tapered roller
bearing segment. This has been important to its ability to remain one
of the leaders in the world's bearing industry. This contrasts with the
majority of Timken's major competitors who focus more heavily on other
bearing types such as ball, straight roller, spherical roller and needle
for the general industrial and automotive markets and are, therefore,
less specialized in the tapered roller bearing segment. Timken competes
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Competition (cont.)
___________________
with domestic manufacturers and many foreign manufacturers of anti-
friction bearings.
The anti-friction bearing business is intensely competitive in every
country in which Timken competes. With the collapse of the former
Soviet Union and the modernization of existing capacity in many
countries, there remain substantial downward pricing pressures in the
United States and other countries even during periods of significant
demand in the United States and other markets. Moreover, international
price discrimination by certain of Timken's foreign competitors and the
continued absorption of antidumping duties by companies related to the
foreign producers in the United States create additional pricing
pressures in the United States. Imports of tapered roller bearings into
the United States in 1997 were $240 million or approximately 18 percent
of the domestic tapered roller bearing market. In addition, Timken
estimates the tapered roller bearings contained as components of foreign
automobiles and heavy equipment produced outside the United States and
imported into this country, to be approximately $207 million in 1997.
To address the problem of injurious dumping by various foreign
competitors, the company has pursued its legal rights in the United
States and in other parts of the world for many years. In the United
States, antidumping orders are outstanding from cases brought by the
company in the early 1970s and in 1986. The antidumping finding issued
in 1976 pertains to tapered roller bearings from Japan that have an
outside diameter of 4 inches or less but excluding unfinished components
or parts. The finding does not apply to one major Japanese producer.
In August 1986, the company filed an antidumping petition on behalf of
the U.S. tapered roller bearing industry with both the U.S.
International Trade Commission and the U.S. Department of Commerce
alleging that imports of tapered roller bearings (including unfinished
parts and components from six countries (China, Romania, Yugoslavia,
Italy, Hungary, and Japan (to the extent not covered by the 1976
finding)) were being sold at less than fair value in the United States
and were causing material injury to the domestic industry. The U.S.
Department of Commerce found that product from each of the countries was
being sold in the United States at less than fair value or "dumped," and
the U.S. International Trade Commission found such imports were causing
injury to the domestic industry. The Commerce Department's notice also
identified the amount by which selling prices of the foreign producers
were less than fair value. This amount is expressed as a weighted
average percentage for each company investigated and is often referred
to as the "final margin" for a particular time period. The final
margins for Japanese producers as originally calculated in 1986-87 were
approximately 36 percent for the major producers. Final margins for
producers in other countries varied but were above 100% for one foreign
producer. If requested by foreign producers, importers, or domestic
producers, the dumping margins (if any) will be examined for a more
recent time period.
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Competition (cont.)
___________________
Substantial dumping margins have been found for most or all of the major
producers in Japan for most years since the antidumping orders issued.
On January 15, 1998, the U.S. Department of Commerce issued final
margins for companies investigated for the 1995-96 time period, finding
dumping margins that ranged from .34% to 29.02%. Margins for some of
the major producers were 9.6%, 27.8% and 29.02%.
Significant dumping margins continue to be found for certain producers
from other countries covered by orders. For some countries covered by
the orders, imports have declined or ceased. Some foreign producers and
exporters / resellers have ceased dumping. The orders were revoked for
Yugoslavia in 1995 and for Italy in 1996 as well as for selected
individual producers in the other orders over time. Importers
are required to post a cash deposit with the U.S. Customs Service equal
to the final margin from the most recent period that has been published
for a particular foreign producer from a country where an order remains
outstanding. If no dumping is found or the amount of dumping is less
than the cash deposit, the importer receives a refund with interest. If
the dumping found in the review is greater than the amount posted as a
cash deposit, the difference must be paid to the U.S. Customs Service
with interest.
Timken has remained deeply concerned about the persistence of unfair
trade practices in its major markets and has participated in the
administrative review process in the United States and elsewhere to
assure that conditions of fair trade are restored if possible. The
company has pursued and continues to pursue legislative changes to
neutralize the price depressing effect of duty absorption that has
continued in the United States for more than 20 years in some cases.
The existence of the orders reduces the commercial harm that would
otherwise be experienced by the company from the continued dumping
practices of certain foreign competitors. In accord with the
international treaty obligations of the United States, each existing
antidumping duty finding or order, including those covering tapered
roller bearings, will be subject to review by U.S. government agencies
to determine whether dumping and injury to the domestic industry are
likely to continue or recur if it is revoked. These reviews are
tentatively scheduled to commence for the finding and order covering
tapered roller bearings in mid-1999. The company intends to participate
actively in the proceedings.
Timken manufactures carbon and alloy seamless tubing, carbon and alloy
steel solid bars, tool steels and other custom-made specialty steel
products. Specialty steels are characterized by special chemistry,
tightly controlled melting and precise processing.
Maintaining high standards of product quality and reliability while
keeping production costs competitive is essential to Timken's ability to
9
Competition (cont.)
___________________
compete in the specialty steel industry with domestic and foreign steel
manufacturers.
Backlog
_______
The backlog of orders of Timken's domestic and overseas operations is
estimated to have been $1.37 billion at December 31, 1997, and
$1.05 billion at December 31, 1996. Actual shipments are dependent upon
ever-changing production schedules of the customer. Accordingly, Timken
does not believe that its backlog data and comparisons thereof as of
different dates are reliable indicators of future sales or shipments.
Raw Materials
_____________
The principal raw materials used by Timken in its North American plants
to manufacture bearings are its own steel tubing and bars and purchased
strip steel. Outside North America the company purchases raw materials
from local sources with whom it has worked closely to assure steel
quality according to its demanding specifications.
The principal raw materials used by Timken in steel manufacturing are
scrap metal, nickel, and other alloys. Timken believes that the
availability of raw materials and alloys are adequate for its needs,
and, in general, it is not dependent on any single source of supply.
Research
________
Timken's major research center, located in Stark County, Ohio near its
largest manufacturing plant, is engaged in research on bearings, steels,
manufacturing methods and related matters. Research facilities are also
located at the MPB New Hampshire Plants, the Duston, England plant and
at the Latrobe, Pennsylvania plant. Expenditures for research,
development and testing amounted to approximately $43,000,000 in 1997,
$41,000,000 in 1996, and $35,000,000 in 1995. The company's research
program is committed to the development of new and improved bearing and
steel products, as well as more efficient manufacturing processes and
techniques and the expansion of application of existing products.
Environmental Matters
_____________________
The company continues to emphasize protecting the environment and
complying with environmental protection laws. In doing so, the company
has invested in pollution control equipment and updated plant
operational practices. The company believes it has established adequate
reserves to cover its environmental expenses and has a well-established
environmental compliance audit program, which includes a proactive
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Environmental Matters (cont.)
_____________________
approach to bringing its domestic and international units to higher
standards of environmental performance. This program measures
performance against local laws as well as to standards that have been
established for all units worldwide.
It is difficult to assess the possible effect of compliance with future
requirements that differ from existing ones. As previously reported,
the company was uncertain whether additional emission monitoring would
be required or what the cost would be when proposed emission monitoring
regulations pursuant to the Clean Air Act of 1990 were issued. In 1997,
the regulations were issued in a modified form from those proposed and,
while some uncertainty remains, the financial impact on the company is
expected to be small, certainly less than anticipated under the proposed
regulations. The company also is unsure of the ultimate future
financial impact to the company that could result from the United States
Environmental Protection Agency's (EPA's) final rules to tighten the
National Ambient Air Quality Standards for fine particulate and ozone,
which were issued in July.
The company and certain of its U.S. subsidiaries have been designated as
potentially responsible parties (PRP's) by the United States EPA for
site investigation and remediation at certain sites under the
Comprehensive Environmental Response, Compensation and Liability Act
(Superfund). The claims for remediation have been asserted against
numerous other entities, which are believed to be financially solvent
and are expected to fulfill their proportionate share of the obligation.
In 1997, the company and its Latrobe Steel subsidiary were both named a
PRP at one additional site. Management believes any ultimate liability
with respect to all pending actions will not materially affect the
company's operations, cash flows or consolidated financial position.
The company's MPB Corporation subsidiary has two environmental projects
at its manufacturing locations in New Hampshire. Remediation at one
plant is nearing completion. In late 1996, the second system was
installed and remediation was begun at the other plant. The company had
provided for the costs of these projects, which to date have been
$3.5 million. A portion of these costs is being recovered from a former
owner of the property. Future operating and maintenance costs are
expected to be $1.7 million. MPB also filed suit against and settled
with four insurance companies for reimbursement of clean-up costs.
The company continued work in 1997 on environmental projects at its
locations in Canton and Columbus, Ohio. Costs for these two projects
are estimated to be about $2.1 million.
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Patents, Trademarks and Licenses
________________________________
Timken owns a number of United States and foreign patents, trademarks
and licenses relating to certain of its products. While Timken regards
these as items of importance, it does not deem its business as a whole,
or either industry segment, to be materially dependent upon any one
item or group of items.
Employment
__________
At December 31, 1997, Timken had 20,994 associates. Thirty-nine percent
of Timken's U.S. associates are covered under collective bargaining
agreements. Three percent of Timken's U.S. associates are covered under
collective bargaining agreements that expire within one year.
Executive Officers of the Registrant
____________________________________
The officers are elected by the Board of Directors normally for a term
of one year and until the election of their successors. All officers
have been employed by Timken or by a subsidiary of the company during
the past five-year period. The Executive Officers of the company as of
February 20, 1998, are as follows:
Current Position and Previous
Name Age Positions During Last Five Years
___________________ ___ ____________________________________________
W. R. Timken, Jr. 59 1992 Chairman - Board of Directors;
1997 Chairman, President and Chief
Executive Officer; Director;
Officer since 1968.
R. L. Leibensperger 59 1992 Vice President - Technology;
1995 Executive Vice President and President
- Bearings;
1997 Executive Vice President, Chief
Operating Officer and President
- Bearings; Officer since 1986.
B. J. Bowling 56 1992 Vice President - Human Resources and
Logistics;
1993 Executive Vice President-Latrobe Steel
Company;
1995 President-Latrobe Steel Company;
1996 Executive Vice President and President
- Steel;
1997 Executive Vice President, Chief
Operating Officer and President
- Steel; Officer since 1996.
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Current Position and Previous
Name Age Positions During Last Five Years
___________________ ___ ____________________________________________
L. R. Brown 62 1992 Vice President and General Counsel;
Secretary;
1997 Senior Vice President and General
Counsel; Secretary; Officer
since 1990.
J. T. Elasser 45 1992 Director-President-Timken do Brasil;
1992 Director-21st Century Business
Project;
1993 Deputy Managing Director-Bearings-
Europe, Africa and West Asia;
1995 Managing Director-Bearings-Europe,
Africa and West Asia;
1996 Vice President-Bearings-Europe, Africa
and West Asia;
1997 Group Vice President - Bearings -
Rail, Europe, Africa and West Asia;
Officer since 1996.
J. W. Griffith 44 1992 Director-Purchasing and Logistics;
1993 Director-Manufacturing-Bearings-North
and South America;
1993 Vice President-Manufacturing-Bearings-
North America;
1996 Vice President-Bearings-North American
Automotive, Rail, Asia Pacific and
Latin America;
1997 Group Vice President - Bearings -
North American Automotive, Asia
Pacific and Latin America; Officer
since 1996.
Karl P. Kimmerling 40 1992 General Manager - Primary Operations
and Engineering - Latrobe Steel
Company;
1995 President - Canadian Timken Ltd.;
1996 Vice President - Manufacturing -
Steel;
1997 Group Vice President - Alloy Steel;
Officer since 1998.
G. E. Little 54 1992 Vice President - Finance; Treasurer;
1997 Senior Vice President - Finance;
Treasurer; Officer since 1990.
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Current Position and Previous
Name Age Positions During Last Five Years
___________________ ___ ____________________________________________
S. J. Miraglia, Jr. 47 1992 Director-Manufacturing-Steel;
1993 Vice President-Manufacturing-Steel;
1994 Director-Manufacturing-Europe, Africa
and West Asia;
1996 Vice President-Bearings-North American
Industrial and Super Precision;
1997 Group Vice President - Bearings -
North American Industrial and Super
Precision; Officer since 1996.
S. A. Perry 52 1992 Director - Purchasing and Logistics;
1993 Vice President - Human Resources and
Logistics;
1997 Senior Vice President - Human
Resources, Purchasing and
Communications; Officer since 1993.
Hans J. Sack 43 1992 Project Manager - Parts Strategy -
Steel;
1993 General Manager - Parts Business -
Steel;
1994 Vice President - Manufacturing -
Steel;
1996 President - Latrobe Steel Company;
1997 Group Vice President - Specialty Steel
and President - Latrobe Steel
Company; Officer since 1998.
J. J. Schubach 61 1992 Vice President - Strategic Management;
1996 Vice President - Strategic Management
and Continuous Improvement;
1997 Senior Vice President - Strategic
Management and Continuous
Improvement; Officer since 1984.
T. W. Strouble 58 1992 Director - Marketing - Bearings -
North and South America;
1993 Vice President - Sales and Marketing -
Bearings - North and South America;
1995 Vice President - Technology;
1997 Senior Vice President - Technology
Officer since 1995.
W. J. Timken 55 1992 Vice President; Director; Officer
since 1992.
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Item 2. Properties
___________________
Timken has bearing and steel manufacturing facilities at several
locations in the United States. Timken also has bearing manufacturing
facilities in several countries outside the United States. The
aggregate floor area of these facilities worldwide is approximately
13,519,000 square feet, all of which, except for approximately 405,000
square feet, is owned in fee. The buildings occupied by Timken are
principally of brick, steel, reinforced concrete and concrete block
construction, all of which are suitably equipped and in satisfactory
operating condition.
Timken's bearing manufacturing facilities in the United States are
located in Ashland, Bucyrus, Canton, Columbus and New Philadelphia,
Ohio; Altavista and Richmond, Virginia; Asheboro and Lincolnton, North
Carolina; Carlyle, Illinois; Gaffney, South Carolina; Keene and Lebanon,
New Hampshire; Knoxville, Tennessee; Lenexa, Kansas; North Little Rock,
Arkansas; Ogden, Utah; and Orange, California. These facilities,
including the research facility in Canton, Ohio, and warehouses at plant
locations, have an aggregate floor area of approximately 4,669,000
square feet.
Timken's bearing manufacturing plants outside the United States are
located in Ballarat, Australia; Benoni, South Africa; Cogozzo, Italy;
Colmar, France; Duston and Wolverhampton, England; Medemblik, The
Netherlands; Ploesti, Romania; Sao Paulo, Brazil; Singapore; Sosnowiec,
Poland; St. Thomas, Canada; and Yantai, China. The facilities,
including warehouses at plant locations, have an aggregate floor area of
approximately 3,634,000 square feet.
Timken's steel manufacturing facilities in the United States are located
in Canton, Eaton, Wauseon and Wooster, Ohio; Columbus, North Carolina;
Franklin and Latrobe, Pennsylvania; and Winchester, Kentucky. These
facilities have an aggregate floor area of approximately 4,959,000
square feet.
Timken also has a tool steel finishing and distribution facility in
Sheffield, England. This facility has an aggregate floor area of
approximately 257,000 square feet.
In addition to the manufacturing and distribution facilities discussed
above, Timken owns warehouses and steel distribution facilities in the
United States, Canada, England, France, Scotland, Singapore, Germany,
Mexico and Argentina, and leases several relatively small warehouse
facilities in cities throughout the world.
During 1997 Timken's Bearing and Steel Businesses continued to
experience high plant utilization as a result of increased sales in most
industries and geographic areas.
15
Properties (cont.)
__________________
Timken's manufacturing facilities expanded significantly during 1997 as
a result of its four most recent acquisitions. The company also
announced plans for plant expansions in several of its U.S. plants.
In February 1997, Timken acquired the certain assets of Gnutti Carlo,
S.p.A. near Brescia, Italy. This subsidiary is now Timken Italia,
s.r.l. and serves primarily the European truck, railroad and industrial
markets. The facility includes floor space of approximately 163,300
square feet and employs some 120 associates.
Also in February, Timken announced plans to open a hot-forming facility
in Winchester, Kentucky. The Winchester Plant, which began operations
in May, is a 75,000 square foot facility and employs about 40 people.
The plant produces forged bearing components from Timken steel bars.
In April, the company broke ground for its $55 million bar mill at the
Harrison Steel Plant in Canton, Ohio. The 119,000 square foot expansion
will house a new rolling mill and bar processing equipment and is
expected to be fully operational by mid-1998.
In May the company announced its acquisition of the assets of Handpiece
Headquarters, Inc., in Orange, California. This company repairs and
rebuilds a variety of dental handpieces for dentists and other
customers in its 1,200 square foot facility.
In July the company acquired the aerospace bearing operations of the
Torrington Company Limited, located in Wolverhampton, England. The
business serves the European commercial and military aircraft industry.
The facility includes floor space of 54,000 square feet and employs
more than 100 people.
Also in July, the company announced a $20 million investment to expand
its Asheboro Plant. The expansion will increase the plant's square
footage by 50%.
In the fourth quarter, the company began work on its $51 million
investment in the Gaffney , South Carolina plant that was announced in
September 1997. The investment, which will be made over the next 5
years, will increase plant capacity by more than 25% in some areas.
Additionally in the fourth quarter, the company announced a $15 million
investment in new machining technology at its Bucyrus plant in Ohio.
Also in the fourth quarter, the company announced the opening of a tool
and alloy steel distribution facility in Greer, South Carolina. The new
operation will offer steel warehousing, cutting and machining services
16
Properties (cont.)
__________________
to independent retail distributors as well as industrial customers in
the southeastern United States.
In December, the company acquired 70% of Rulmenti Grei S.A., a bearing
manufacturer in Ploesti, Romania. The company serves mainly the
industrial markets in Romania as well as in Eastern and Western Europe,
Asia and North America. The operation contains 498,000 square feet of
manufacturing space and employs some 1,000 people.
The company is a forty percent shareholder in Tata Timken Limited, a
joint venture with The Tata Iron and Steel Company Limited. The joint
venture consists of a manufacturing facility in Jamshedpur, India,
completed in March of 1992, and four sales offices, also located in
India.
Item 3. Legal Proceedings
__________________________
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
____________________________________________________________
No matters were submitted to a vote of security holders during the
fourth quarter ended December 31, 1997.
17
PART II
_______
Item 5. Market for the Registrant's Common Equity and Related Stock
____________________________________________________________________
Holder Matters
______________
The company's common stock is traded on the New York Stock Exchange
(TKR). The estimated number of record holders of the company's common
stock at December 31, 1997, was 8,313. The estimated number of
shareholders at December 31, 1997, was 46,394.
High and low stock prices and dividends for the last two years are
presented in the Quarterly Financial Data schedule on Page 1 of the
Annual Report to Shareholders for the year ended December 31, 1997, and
is incorporated herein by reference.
Between October 1, 1996 and December 31, 1997, non-United States
fiduciaries of certain employee stock purchase and savings plans
established and administered in accordance with the laws of countries
other than the United States purchased 44,470 shares of the company's
common stock on the New York Stock Exchange on behalf of persons not
resident in the United States who are employed by subsidiaries of the
company. The purchases were made in reliance on Regulation S under the
Securities Act of 1933 for an aggregate consideration of $1,317,941.
The number of shares have been adjusted to reflect the impact of the two-
for-one stock split approved by the Board of Directors on April 15,
1997.
Item 6. Selected Financial Data
________________________________
The Summary of Operations and Other Comparative Data on Pages 34 and 35
of the Annual Report to Shareholders for the year ended December 31,
1997, is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
________________________________________________________________________
Results of Operation
____________________
Management's Discussion and Analysis of Financial Condition and Results
of Operations on Pages 17-24 of the Annual Report to Shareholders for
the year ended December 31, 1997, is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
____________________________________________________
The Quarterly Financial Data schedule included on Page 1, the
consolidated financial statements of the registrant and its subsidiaries
on Pages 18-24, the notes to consolidated financial statements on Pages
25-33, and the Report of Independent Auditors on Page 33 of the Annual
18
Report to Shareholders for the year ended December 31, 1997, are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants
______________________________________________________
on Accounting and Financial Disclosure
______________________________________
Not applicable.
19
PART III
________
Item 10. Directors and Executive Officers of the Registrant
____________________________________________________________
Required information is set forth under the caption "Election of
Directors" on Pages 4-7 of the proxy statement issued in connection with
the annual meeting of shareholders to be held April 21, 1998, and is
incorporated herein by reference. Information regarding the executive
officers of the registrant is included in Part I hereof.
Item 11. Executive Compensation
________________________________
Required information is set forth under the caption "Executive
Compensation" on Pages 10-20 of the proxy statement issued in connection
with the annual meeting of shareholders to be held April 21, 1998, and
is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
________________________________________________________________________
Required information regarding Security Ownership of Certain Beneficial
Owners and Management, including institutional investors owning more
than 5% of the company's Common Stock, is set forth under the caption
"Beneficial Ownership of Common Stock" on Pages 8-9 of the proxy
statement issued in connection with the annual meeting of shareholders
to be held April 21, 1998, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
________________________________________________________
Required information is set forth under the caption "Election of
Directors" on Pages 4-7 of the proxy statement issued in connection with
the annual meeting of shareholders to be held April 21, 1998, and is
incorporated herein by reference.
20
PART IV
_______
Item 14. Exhibits, Financial Statement Schedules, and Report on
Form 8-K
_________________________________________________________________________
(a)(1) and (2) - The response to this portion of Item 14 is submitted
as a separate section of this report.
(3) Listing of Exhibits
Exhibit
_______
(3)(i) Amended Articles of Incorporation of The Timken Company
(Effective April 16, 1996) were filed with Form S-8
dated April 16, 1996 and are incorporated herein by
reference.
(3)(ii) Amended Regulations of The Timken Company effective
April 21, 1987, were filed with Form 10-K for the
period ended December 31, 1992, and are incorporated
herein by reference.
(4) Sixth Amendment Agreement dated August 31, 1997, to the
amended and restated credit agreement as amended
February 23, 1993, May 31, 1994, November 15, 1994, and
August 15, 1995, and August 31, 1996, between Timken
and certain banks was filed with Form 10-Q for the
period ended September 30, 1997, and is incorporated
herein by reference.
(4.1) Fifth Amendment Agreement dated August 31, 1996, to the
amended and restated credit agreement as amended
February 23, 1993, May 31, 1994, November 15, 1994, and
August 15, 1995, between Timken and certain banks was
filed with Form 10-Q for the period ended September 30,
1996, and is incorporated herein by reference.
(4.2) Fourth Amended Agreement dated August 15, 1995, to the
amended and restated credit agreement as amended
February 23, 1993, May 31,1994, and November 15, 1994,
between Timken and certain banks, was filed with Form
10-Q for the period ended September 30, 1995, and is
incorporated herein by reference.
(4.3) Third Amendment Agreement dated November 15, 1994, to
the amended restated credit agreement as amended
February 23, 1993, and May 31, 1994, between Timken and
certain banks, was filed with Form 10-Q for the period
ended September 30, 1995, and is incorporated herein by
reference.
21
Listing of Exhibits (cont.)
___________________________
(4.4) Second Amendment Agreement dated May 31, 1994, to the
amended restated credit agreement as amended February
23, 1993, between Timken and certain banks, was filed
with Form 10-Q for the period ended June 30, 1994, and
is incorporated herein by reference.
(4.5) First Amendment Agreement dated February 26, 1993, to
the restated credit agreement as amended December 31,
1991, between Timken and certain banks was filed with
Form 10-K for the period ended December 31, 1992, and
is incorporated herein by reference.
(4.6) Credit Agreement amended as of December 31, 1991,
between Timken and certain banks was filed with Form
10-K for the period ended December 31, 1991, and is
incorporated herein by reference.
(4.7) Indenture dated as of July 1, 1990, between Timken and
Ameritrust Company of New York, which was filed with
Timken's Form S-3 registration statement dated July 12,
1990, and is incorporated herein by reference.
(4.8) First Supplemental Indenture, dated as of July 24,
1996, by and between The Timken Company and Mellon
Bank, N.A. was filed with Form 10-Q for the period
ended September 30, 1996, and is incorporated herein by
reference.
(4.9) The company is also a party to agreements with respect
to other long-term debt in total amount less than 10%
of the registrant's consolidated total assets. The
registrant agrees to furnish a copy of such agreements
upon request.
Management Contracts and Compensation Plans
___________________________________________
(10) The Management Performance Plan of The Timken Company
for Officers and Certain Management Personnel.
(10.1) The form of Deferred Compensation Agreement entered
into with Joseph F. Toot, Jr., W. R. Timken, Jr., R. L.
Leibensperger and B. J. Bowling was filed with Form
10-Q for the period ended September 30, 1995, and is
incorporated herein by reference.
(10.2) The Timken Company 1996 Deferred Compensation Plan for
officers and other key employees, was filed with Form
10-Q for the period ended September 30, 1995, and is
incorporated herein by reference.
22
Listing of Exhibits (cont.)
___________________________
(10.3) The Timken Company Long-Term Incentive Plan for
officers and other key employees as amended and
restated as of December 20, 1995, and approved by
shareholders April 16, 1996, was filed as Appendix A to
Proxy Statement dated March 6, 1996, and is
incorporated herein by reference.
(10.4) The 1985 Incentive Plan of The Timken Company for
Officers and other key employees as amended through
December 17, 1997.
(10.5) The form of Severance Agreement entered into with all
Executive Officers of the company was filed with
Form 10-K for the period ended December 31, 1996, and
is incorporated herein by reference. Each differs only
only as to name and date executed.
(10.6) The form of Death Benefit Agreement entered into with
all Executive Officers of the company was filed with
Form 10-K for the period ended December 31, 1993, and
is incorporated herein by reference. Each differs only
as to name and date executed.
(10.7) The form of Indemnification Agreements entered into
with all Directors who are not Executive Officers of
the company was filed with Form 10-K for the period
ended December 31, 1990, and is incorporated herein by
reference. Each differs only as to name and date
executed.
(10.8) The form of Indemnification Agreements entered into
with all Executive Officers of the company who are not
Directors of the company was filed with Form 10-K for
the period ended December 31, 1990 and is incorporated
herein by reference. Each differs only as to name and
date executed.
(10.9) The form of Indemnification Agreements entered into
with all Executive Officers of the company who are also
Directors of the company was filed with Form 10-K for
the period ended December 31, 1990 and is incorporated
herein by reference. Each differs only as to name and
date executed.
(10.10) The form of Employee Excess Benefits Agreement entered
into with all active Executive Officers, certain
retired Executive Officers, and certain other key
employees of the company was filed with Form 10-K for
the period ended December 31, 1991 and is incorporated
herein by reference. Each differs only as to name and
date executed, except Mr. Brown who will be given
additional service.
23
Listing of Exhibits (cont.)
___________________________
(10.11) The Amended and Restated Supplemental Pension Plan of
The Timken Company as adopted March 16, 1998.
(10.12) The form of The Timken Company Nonqualified Stock
Option Agreement for nontransferable options as adopted
on November 7, 1997.
(10.13) The form of The Timken Company Nonqualified Stock
Option Agreement for transferable options as adopted on
November 7, 1997.
(10.14) The Consulting Agreement entered into with Joseph F.
Toot, Jr.
(10.15) The form of The Timken Company Performance Share
Agreement entered into with W. R. Timken, Jr.,
R. L. Leibensperger and B. J. Bowling.
(13) Annual Report to Shareholders for the year ended
December 31, 1997, (only to the extent expressly
incorporated herein by reference).
(21) A list of subsidiaries of the registrant.
(23) Consent of Independent Auditors.
(24) Power of Attorney
(27) Financial Data Schedule
(b) Reports on Form 8-K:
On February 6, 1998, the company filed a Form 8-K to report
selected financial data.
(c) The exhibits are contained in a separate section of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the company has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
THE TIMKEN COMPANY
By /s/ W. R. Timken, Jr. By /s/ G. E. Little
________________________________ _____________________________
W. R. Timken, Jr. G. E. Little
Director and Chairman; President Senior Vice President-Finance
and Chief Executive Officer Principal Financial and
Accounting Officer)
Date March 20, 1998 Date March 20, 1998
________________________________ _____________________________
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
By /s/ Robert Anderson* By /s/ John M. Timken, Jr.*
______________________________ ________________________________
Robert Anderson Director John M. Timken, Jr. Director
Date March 20, 1998 Date March 20, 1998
______________________________ _______________________________
By /s/ Martin D. Walker* By /s/ W. J. Timken*
______________________________ _______________________________
Martin D. Walker Director W. J. Timken Director
Date March 20, 1998 Date March 20, 1998
______________________________ _______________________________
By /s/ Stanley C. Gault* By /s/ Joseph F. Toot, Jr.*
______________________________ _______________________________
Stanley C. Gault Director Joseph F. Toot, Jr. Director
Date March 20, 1998 Date March 20, 1998
______________________________ _______________________________
By /s/ J. Clayburn La Force, Jr.* By /s/ Charles H. West*
______________________________ _______________________________
J. Clayburn La Force, Jr. Director Charles H. West Director
Date March 20, 1998 Date March 20, 1998
______________________________ _______________________________
By /s/ Robert W. Mahoney* By /s/ Alton W. Whitehouse*
______________________________ _______________________________
Robert W. Mahoney Director Alton W. Whitehouse Director
Date March 20, 1998 Date March 20, 1998
______________________________ _______________________________
By /s/ Jay A. Precourt*
______________________________ *By: /s/ G. E. Little
Jay A. Precourt Director ______________________________
Date March 20, 1998 G. E. Little, attorney-in-fact
______________________________ by authority of Power of
Attorney filed as Exhibit 24
hereto