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Rule 424(b)(5)
File No. 33-35773
PRICING SUPPLEMENT
(To Prospectus Supplement dated July 24, 1996)
To Prospectus dated July 24, 1996
$10,000,000
The Timken Company
7.49% Fixed Rate Medium-Term Notes, Series A
---------------------------
Interest payable August 15 and February 15
Commencing February 15, 1997
---------------------------
Principal Date of Maturity Fixed Interest Rate
Amount Issue Date Per Annum
- ----------- ------ -------- -------------------
$10,000,000 8/7/96 8/8/16 7.49%
Price to Public: 100% of principal amount of each Note.
Redemption/Repayment: The Notes are not redeemable prior to their stated
maturity date and are not repayable prior to such
date.
---------------------------------
Morgan Stanley & Co. Incorporated
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August 7, 1996
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RECENT DEVELOPMENTS
On June 17, 1996, the Company issued the following press release:
CANTON, OH -- June 17, 1996 -- The Timken Company announced today its
board of directors has authorized the company to purchase up to two million of
its own shares. The company had 31.4 million shares outstanding during the
first quarter of 1996.
The company may buy back shares during the next 30 months, although
there is no precise timetable for making purchases. The timing of purchases and
the number of shares to be purchased will depend upon prevailing share market
prices and trading volumes. Shares that are acquired will be held as treasury
shares and will be available for general corporate purposes.
The Timken Company is a leading international manufacturer of highly
engineered bearings and alloy steels. The company employs about 17,000 people
worldwide and recorded 1995 sales of more that $2.2 billion. On Industry Week
magazine's list of 1,000 largest companies worldwide, The Timken Company ranks
639th.
On June 27, 1996, the Company issued the following press release:
CANTON, OH -- June 27, 1996 -- The Timken Company today announced plans
to expand the scope of its products and services to tool steel customers by
entering into a definitive agreement by which Houghton & Richards, Inc. (H & R)
will sell the assets of its tool steel service center headquartered in
Marlborough, Mass.
The transaction, which complements Timken's tool steel distribution
network, is subject to government approval and should be completed in the third
quarter of 1996. H & R will then function as a subsidiary of Latrobe Steel
Company, a specialty steel manufacturer that has operated as a Timken Company
subsidiary since 1975. H & R serves customers from a wide base of facilities in
White House, Tenn.; Northborough, Mass.; Walton Hills, Ohio; Forest Park, Ill.;
and Greenville, S.C.
"As with our other recent acquisitions, this move once again emphasizes
The Timken Company's commitment to expand our range of services and to do so by
building on core competencies," said Joseph F. Toot, Jr., president and chief
executive officer. "The product range and geographic scope of H & R complements
our newly acquired Ohio Alloy Steels Corporation and allows us to provide tool
steel customers with a unique mix of products and services.
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"The series of acquisitions we have made, as well as our joint ventures
in India and China, will improve substantially the company's ability to
continue adding value for both shareholders and customers."
Latrobe Steel gains additional worldwide purchasing expertise along
with H & R's excellent reputation as a distributor that provides a variety of
value-added services and carries rolled bar, bar cut from plate, sheet and
plate.
"H & R itself enjoys solid stature in the tool steel market," said Hans
J. Sack, president of Latrobe Steel Company. "Its specialty of flat products
will allow us to offer our customers a more complete line. Also, the strong
presence of H & R has established in the south, in New England and on the
eastern seaboard will further enhance the range of Latrobe's tool steel
distribution network.
"We have put together a comprehensive network that covers the entire
country with a combination of products and services from three well-respected
names in the tool steel business -- H & R, Ohio Alloy Steels and Latrobe Steel
Company."
H & R is a privately owned company established in 1881 that employs
about 80 people and has annual sales of less than $50 million.
"Our reputation as a service company, combined with Ohio Alloy Steels'
round tool steel products line and Latrobe Steel's technical services and
specialty grades, makes this a perfect fit for us," said Robert E. Flynn,
president of H & R. "There is little overlap as all the pieces combined to
create a supplier unique to the entire tool steel industry, one that can
provide every customer the right product on time, every time."
Mr. Flynn and his management team will continue to run the day-to-day
operations of the business as H & R becomes one of the operating units within
Latrobe Steel Company's recently established distribution business. The
distribution business is aimed specifically at servicing Latrobe Steel's tool
steel customers, while the manufacturing business will continue to market
specialized steel products to large end users.
"We will focus on offering an unprecedented level of service to the
market," said Scott R. Boyd, general manager -- distribution and special
products. "Combining the resources of our recent acquisitions with existing
Latrobe Steel units -- Special Products Division and Koncor Industries -- will
greatly enhance our ability to meet and exceed the expectations of our tool
steel customers."
The Timken Company is a leading international manufacturer of highly
engineered bearings and alloy steels. The company employs some 17,000 people
worldwide and reported 1995
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sales of more than $2.2 billion. On Industry Week magazine's list of the 1,000
largest public manufacturing companies worldwide, The Timken Company ranks
639th.
On July 23, 1996, the Company issued the following press release:
CANTON, OH -- July 23, 1996 -- In a first half punctuated by
acquisitions and a joint venture, The Timken Company achieved higher sales and
earnings for both the first six months and the second quarter ended June 30,
despite slower economic growth in both the United States and Europe.
Sales were at record levels for both the first half and second quarter,
while earnings set a second quarter record.
"The first half of 1996 was a watershed period for the company," said
Joseph F. Toot, Jr., president and chief executive officer. "The acquisitions
and joint venture accomplished two strategic goals; they expanded appreciably
our geographic scope, and they broadened the range of services that we provide
to customers. While our financial results signal that we continue to make good
progress in improving our overall performance, our job remains unfinished. As
we work to accelerate continuous improvement results in our plants, the Steel
Business is on track. The Bearing Business is achieving savings but is somewhat
behind schedule. Companywide, the success of this program is our number one
priority. We must keep on creating opportunities that will grow the company,
and we must continue to improve operations."
For the first six months of 1996, the company achieved net sales of
1.198 billion U.S. dollars. This is an increase of 3.7 percent from 1.155
billion U.S. dollars in 1995's first six months, also then a record. For the
second quarter, net sales topped 600 million U.S. dollars for the first time,
totaling 601.6 million U.S. dollars or 2.7 percent above the 585.8 million U.S.
dollars in the year-earlier period.
"This performance," said Mr. Toot, "comes amidst a period of moderating
economic growth in the United States and uneven economic conditions abroad. It
is too early for our new acquisitions and joint venture to have an effect on
results."
Net income for 1996's first half was 68.1 million U.S. dollars, up 4
percent from 65.5 million U.S. dollars in last year's first six months. For
the second quarter just ended, net income was 3.45 million U.S. dollars,
topping the year-earlier total of 31.2 million U.S. dollars.
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BEARING BUSINESS RESULTS
In the Bearing Business, exports from the U.S. remained strong, and
sales in Mexico continued a strong rebound. But sales in the U.S. were
generally flat with a year ago, and in Brazil decreased significantly.
In the first quarter, the company completed the acquisition of Timken
Polska in Poland, and in the second quarter officially launched its
Yantai-Timken joint venture in China. Both operations manufacture tapered
roller bearings.
During the first half, Bearing Business net sales were 811 million U.S.
dollars compared to 794.8 million U.S. dollars in 1995's first six months. For
the second quarter net sales were 403.5 million U.S. dollars, a slight increase
from 399.8 million U.S. dollars a year ago.
Operating income in the first half totaled 76.4 million U.S. dollars
versus 76 million U.S. dollars in last year's first half. For the second
quarter, operating income increased to 36 million U.S. dollars from 34.2
million U.S. dollars in 1995's second period.
STEEL BUSINESS RESULTS
The Steel Business achieved an improved operating margin primarily as a
result of continuous improvement efforts in its manufacturing processes. The
business overcame significantly higher scrap and natural gas costs and higher
costs related to investments in new business systems.
During the first half, the company acquired Ohio Alloy Steels and
announced its intent to acquire Houghton & Richards, Inc., a transaction
expected to be completed in the third quarter following government approval.
Both are tool or specialty steel service firms and will expand the range of
products and services provided to their customers. Both will operate as
subsidiaries of Latrobe Steel Company, a Timken Company subsidiary since 1975.
In the first half, Steel Business net sales totaled 386.5 million U.S.
dollars, up from 359.9 million U.S. dollars in last year's first six months.
For the second quarter, net sales increased to 198 million U.S. dollars from
186 million U.S. dollars in the year-ago period.
Operating income in the first half totaled 48.1 million U.S. dollars
versus 47.5 million U.S. dollars in 1995's first half. For the second quarter,
operating income increased to 28.2 million U.S. dollars from 24.1 million U.S.
dollars in the year-earlier period.
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<TABLE>
<CAPTION>
FINANCIAL SUMMARY - THE TIMKEN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Second Quarter First Quarter Six Months
Ended June 30 Ended March 31 Ended June 30
Thousands of U.S.
dollars, except share 1996 1995 1996 1996 1995
data.)
<S> <C> <C> <C> <C> <C>
Net sales 601,553 585,797 595,954 1,197,507 1,154,696
Cost of products sold 459,164 452,655 456,739 915,903 882,728
Gross profit 142,389 133,142 139,215 281,604 271,968
Selling, admin. &
general expenses 78,217 74,783 78,917 157,134 148,422
Operating income 64,172 58,359 60,298 124,470 123,546
Other income
(expense):
Interest expense (4,059) (4,945) (3,675) (7,734) (10,381)
Other income
(expense) - net: (2,281) (3,313) (2,780) (5,061) (7,148)
Income before
income taxes 57,832 50,101 53,843 111,675 106,017
Provision for income
taxes 23,308 18,858 20,245 43,553 40,498
Net income 34,524 31,243 33,598 68,122 65,519
Net income per
share 1.10 1.00 1.07 2.17 2.11
Average shares
outstanding 31,480,612 31,155,318 31,390,830 31,433,288 31,117,222
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(Thousands of U.S. June 30 December 31 March 31
dollars.) 1996 1995 1996
<S> <C> <C> <C>
ASSETS
Cash & cash equivalents 6,869 7,262 864
Accounts receivable 326,535 284,924 320,583
Deferred income taxes 52,686 50,183 54,040
Inventories 413,866 367,889 395,362
Total current assets 799,956 710,258 770,849
Property, plant & 1,058,753 1,039,382 1,039,709
equipment
Deferred income taxes 30,710 31,176 30,374
Other assets 165,887 145,109 146,779
Total assets 2,055,306 1,925,925 1,987,711
</TABLE>
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<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C> <C>
Accounts payable &
other liabilities 235,751 229,096 234,330
Short-term debt &
commercial paper 101,656 60,078 62,068
Accrued expenses 192,913 173,189 191,528
Total current liabilities 530,320 462,363 487,926
Long-term debt 151,012 151,154 151,108
Accrued pension cost 102,823 97,524 105,331
Accrued postretirement
benefits 396,551 393,706 394,893
Total liabilities 1,180,706 1,104,747 1,139,258
SHAREHOLDERS' EQUITY 874,600 821,178 848,453
Total liabilities & equity 2,055,306 1,925,925 1,987,711
</TABLE>
<TABLE>
<CAPTION>
BEARING BUSINESS SEGMENT FINANCIAL RESULTS
(U.S. DOLLARS IN MILLIONS)
Second Quarter First Quarter Six Months
Ended June 30 Ended March 31 Ended June 30
1996 1995 1996 1996 1995
<S> <C> <C> <C> <C> <C>
Net Sales 403.5 399.8 407.5 811.0 794.8
Operating Income 36.0 34.2 40.4 76.4 76.0
Operating Margin 8.9% 8.6% 9.9% 9.4% 9.6%
</TABLE>
<TABLE>
<CAPTION>
STEEL BUSINESS SEGMENT FINANCIAL RESULTS
(U.S. DOLLARS IN MILLIONS)
Second Quarter First Quarter Six Months
Ended June 30 Ended March 31 Ended June 30
1996 1995 1996 1996 1995
<S> <C> <C> <C> <C> <C>
Net Sales 198.0 186.0 188.5 386.5 359.9
Operating Income 28.2 24.1 19.9 48.1 47.5
Operating Margin 14.2% 13.0% 10.6% 12.4% 13.2%
</TABLE>
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