-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ps0JbsVBAO6XSjBhGF8PWFx7j5+HusY5b2WX+F+KYUtY/BsOkUXJyI9+4+XTEQz0 hOMWKTBTKhkXdkOp931Oqw== 0000950123-04-000580.txt : 20040122 0000950123-04-000580.hdr.sgml : 20040122 20040122073218 ACCESSION NUMBER: 0000950123-04-000580 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040122 ITEM INFORMATION: FILED AS OF DATE: 20040122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIMKEN CO CENTRAL INDEX KEY: 0000098362 STANDARD INDUSTRIAL CLASSIFICATION: BALL & ROLLER BEARINGS [3562] IRS NUMBER: 340577130 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01169 FILM NUMBER: 04536512 BUSINESS ADDRESS: STREET 1: 1835 DUEBER AVE SW CITY: CANTON STATE: OH ZIP: 44706-2798 BUSINESS PHONE: 3304713078 FORMER COMPANY: FORMER CONFORMED NAME: TIMKEN ROLLER BEARING CO DATE OF NAME CHANGE: 19710304 8-K 1 l05199e8vk.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): JANUARY 22, 2004 ------------------ THE TIMKEN COMPANY - ------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) OHIO - ------------------------------------------------------------------------------- (State or Other Jurisdiction of Incorporation) 1-1169 34-0577130 - ---------------------------------- ------------------------------------ (Commission File Number) (I.R.S. Employer Identification No.) 1835 DUEBER AVENUE, S.W., CANTON, OHIO 44706-2798 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (330) 438-3000 - ------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION The Timken Company issued a press release on January 22, 2004, announcing results for the full year and fourth quarter of 2003. A copy of the press release is attached as Exhibit 99.1 to this report and incorporated herein by this reference. This information shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. Exhibits. --------- 99.1 The Timken Company Press Release dated January 22, 2004, announcing results for the full year and fourth quarter of 2003 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE TIMKEN COMPANY By: /s/ William R. Burkhart --------------------------- William R. Burkhart Senior Vice President and General Counsel Date: January 22, 2004 3 EXHIBIT INDEX Exhibit Number Description of Document -------------- ----------------------- 99.1 The Timken Company Press Release dated January 22, 2004, announcing results for the full year and fourth quarter of 2003 EX-99.1 3 l05199exv99w1.txt PRESS RELEASE Exhibit 99.1 NEWS RELEASE - ------------------------------------------------------------------------------- WORLDWIDE LEADER IN BEARINGS AND STEEL MEDIA CONTACT: Denise L. Bowler Manager - Communications Planning & Integration (330) 471-3485 www.timken.com/media INVESTOR CONTACT: Kevin R. Beck Manager - Investor Relations (330) 471-7181 THE TIMKEN COMPANY ANNOUNCES RESULTS FOR 2003 AND FOURTH QUARTER CANTON, OH - January 22, 2004 - The Timken Company (NYSE: TKR) today reported record 2003 sales of $3.8 billion, a 49 percent increase from the prior year. Excluding the impact of the February 2003 acquisition of The Torrington Company, sales grew approximately 8 percent, including 3 percent related to foreign currency translation. Timken achieved 2003 net income of $36.5 million or $0.44 per diluted share, compared with $38.7 million or $0.62 per diluted share for the prior year. Adjusted 2003 net income was $56.0 million or $0.67 per diluted share compared to $53.3 million or $0.87 per diluted share in 2002, excluding the impact of special items discussed below and the cumulative effect of change in accounting principle in 2002. In commenting on 2003 results, James W. Griffith, president and CEO, said: "2003 was a pivotal year for The Timken Company. Our $840 million strategic acquisition of Torrington was accretive to earnings and added $1 billion in new sales. We leveraged our balance sheet higher to purchase Torrington with debt peaking at more - more - Denise L. Bowler Kevin R. Beck Mail Code: GNW-37 Mail Code: GNE-26 1835 Dueber Avenue, S.W. 1835 Dueber Avenue, S.W. P.O. Box 6932 P.O. Box 6928 Canton, OH 44706-0932 U.S.A. Canton, Ohio 44706-0928 U.S.A. Telephone: 330-471-3485 Telephone: 330-471-7181 Facsimile: 330-471-4118 Facsimile: 330-471-2792 e-mail: denise.bowler@timken.com e-mail: kevin.beck@timken.com ------------------------ --------------------- THE TIMKEN COMPANY than $1 billion during the year, but we have since reduced this level by nearly $300 million. While we were disappointed in our 2003 earnings performance, the year ended with signs of improvement. We will continue to focus on returns to our shareholders by providing better value to our customers, as we grow opportunities and synergies created by the acquisition. Our actions in 2003 set the course for improved performance and created a solid foundation for our future." During 2003, the company: - Acquired the Torrington Company -- the largest acquisition in Timken history-- and completed the first phase of integration. For 2003, the company achieved pretax integration cost savings of $28 million -- $8 million above the stated target for the year -- primarily by leveraging the combined purchasing spend of the two companies and reducing employment. - Reduced debt following the Torrington acquisition. Year-end debt was $735 million, or 40 percent of total capitalization. - Raised $375 million in proceeds, before expenses, from equity offerings totaling 25.5 million common shares, including 9.4 million shares issued for $140 million of the purchase price for Torrington. - Divested non-strategic assets, generating gross proceeds of $170 million. - Closed two industrial plants and rationalized production across automotive plants. - Generated cash of $31 million in the Steel Group, despite a difficult economic environment. - Began construction of the company's fourth bearing plant in China through a joint venture. The 2003 reported income includes the following special pretax items that are excluded from 2 THE TIMKEN COMPANY adjusted results. - $66 million of income received under the Continued Dumping and Subsidy Offset Act (CDSOA), which requires that tariffs collected on dumped imports be directed to the industries harmed. - Restructuring, integration, reorganization and certain other charges in 2003 of $49 million, principally due to costs of integrating the Torrington acquisition. - Non-recurring, non-cash impairment charge of $46 million in the fourth quarter relating to PEL Technologies, a joint venture investment of our Steel Group. FOURTH QUARTER RESULTS ---------------------- For the quarter ended December 31, 2003, sales were a record $1.0 billion, an increase of 58 percent from a year ago. Excluding the impact of Torrington, sales grew approximately 10 percent, including 4 percent related to foreign currency translation. Fourth quarter 2003 net income was $22.5 million, or $0.25 per diluted share. Excluding special items, the company reported adjusted fourth quarter net income of $23.3 million or $0.26 per diluted share versus $12.0 million or $0.19 per diluted share a year ago. Excluding the impact of Torrington, fourth quarter earnings per diluted share were $0.01. Fourth quarter performance was driven by the Torrington acquisition. Torrington's fourth quarter results reflect seasonally strong volume, product mix, cost savings and the positive impact of acquisition and timing-related accrual adjustments. The segment results that follow exclude special charges for all periods. They also reflect for all periods a reorganization of the Automotive and Industrial Groups that occurred in the first quarter of 2003. Automotive distribution operations are now reported as part of the Industrial Group. Additionally, company sales to emerging markets -- principally in central and eastern 3 THE TIMKEN COMPANY Europe and Asia-- previously were reported as part of the Industrial Group. Emerging market sales to automotive original equipment manufacturers are now included in the Automotive Group. AUTOMOTIVE GROUP RESULTS ------------------------ In 2003, Automotive Group sales increased 86 percent to $1.4 billion due primarily to the Torrington acquisition. Excluding Torrington, Timken sales grew 9 percent, which included recent new product launches at Ford and Nissan for the light truck market. Automotive Group earnings before interest and taxes (EBIT) in 2003 were $15.7 million compared with $11.1 million in 2002, with the increase in earnings due to the addition of Torrington. Excluding the Torrington acquisition, the Automotive Group reported sales in 2003 of $822.1 million and a loss of $7.7 million. Automotive Group results reflected significantly higher costs in 2003 due to problems in executing the restructuring of automotive plants. This impacted both Timken and Torrington operations globally. The Automotive Group began to see some improvement from the rationalization initiatives in the fourth quarter. The Automotive Group announced in the second half of 2003 that it would reduce manufacturing expenses, including workforce reductions of more than 700 positions, to achieve the benefits of rationalization programs and adjust to reduced demand. During the second half, workforce reductions exceeded 750. In the fourth quarter of 2003, the Automotive Group recorded sales of $374.6 million, nearly twice the sales recorded a year ago. Fourth quarter 2003 sales increased primarily due to the Torrington acquisition but also benefited from 12 percent growth in the traditional Timken business. 4 THE TIMKEN COMPANY Automotive Group EBIT was $8.3 million in the fourth quarter of 2003 compared with $7.7 million for the same period a year ago. Excluding Torrington, the Group incurred a loss in the 2003 fourth quarter of $5.1 million. Despite benefiting from increased sales, the Group incurred expenses in the 2003 fourth quarter associated with the manufacturing cost reductions as well as expenditures related to new ventures to grow the business. INDUSTRIAL GROUP RESULTS ------------------------ Industrial Group 2003 sales increased 54 percent from the prior year to $1.5 billion. The sales increase reflected the acquisition of Torrington and the favorable effect of foreign currency. Many markets served by the Industrial Group remained relatively flat during the year. Industrial Group 2003 EBIT was $128.0 million, compared with $73.0 million in 2002. The increase reflected the addition of Torrington, the effect of the company's continued manufacturing improvement initiatives and improved European results. Excluding the impact of Torrington, the Industrial Group had 2003 EBIT of $94.8 million on sales of $1.0 billion. Industrial Group sales in the 2003 fourth quarter increased 69 percent to $418.2 million from the prior year, reflecting the addition of Torrington and the favorable effect of foreign currency. Fourth quarter EBIT was $44.5 million, compared with $17.7 million a year earlier. Excluding Torrington, fourth quarter sales were $270.3 million and EBIT was $15.8 million. Fourth quarter results reflected strong distribution sales and improving industrial order activity in the heavy industries, power transmission, off-highway and consumer markets. STEEL GROUP RESULTS ------------------- Despite challenging market conditions, Steel Group 2003 sales, including inter-segment sales, were $1.0 billion, up 5 percent from 2002. The increase reflected penetration gains in industrial markets and increased demand from automotive and industrial customers. The group 5 THE TIMKEN COMPANY recorded a loss of $6.0 million in 2003 versus EBIT of $32.5 million in 2002. Steel Group performance in 2003 was negatively impacted by extremely high costs for scrap steel, natural gas and alloys. Steel Group sales, including inter-segment sales, were $257.3 million in the fourth quarter of 2003, an increase of 7 percent from the prior year. The sales improvement resulted from increased demand from automotive and industrial customers. Inter-segment sales were lower due to the raw material conversion in bearing processes from tubing to forged components. The group recorded a 2003 fourth quarter loss of $4.2 million before interest and taxes, compared with EBIT of $0.2 million a year ago. Performance was negatively affected by high raw material and energy costs and lower inter-segment sales, which could not be fully offset by higher external sales, implementation of new raw material surcharges, price increases and higher production levels. OUTLOOK ------- We expect improved performance in 2004 across all three segments. We currently expect earnings per diluted share, excluding special items to be $0.85 to $1.00 for the year and $0.15 to $0.20 for the first quarter. North American industrial markets are expected to grow slowly from low 2003 levels, while strong growth is expected in emerging markets. North American automotive production is expected to be up slightly. Medium and heavy truck production should strengthen further, and better Automotive Group profitability is expected with continued manufacturing improvements. Steel profitability is expected to be challenged by continued high raw material and energy costs and lower inter-segment sales. Mr. Griffith said: "We are encouraged by our solid finish in 2003, and we are looking forward to building on this foundation in 2004." The company will host a conference call for investors and analysts today to discuss financial 6 THE TIMKEN COMPANY results. Conference Call: Thursday, January 22, 2004 11 a.m. Eastern Time All Callers: Live Dial-In: 706-634-0975 (Call in 10 minutes prior to be included) Replay Dial-In: 706-645-9291 Replay Passcode: 4536689 Live Webcast: www.timken.com -------------- The Timken Company (www.timken.com) is a leading global manufacturer of highly engineered bearings and alloy steels and a provider of related products and services with operations in 29 countries. The company recorded 2003 sales of $3.8 billion and employed approximately 26,000 at year-end. Certain statements in this news release (including statements regarding the Company's forecasts, beliefs and expectations) that are not historical in nature are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, the statements contained in the paragraph under the heading "Outlook" are forward-looking. The Company cautions that actual results may differ materially from those projected or implied in forward-looking statements due to a variety of important factors, including: uncertainties in both timing and amount, if any, of actual benefits realized through the integration of Torrington with Timken's operations and the timing and amount of the resources required to achieve those results; risks associated with diversion of management's attention from operations during the integration process; risks associated with the greater level of debt associated with the acquisition; and the impact on operations of general economic conditions, higher raw material and energy costs, the cyclicality of the Company's business, fluctuations in customer demand and the Company's ability to achieve the benefits of its ongoing programs, including the implementation of its manufacturing transformation and rationalization activities. These and additional factors are described in greater detail in the Company's Prospectus Supplements dated February 11, 2003 and October 15, 2003 relating to the offerings of the Company's common stock, in the Company's Annual Report on Form 10-K for the year ended December 31, 2002, in the Company's 2002 Annual Report, page 47, and in the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and September 30, 2003. The Company undertakes no obligation to update or revise any forward-looking statement. ### 7 THE TIMKEN COMPANY
CONSOLIDATED STATEMENT OF INCOME AS REPORTED - -------------------------------------------------------------------------------------------------------------------- (Thousands of U.S. dollars, except share data) 4Q 03 4Q 02 YEAR 2003 Year 2002 - -------------------------------------------------------------------------------------------------------------------- Net sales $1,021,825 $644,898 $3,788,097 $2,550,075 Cost of products sold 833,274 528,123 3,153,061 2,071,956 Integration/Reorganization (income) expenses - cost of products sold (7,126) 1,403 3,414 8,542 - -------------------------------------------------------------------------------------------------------------------- GROSS PROFIT $195,677 $115,372 $631,622 $469,577 Selling, administrative & general expenses (SG&A) 133,185 89,751 483,721 348,963 Integration/Reorganization expenses - SG&A 12,114 2,736 30,500 9,903 Impairment and restructuring 16,418 7,157 19,154 32,143 - -------------------------------------------------------------------------------------------------------------------- OPERATING INCOME $33,960 $15,728 $98,247 $78,568 Other expense (5,309) (898) (13,689) (13,388) Special charges - other income 21,325 50,202 23,522 50,202 - -------------------------------------------------------------------------------------------------------------------- EARNINGS BEFORE INTEREST AND TAXES (EBIT) $49,976 $65,032 $108,080 $115,382 Interest expense (12,757) (7,544) (48,401) (31,540) Interest income 275 685 1,123 1,676 - -------------------------------------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $37,494 $58,173 $60,802 $85,518 Provision for income taxes 14,998 21,707 24,321 34,067 ---------------------------------------------------------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $22,496 $36,466 $36,481 $51,451 Cumulative effect of change in accounting principle (net of income tax benefit of $7,786) -- 0 -- (12,702) ---------------------------------------------------------- NET INCOME $22,496 $36,466 $36,481 $38,749 ========================================================== EARNINGS PER SHARE: INCOME BEFORE ACCOUNTING CHANGE $0.26 $0.58 $0.44 $0.84 CUMULATIVE EFFECT OF ACCOUNTING CHANGE $0.00 $0.00 $0.00 ($0.21) ---------------------------------------------------------- EARNINGS PER SHARE $0.26 $0.58 $0.44 $0.63 ========================================================== EARNINGS PER SHARE-ASSUMING DILUTION: INCOME BEFORE ACCOUNTING CHANGE $0.25 $0.57 $0.44 $0.83 CUMULATIVE EFFECT OF ACCOUNTING CHANGE $0.00 $0.00 $0.00 ($0.21) ---------------------------------------------------------- EARNINGS PER SHARE-ASSUMING DILUTION $0.25 $0.57 $0.44 $0.62 ========================================================== Average Shares Outstanding 88,191,613 63,346,740 82,945,174 61,128,005 Average Shares Outstanding-assuming dilution 88,520,320 63,758,276 83,159,321 61,635,339 ====================================================================================================================
ADJUSTED(1) - -------------------------------------------------------------------------------------------------------------------- 4Q 03 4Q 02 YEAR 2003 Year 2002 - -------------------------------------------------------------------------------------------------------------------- Net sales $1,021,825 $644,898 $3,788,097 $2,550,075 Cost of products sold 833,274 528,123 3,153,061 2,071,956 Integration/Reorganization (income) expenses - cost of products sold -- -- -- -- - -------------------------------------------------------------------------------------------------------------------- GROSS PROFIT $188,551 $116,775 $635,036 $478,119 Selling, administrative & general expenses (SG&A) 133,185 89,751 483,721 348,963 Integration/Reorganization expenses - SG&A -- -- -- -- Impairment and restructuring -- -- -- -- - -------------------------------------------------------------------------------------------------------------------- OPERATING INCOME $55,366 $27,024 $151,315 $129,156 Other expense (5,309) (898) (13,689) (13,388) Special charges - other income -- -- -- -- - -------------------------------------------------------------------------------------------------------------------- EARNINGS BEFORE INTEREST AND TAXES (EBIT) $50,057 $26,126 $137,626 $115,768 Interest expense (12,757) (7,544) (48,401) (31,540) Interest income 275 685 1,123 1,676 - -------------------------------------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $37,575 $19,267 $90,348 $85,904 Provision for income taxes 14,279 7,220 34,332 32,558 ---------------------------------------------------------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $23,297 $12,047 $56,016 $53,346 Cumulative effect of change in accounting principle (net of income tax benefit of $7,786) -- -- -- -- ---------------------------------------------------------- NET INCOME $23,297 $12,047 $56,016 $53,346 ========================================================== EARNINGS PER SHARE: INCOME BEFORE ACCOUNTING CHANGE $0.26 $0.19 $0.68 $0.87 CUMULATIVE EFFECT OF ACCOUNTING CHANGE -- -- -- -- ---------------------------------------------------------- EARNINGS PER SHARE $0.26 $0.19 $0.68 $0.87 ========================================================== EARNINGS PER SHARE-ASSUMING DILUTION: INCOME BEFORE ACCOUNTING CHANGE $0.26 $0.19 $0.67 $0.87 CUMULATIVE EFFECT OF ACCOUNTING CHANGE -- -- -- -- ---------------------------------------------------------- EARNINGS PER SHARE-ASSUMING DILUTION $0.26 $0.19 $0.67 $0.87 ========================================================== Average Shares Outstanding 88,191,613 63,346,740 82,945,174 61,128,005 Average Shares Outstanding-assuming dilution 88,520,320 63,758,276 83,159,321 61,635,339 ====================================================================================================================
BUSINESS SEGMENTS - ------------------------------------------------------------------------------------------------------------ (THOUSANDS OF U.S. DOLLARS) 4Q 03 4Q 02 YEAR 2003 Year 2002 - ------------------------------------------------------------------------------------------------------------ AUTOMOTIVE GROUP (3) Net sales to external customers $374,646 $188,641 $1,396,104 $752,763 Impairment and restructuring -- -- -- -- Integration/Reorganization expenses -- -- -- -- Earnings before interest and taxes (EBIT) * (2) $8,287 $7,680 $15,685 $11,096 EBIT Margin 2.2% 4.1% 1.1% 1.5% INDUSTRIAL GROUP (3) Net sales to external customers $417,881 $247,417 $1,498,832 $971,534 Intersegment sales 356 -- 837 -- ------------------------------------------------------- Total net sales $418,237 $247,417 $1,499,669 $971,534 Impairment and restructuring -- -- -- -- Integration/Reorganization expenses -- -- -- -- Earnings before interest and taxes (EBIT) * (2) $44,542 $17,699 $128,031 $73,040 EBIT Margin 10.6% 7.2% 8.5% 7.5% STEEL GROUP Net sales to external customers $229,298 $208,840 $893,161 $825,778 Intersegment sales 27,985 31,845 133,356 155,500 ------------------------------------------------------- Total net sales $257,283 $240,685 $1,026,517 $981,278 Impairment and restructuring -- -- -- -- Integration/Special expenses -- -- -- -- Earnings before interest and taxes (EBIT) * (2) ($4,217) $241 ($6,043) $32,520 EBIT Margin -1.6% 0.1% -0.6% 3.3%
*Automotive Bearings, Industrial Bearings and Steel EBIT do not equal Consolidated EBIT due to intersegment adjustments which are eliminated upon consolidation. (1) "Adjusted" statements exclude the impact of impairment and restructuring, integration/reorganization and special charges for all periods shown, and cumulative effect of change in accounting principle recognized in 2002. (2) EBIT is defined as operating income plus other income (expense). EBIT Margin is EBIT as a percentage of net sales. EBIT and EBIT margin on a segment basis exclude certain special items set forth above. EBIT and EBIT Margin are important financial measures used in the management of the business, including decisions concerning the allocation of resources and assessment of performance. Management believes that reporting EBIT and EBIT Margin best reflect the performance of our business segments, and EBIT disclosures are responsive to investors. (3) Automotive Group and Industrial Group 2002 segment results have been adjusted for the 2003 reclassification of Automotive Distribution and Emerging Markets' results. RECONCILIATION OF TOTAL DEBT AS OF DECEMBER 31, 2003 Short-term debt and commercial paper $121,194 Long-term debt 613,446 -------------- Total Debt as of December 31, 2003 $734,640 ============== RECONCILIATION OF GAAP NET INCOME AND EPS - BASIC AND DILUTED AS PREVIOUSLY DISCLOSED. This reconciliation is provided as additional relevant information about the company's performance. Management believes adjusted net income and adjusted earnings per share are more representative of the company's performance, and therefore useful to investors. Management also believes that it is appropriate to compare GAAP net income to adjusted net income in light of special items related to impairment and restructuring and integration/reorganization costs, one-time gains/losses on sales of assets, Continued Dumping and Subsidy Offset Act (CDSOA) receipts and payments and cumulative effect of change in accounting principle.
-------------------------------------------- 4Q 03 4Q 02 - -------------------------------------------------------------------------------------------------------------------- (THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA) $ EPS $ EPS - -------------------------------------------------------------------------------------------------------------------- Net income $22,496 $0.25 $36,466 $0.57 Integration expense - inventory write-up - cost of products sold -- -- -- -- Integration expense - cost of products sold 2,460 0.03 -- -- Re-design of employee benefit plans (7,040) (0.08) -- -- Reorganization expense - cost of products sold 325 0.00 1,403 0.02 Integration/Reorganization expenses - SG&A 9,243 0.10 2,736 0.05 Impairment and restructuring 16,418 0.19 7,157 0.11 Special charges - other income (expense) -- LOSS (GAIN) ON SALE OF ASSETS 1,111 0.01 -- -- CDSOA RECEIPTS, NET OF EXPENSES (68,367) (0.77) (50,202) (0.79) CDSOA REPAYMENT -- -- -- -- ACQUISITION-RELATED UNREALIZED CURRENCY EXCHANGE GAINS 201 0.00 -- -- IMPAIRMENT CHARGE FOR INVESTMENT IN PEL 45,730 0.52 -- -- Tax effect of special items 720 0.01 14,487 0.23 Cumulative effect of change in accounting principle -- -- -- -- ------------------------------------------------ Adjusted net income $23,297 $0.26 $12,047 $0.19 Impact of Torrington acquisition (7) (22,780) ($0.25) ---------- Adjusted net income, excluding Torrington acquisition $517 $0.01 Average shares outstanding, assuming dilution 88,520,320 ---------- Impact of Torrington acquisition (7) 24,857,359 Adjusted average shares outstanding - assuming dilution 63,662,961
-------------------------------------------------- YEAR 2003 Year 2002 - ------------------------------------------------------------------------------------------------------------------------ (THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA) $ EPS $ EPS - ------------------------------------------------------------------------------------------------------------------------ Net income $36,481 $0.44 $38,749 $0.62 Integration expense - inventory write-up - cost of products sold 6,897 (1) 0.08 -- -- Integration expense - cost of products sold 2,460 0.03 -- -- Re-design of employee benefit plans (7,040)(2) (0.08) -- -- Reorganization expense - cost of products sold 3,968 (3) 0.05 8,542 0.14 Integration/Reorganization expenses - SG&A 27,628 0.32 9,903 0.16 Impairment and restructuring 19,154 0.23 32,143 0.53 Special charges - other income (expense) -- LOSS (GAIN) ON SALE OF ASSETS (1,996) (0.02) -- -- CDSOA RECEIPTS, NET OF EXPENSES (68,367)(4) (0.82) (50,202) (0.81) CDSOA REPAYMENT 2,808 (5) 0.03 -- -- ACQUISITION-RELATED UNREALIZED CURRENCY EXCHANGE GAINS (1,696) (0.02) -- -- IMPAIRMENT CHARGE FOR INVESTMENT IN PEL 45,730 (6) 0.55 -- -- Tax effect of special items (10,011) (0.12) 1,509 0.02 Cumulative effect of change in accounting principle -- -- 12,702 .021 --------------------------------------------------- Adjusted net income $56,016 $0.67 $53,346 $0.87 Impact of Torrington acquisition (7) (23,053) ($0.15) ---------- Adjusted net income, excluding Torrington acquisition $32,963 $0.52 Average shares outstanding, assuming dilution 83,159,321 Impact of Torrington acquisition (7) 19,532,461 ---------- Adjusted average shares outstanding - assuming dilution 63,626,860
(1) Represents a one-time inventory write-up related to purchase price accounting. (2) Timken made amendments to certain employee benefit plans which resulted in a net curtailment gain. (3) Costs associated with the Duston, England plant closure. (4) CDSOA receipts are reported net of applicable expenses. (5) One-time repayment of CDSOA funds in 2003, due to a miscalculation by the U.S. Treasury Department of funds received in 2002. (6) In the fourth quarter of 2003, Timken concluded that its investment in a joint venture, PEL, was impaired. Timken wrote off its investment and recorded the PEL debt that Timken guaranteed. (7) Impact of Torrington acquisition includes acquisition earnings, financing and synergies. RECONCILIATION OF 4Q 03 TIMKEN COMPANY AND IMPACT OF TORRINGTON ACQUISITION FOR BUSINESS SEGMENTS
4Q 03 ADJUSTED (8) YEAR 2003 ADJUSTED (8) ------------------------------------------ ------------------------------------------ IMPACT OF IMPACT OF TIMKEN TORRINGTON TIMLEN TIMKEN TORRINGTON TIMKEN COMPANY ACQUISITION STANDALONE COMPANY ACQUISTION STANDALONE ------------------------------------------ ------------------------------------------ AUTOMOTIVE GROUP Net sales to external customers $374,646 $163,497 $211,149 $1,396,104 $574,049 $822,055 EBIT $8,287 $13,345 ($5,058) $15,685 $23,369 ($7,684) EBIT Margin 2.2% 8.2% -2.4% 1.1% 4.1% -0.9% INDUSTRIAL GROUP Net sales to external customers $417,881 $147,899 $269,982 $1,498,832 $456,353 $1,042,479 Intersegment sales 356 -- 356 837 -- 837 ------------------------------------------ ------------------------------------------ Total net sales $418,237 $147,899 $270,338 $1,499,669 $456,353 $1,043,316 EBIT $44,542 $28,778 $15,764 $128,031 $33,194 $94,837 EBIT Margin 10.6% 19.5% 5.8% 8.5% 7.3% 9.1% STEEL GROUP Net sales to external customers $229,298 -- $229,298 $893,161 -- $893,161 Intersegment sales 27,985 -- 27,985 133,356 -- 133,356 ------------------------------------------ ------------------------------------------ Total net sales $257,283 -- $257,283 $1,026,517 -- $1,026,517 EBIT ($4,217) -- ($4,217) ($6,043) -- ($6,043) EBIT Margin -1.6% -- -1.6% -0.6% -- -0.6% CONSOLIDATED Net sales to external customers $1,021,825 $311,396 $710,429 $3,788,097 $1,030,402 $2,757,695 Total EBIT for reportable segments $48,612 42,123 $6,489 $137,673 56,563 $81,110 Intersegment adjustments 1,445 -- 1,445 (47) -- (47) ------------------------------------------ ------------------------------------------ Total EBIT $50,057 $42,123 $7,934 $137,626 $56,563 $81,063 EBIT Margin 4.9% 13.5% 1.1% 3.6% 5.5% 2.9%
(8) "Adjusted" statements exclude the impact of impairment and restructuring and integration/reorganization expenses and special items for all periods shown. RECONCILIATION OF OUTLOOK INFORMATION - Expected net income per diluted share for the full year and the first quarter exclude special items. Examples of such special items include impairment and restructuring, integration/reorganization expenses and payments under the CDSOA. It is not possible at this time to identify the potential amount or significance of these special items. We cannot predict whether we will receive any payments under the CDSOA in 2004 and if so, in what amount. If we do receive any CDSOA payments, they will be received in the fourth quarter.
- ------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF CASH FLOWS For the three months ended Year ended DEC 31 DEC 31 DEC 31 DEC 31 (THOUSANDS OF U.S. DOLLARS) 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------------------------------- CASH PROVIDED (USED) OPERATING ACTIVITIES Net Income $22,496 $36,466 $36,481 $38,749 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting change -- -- -- 12,702 Depreciation and amortization 62,839 35,579 208,851 146,535 Loss on disposals of property, plant and equipment 5,592 14,759 4,944 5,904 Provision (benefit) for deferred income taxes 10,681 (6,307) 13,315 17,250 Stock issued in lieu of cash 443 589 2,744 5,217 Changes in impairment and restructuring charges - net 10,237 (196) 10,237 (13,564) Impairment charges in joint venture 45,730 45,730 0 Changes in operating assets and liabilities: Accounts receivable 29,773 20,575 (27,751) (43,679) Inventories 46,449 (15,389) 33,413 (50,611) Other assets (13,441) 3,568 (19,509) (3,198) Accounts payable and accrued expenses (21,293) 34,667 (97,676) 80,761 Foreign currency translation 3,648 1,591 (8,145) 10,037 --------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $203,154 $125,902 $202,634 $206,103 INVESTING ACTIVITIES Capital expenditures ($46,259) ($36,533) ($127,061) ($90,673) Proceeds from disposals of property, plant and equipment 18,743 3,112 32,321 12,616 Other 11,663 (14,246) 10,785 5,396 Proceeds from disposals of equity investments 0 -- 146,335 -- Acquisitions (1,215) -- (725,120) (6,751) --------------------------------------------------------- NET CASH (USED) BY INVESTING ACTIVITIES ($17,068) ($47,667) ($662,740) ($79,412) FINANCING ACTIVITIES Cash dividends paid to shareholders ($11,578) ($8,232) ($42,078) ($31,713) Issuance of common stock for acquisition -- -- 180,010 -- Issuance of common stock 54,985 54,985 -- Accounts receivable securitization financing borrowings 2,000 -- 127,000 -- Accounts receivable securitization financing payments (125,000) -- (127,000) -- Payments on long-term debt (90,084) (424) (242,465) (37,296) Proceeds from issuance of long-term debt -- -- 424,957 -- Short-term debt activity - net (27,985) (25,960) 26,436 (11,498) --------------------------------------------------------- NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES ($197,662) ($34,616) $401,845 ($80,507) Effect of exchange rate changes on cash $2,159 $1,619 $4,837 $2,474 (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (9,417) 45,238 (53,424) 48,658 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $38,043 $36,812 $82,050 $33,392 --------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $28,626 $82,050 $28,626 $82,050 =========================================================
- -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEET DEC 31 Dec 31 (THOUSANDS OF U.S. DOLLARS) 2003 2002 - -------------------------------------------------------------------------------- ASSETS Cash & cash equivalents $ 28,626 $ 82,050 Accounts receivable 602,262 361,316 Deferred income taxes 50,271 36,003 Inventories 695,946 488,923 - -------------------------------------------------------------------------------- TOTAL CURRENT ASSETS $1,377,105 $ 968,292 Property, plant & equipment 1,608,594 1,226,244 Goodwill 173,099 129,943 Other assets 530,991 423,877 - -------------------------------------------------------------------------------- TOTAL ASSETS $3,689,789 $2,748,356 ================================================================================ LIABILITIES Accounts payable & other liabilities $ 425,157 $ 296,543 Short-term debt & commercial paper 121,194 111,134 Accrued expenses 508,205 226,393 - -------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES $1,054,556 $ 634,070 Long-term debt 613,446 350,085 Accrued pension cost 424,414 723,188 Accrued postretirement benefits cost 476,966 411,304 Other non-current liabilities 30,780 20,623 - -------------------------------------------------------------------------------- TOTAL LIABILITIES $2,600,162 $2,139,270 SHAREHOLDERS' EQUITY 1,089,627 609,086 - -------------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,689,789 $2,748,356 ================================================================================ -----END PRIVACY-ENHANCED MESSAGE-----