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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, 1998
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. [X].
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 19, 1999, was $946,108,777 (representing 50,968,823 shares).
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of February 19, 1999.
Common Stock without par value--61,876,547 shares (representing a market
value of $1,148,583,404).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended
December 31, 1998, 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 20, 1999, are incorporated by reference into parts III
and IV.
Exhibit Index may be found on Pages 19 through 22.
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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
Timken Aerospace & Super Precision Bearings, a subsidiary of the company.
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 Timken Aerospace & Super
Precision Bearings' 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.
4
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. 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. In October 1998, the company introduced the new Timken
IsoClassTM brand of tapered roller bearings. This gives Timken access
to 95% of the market for ISO tapered roller bearings which are about one
half of today's total tapered roller bearing market.
In addition to bearing products, Timken is also expanding its presence
in providing bearing reconditioning services for industrial and railroad
markets as evidenced by the acquisition of Bearing Repair Specialists in
South Bend, Indiana, in May, 1998. Additional evidence of this commitment
was the second quarter 1998 announcement to build a railroad bearing
reconditioning facility in Benoni, South Africa, where the company has
operated a bearing manufacturing plant since 1951.
Steel products include steels of low and intermediate alloy, vacuum-
processed alloys, tool steel and some carbon grades. These are
available in a wide range of solid and tubular sections with a variety
of finishes.
The company also produces custom-made steel products including precision
steel components for automotive and industrial customers. The development
of the precision steel components 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. This activity is a growing portion of the Steel business.
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, Argentina and Australia. These
warehouse inventories are augmented by authorized distributor and
jobber inventories throughout the world which provide local availability
when service is required.
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Sales and Distribution (cont.)
______________________________
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. Timken Aerospace & Super
Precision Bearings' 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, oil and gas drilling and tooling 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
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
_________________
The company has two reportable segments: Bearings and Steel. Segment
information in Note 11 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, 1998, 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 Bearings business has
historically participated in the worldwide bearing markets while
Steel has concentrated on U.S. markets.
6
Industry Segments (cont.)
_________________________
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 Timken Aerospace & Super
Precision Bearings 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 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 1998 were $260 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 $210 million in 1998.
7
Competition (cont.)
______________________________
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.
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 November 17, 1998, the U.S. Department of Commerce issued final
margins for companies investigated for the 1996-97 time period, finding
dumping margins that ranged from 7.62% to 19.78%.
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.
8
Competition (cont.)
______________________________
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 will
commence for the finding and orders covering tapered roller bearings in
April 1999. The company intends to participate actively in the proceed-
ings which may conclude in as little as five months but more likely will
conclude sometime between March and September 2000. If the U.S.
government determines that dumping and injury are likely to continue or
recur, the antidumping duting finding and orders will continue in place.
If a negative determination is made on either issue for any of the four
countries covered, the finding or order will be revoked. By statute,
the earliest that an order or finding could be revoked is as of January
1, 2000.
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
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 $1.22 billion at December 31, 1998, and
$1.37 billion at December 31, 1997. 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.
9
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. In December 1998,
the company acquired Desford Steel Tubes Ltd., a steel tube manufacturer
in Leicester, England. Now called Timken Desford Steel, the operation
will be a major source of raw materials for many Timken plants in Europe.
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 Timken Aerospace & Super Precision Bearings New Hampshire
plants, the Duston, England plant, the Latrobe, Pennsylvania plant and
the facility in Bangelore, India. Expenditures for research, development
and testing amounted to approximately $48,000,000 in 1998, $43,000,000 in
1997, and $41,000,000 in 1996. 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 protect the environment and comply with
environmental protection laws. The company has invested in pollution
control equipment and updated plant operational practices. In 1998,
the company received the Governor's Award for waste reduction from the
state of North Carolina. This makes the third such state award the
company has received for pollution prevention in the past two years.
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 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 is unsure of the 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.
10
Environmental Matters (cont.)
_____________________________
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.
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 Timken Aerospace & Super Precision Bearings subsidiary has two
environmental projects at its manufacturing locations in New Hampshire.
The company has provided for the costs of these projects, which to date
have been $3.7 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 $1.5 million.
The company continued work in 1998 on environmental projects at its
locations in Canton and Columbus, Ohio. Costs for these two projects
are estimated to be about $2.1 million. Remediation system upgrades
became operational in August 1998 at the Columbus, Ohio plant.
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, 1998, Timken had 21,046 associates. Thirty-seven percent
of Timken's U.S. associates are covered under collective bargaining
agreements. None 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 19, 1999, are as follows:
11
Current Position and Previous
Name Age Positions During Last Five Years
___________________ ___ ____________________________________________
W. R. Timken, Jr. 60 1993 Chairman - Board of Directors;
1997 Chairman, President and Chief
Executive Officer; Director;
Officer since 1968.
R. L. Leibensperger 60 1993 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 57 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.
L. R. Brown 63 1993 Vice President and General Counsel;
Secretary;
1998 Senior Vice President and General
Counsel; Secretary; Officer
since 1990.
J. T. Elasser 46 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;
1998 Group Vice President - Bearings -
Rail, Europe, Africa and West Asia;
Officer since 1996.
J. W. Griffith 45 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;
1998 Group Vice President - Bearings -
North American Automotive, Asia
Pacific and Latin America; Officer
since 1996.
12
Current Position and Previous
Name Age Positions During Last Five Years
___________________ ___ ____________________________________________
Karl P. Kimmerling 41 1993 General Manager - Primary Operations
and Engineering - Latrobe Steel
Company;
1995 President - Canadian Timken Ltd.;
1996 Vice President - Manufacturing -
Steel;
1998 Group Vice President - Alloy Steel;
Officer since 1998.
G. E. Little 55 1993 Vice President - Finance; Treasurer;
1998 Senior Vice President - Finance;
Treasurer; Officer since 1990.
S. J. Miraglia, Jr. 48 1993 Vice President - Manufacturing - Steel;
1994 Director - Manufacturing - Europe,
Africa and West Asia;
1996 Vice President - Bearings - North
American Industrial and Super
Precision;
1998 Group Vice President - Bearings -
North American Industrial and Super
Precision; Officer since 1996.
S. A. Perry 53 1993 Vice President - Human Resources and
Logistics;
1998 Senior Vice President - Human
Resources, Purchasing and
Communications; Officer since 1993.
Hans J. Sack 44 1993 General Manager - Parts Business -
Steel;
1994 Vice President - Manufacturing -
Steel;
1996 President - Latrobe Steel Company;
1998 Group Vice President - Specialty Steel
and President - Latrobe Steel
Company; Officer since 1998.
J. J. Schubach 62 1993 Vice President - Strategic Management;
1996 Vice President - Strategic Management
and Continuous Improvement;
1998 Senior Vice President - Strategic
Management and Continuous
Improvement; Officer since 1984.
13
Current Position and Previous
Name Age Positions During Last Five Years
___________________ ___ ____________________________________________
T. W. Strouble 60 1993 Vice President - Sales and Marketing -
Bearings - North and South America;
1995 Vice President - Technology;
1998 Senior Vice President - Technology
Officer since 1995.
W. J. Timken 56 1993 Vice President; Director; Officer
since 1992.
14
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
14,096,000 square feet, all of which, except for approximately 385,000
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; South Bend, Indiana; 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 4,702,000 square feet.
Timken's bearing manufacturing plants outside the United States are
located in Ballarat, Australia; Benoni, South Africa; Cogozzo, Italy;
Colmar, France; Duston, Northampton 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 3,541,000 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 5,020,000
square feet.
Timken's steel manufacturing facility outside the United States is
located in Leicester, England. This facility has an aggregate floor
area of approximately 590,000 square feet. Timken also has a tool
steel finishing and distribution facility in Sheffield, England. This
facility has an aggregate floor area of approximately 244,000 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, Argentina and Australia, and leases several relatively small
warehouse facilities in cities throughout the world.
During the first half of 1998, Timken's Bearings and Steel businesses
continued to experience high plant utilization as a result of increased
sales in most industries and geographic areas. However, plant utilization
decreased during the last half of the year as a result of general world
economic difficulties which decreased demand in the oil country and
general industrial markets.
15
Properties (cont.)
__________________
Timken's manufacturing facilities expanded during 1998 as a result
of its two most recent acquisitions. In May, the company acquired
Bearing Repair Specialists, an industrial bearing repair business in
South Bend, Indiana, that reconditions or modifies a wide variety of
bearing types for industrial customers in the United States and Canada.
The facility includes floor space of approximately 40,000 square feet
and employs some 19 associates.
In December, the company acquired Desford Steel Tubes Ltd. of Leicester,
England, a manufacturer of seamless mechanical tubing of consistent
quality necessary for bearing, automotive, off-highway and defense
applications. The facility includes floor space of approximately 590,000
square feet and employs some 571 associates.
In the second quarter, Timken made the announcement to build a railroad
bearing reconditioning facility in Benoni, South Africa, where the company
has operated a bearing manufacturing plant since 1951. Also in the second
quarter, growing demand for the advanced bearings produced at the Altavista
Bearing Plant in Virginia for the light truck and sport utility vehicle
markets prompted the plant's third expansion since it was built in 1991.
During the third quarter, Timken dedicated its $55 million rolling mill
investment at the Harrison Steel Plant in Canton, Ohio. The 119,000
square foot facility houses a new rolling mill and bar processing
equipment.
In September 1998, the company announced that Australian Timken would be
closing its bearing manufacturing operation in Ballarat. The plant closure
is now expected to be completed early in the second quarter of 1999.
As of December 31, 1998, the company was a forty percent shareholder in
Tata Timken Limited, a joint venture with The Tata Iron and Steel Company
Limited (TISCO) of India. The joint venture consists of a manufacturing
facility in Jamshedpur, India, completed in March of 1992, and six sales
offices, also located in India. In February 1999, the company agreed to
increase its stake in Tata Timken Limited to 80 percent by acquiring the
40 percent stake held by TISCO. The transaction was approved by the Indian
government and completed in March.
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, 1998.
16
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, 1998, was 8,939. The estimated number of
shareholders at December 31, 1998, was 45,942.
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, 1998, and
is incorporated herein by reference.
During 1998, the non-United States fiduciary of an employee stock purchase
and savings plan established and administered in accordance with the laws
of France purchased 22,625 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 connection with sales to employees made in reliance on Regulation S
under the Securities Act of 1933 and were made for an aggregate
consideration of $522,836.
Item 6. Selected Financial Data
________________________________
The Summary of Operations and Other Comparative Data on Pages 34-35
of the Annual Report to Shareholders for the year ended December 31,
1998, 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, 1998, is incorporated herein by reference.
In February 1999, the company agreed to increase its stake in Tata Timken
Limited to 80 percent by acquiring the 40 percent stake held by The Tata
Iron and Steel Company of India. The transaction was approved by the
Indian government and completed in March.
17
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
____________________________________________________________________
Information appearing under the caption "Management's Discussion and
Analysis of Other Information" appearing on page 23 of the Annual
Report to Shareholders for the year ended December 31, 1998, 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
Report to Shareholders for the year ended December 31, 1998, are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants
______________________________________________________
on Accounting and Financial Disclosure
______________________________________
Not applicable.
18
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 20, 1999, 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 20, 1999, 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 20, 1999, 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 20, 1999, and is
incorporated herein by reference.
19
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) Credit Agreement dated as of July 10, 1998 among The
Timken Company, as Borrower, Various Financial
Institutions, as Banks, and Keybank National
Association, as Agent was filed with Form 10-Q for the
period ended June 30, 1998, and is incorporated herein
by reference.
(4.1) Indenture dated as of April 24, 1998, between The Timken
Company and The Bank of New York, which was filed with
Timken's Form S-3 registration statement which became
effective April 24, 1998, and is incorporated herein by
reference.
(4.2) 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.
(4.3) 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.
(4.4) 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.
20
Listing of Exhibits (cont.)
___________________________
Management Contracts and Compensation Plans
___________________________________________
(10) The Management Performance Plan of The Timken Company
for Officers and Certain Management Personnel was filed
with Form 10-K for the period ended December 31, 1997,
and is incorporated herein by reference.
(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.
(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 was filed with Form 10-K for the
period ended December 31, 1997, and is incorporated
herein by reference.
(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
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.
21
Listing of Exhibits (cont.)
___________________________
(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.
(10.11) The Amended and Restated Supplemental Pension Plan of
The Timken Company as adopted March 16, 1998 was filed
with Form 10-K for the period ended December 31, 1997,
and is incorporated herein by reference.
(10.12) Amendment to the Amended and Restated Supplemental Pension
Plan of the Timken Company executed on December 29, 1998.
(10.13) The form of The Timken Company Nonqualified Stock
Option Agreement for nontransferable options as adopted
on April 21, 1998 was filed with Form 10-Q for the
period ended March 31, 1998, and is incorporated
herein by reference.
(10.14) The form of The Timken Company Nonqualified Stock
Option Agreement for transferable options as adopted on
April 21, 1998 was filed with Form 10-Q for the period
ended March 31, 1998, and is incorporated herein by
reference.
(10.15) The form of The Timken Company Nonqualified Stock Option
Agreement for transferable options as adopted on
November 18, 1998.
(10.16) The Timken Company Deferral of Stock Option Gains Plan
effective as of April 21, 1998 was filed with Form 10-Q
for the period ended March 31, 1998, and is incorporated
herein by reference.
22
Listing of Exhibits (cont.)
___________________________
(10.17) The Consulting Agreement entered into with Joseph F.
Toot, Jr. was filed with Form 10-K for the period ended
December 31, 1997, and is incorporated herein by
reference.
(10.18) The form of The Timken Company Performance Share
Agreement entered into with W. R. Timken, Jr.,
R. L. Leibensperger and B. J. Bowling was filed with
Form 10-K for the period ended December 31, 1997, and is
incorporated herein by reference.
(12) Ratio of Earnings to Fixed Charges
(13) Annual Report to Shareholders for the year ended
December 31, 1998, (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:
None
(c) and (d) 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 30, 1999 Date March 30, 1999
________________________________ _______________________________
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/ Martin D. Walker* By /s/ John M. Timken, Jr.*
______________________________ _______________________________
Martin D. Walker Director John M. Timken, Jr. Director
Date March 30, 1999 Date March 30, 1999
By /s/ Stanley C. Gault* By /s/ W. J. Timken*
______________________________ _______________________________
Stanley C. Gault Director W. J. Timken Director
Date March 30, 1999 Date March 30, 1999
By /s/ J. Clayburn La Force, Jr.* By /s/ Joseph F. Toot, Jr.*
______________________________ _______________________________
J. Clayburn La Force, Jr., Director Joseph F. Toot, Jr. Director
Date March 30, 1999 Date March 30, 1999
By /s/ Robert W. Mahoney* By /s/ Charles H. West*
______________________________ _______________________________
Robert W. Mahoney Director Charles H. West Director
Date March 30, 1999 Date March 30, 1999
By /s/ Jay A. Precourt* By /s/ Alton W. Whitehouse*
______________________________ _______________________________
Jay A. Precourt Director Alton W. Whitehouse, Director
Date March 30, 1999 Date March 30, 1999
*By /s/ G. E. Little
___________________________________
G. E. Little, attorney-in-fact
by authority of Power of Attorney
filed as Exhibit 24 hereto