General Bearing Corporation (USA) reported sales and earnings both improved in 2002's third quarter. The improvements came despite the slow economic climate and shifts in the product sales mix which hampered efforts to further improve profitability.

General Bearing operates in two business segments: bearings (via Hyatt™ and The General™ bearings) and machine tools. General's bearing markets are OEMs and distributors in North America and Asia; the company's products are sourced primarily via plants and joint ventures in China. Bearings accounted for 86% of third quarter sales.

The machine tools business includes production and distribution of machine tools for mills, lathes and grinders. Machine tools accounted for 14% of third quarter sales.

Over the past 18 months, General Bearing has been realigning its ownership of various joint ventures in China. Most notably, it took 100% control of NN General, LLC (NNGLLC), a Chinese joint venture investment company it had formed with NN Ball & Roller. NNGLLC owned 60% of Jiangsu General Ball and Roller (JGBR). In late June 2002, NNGLLC reduced its ownership of JGBR from 60% to 51% while its domestic Chinese partners upped their ownership from 40% to 49%. The 51% ownership means results from JGBR are now consolidated with General Bearing's overall results.

Bearing sales in the third quarter hit $15.2 million, up 42% from third quarter 2001. The increase was primarily due to consolidating sales of JGBR, although some overall improvement was also seen.

The company said sales of OEM drive line components to the automotive industry picked up, as did sales of tapered roller bearings for heavy duty trailers. Those increases were partially offset by lower sales to distributors.

Gross profit for the quarter was $5.3 million, up 31% from 2001. Gross profit margin slipped to 30.0% from 30.2% in 2001, primarily due to unfavorable changes in the product sales mix and including more low-margin sales by JGBR within the Chinese market.

Net income was the real bright spot, hitting $546,000, up 95% from $280,000 in third quarter 2001. General attributed the improvement primarily to higher sales volume, partially offset by higher SG&A expenses.

General Bearing's share price has taken a beating as the economy remained soft and questions remain about the ultimate impact of new duties on bearings from China. Recently trading at $2.70, the stock (NASDAQ: GNRL) is near its 52-week low of $2.65 set back on March 5, 2002. Its 52-week high was recorded in between, at $4.50 on July 15.