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): October 16, 2002
------------------------------
THE TIMKEN COMPANY
-------------------
(Exact name of registrant as specified in charter)
Ohio 1-1169 34-0577130
--------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1835 Dueber Avenue, S.W., Canton, Ohio 44706-2798
--------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (330) 438-3000
ITEM 5. OTHER EVENTS.
Press Releases
On October 16, 2002, The Timken Company issued the following press release:
THE TIMKEN COMPANY ANNOUNCES
THIRD QUARTER RESULTS:
SALES AND EARNINGS BOTH UP
CANTON, OHIO -- October 16, 2002 - The Timken Company (NYSE: TKR) today
reported third quarter 2002 earnings of $0.17 per diluted share versus a loss of
($0.03) per diluted share a year ago, excluding restructuring and reorganization
charges, goodwill amortization and the impact of an accounting change related to
goodwill. Earnings were above consensus analyst estimates of $0.14 per share.
Sales were $628.6 million and about 9 percent above the $577.7 million recorded
in last year's third quarter.
Including the impact of the special charges, goodwill amortization and the
change in accounting principle, the company reported a third quarter net loss of
($10.9) million or ($0.18) per diluted share versus a net loss last year of
($30.5) million or ($0.51) per share. Results in the third quarter of 2002 were
negatively impacted by a goodwill impairment write-off, which is reflected as
the cumulative effect of a change in accounting principle. This amounted to
$20.5
-2-
million before taxes or $12.7 million after taxes ($0.21 per share).
Earnings before interest and taxes (EBIT) were $12.8 million -- an
improvement from last year's loss of ($23.0) million.
"Our third-quarter results demonstrate the ongoing success of our strategic
manufacturing restructuring and cost-cutting actions, which are improving our
profitability," said James W. Griffith, president and chief executive officer.
"These initiatives are on track to deliver an annualized savings rate of $80
million by the end of the year. Automotive demand also continued strong in the
quarter due to incentive programs from automakers which spurred light vehicle
production. Changing environmental regulations for heavy trucks created a surge
in demand in that sector. While industrial sales continue to be sluggish, the
third quarter reflected an improved sales mix which contributed to
profitability."
In September, the company contributed 3 million shares of common stock in
lieu of cash to its pension plan, which increased shareholders' equity by $54.5
million.
In the first nine months, net income excluding special charges, goodwill
amortization and the cumulative effect of the accounting change, rose from a
year ago to $41.3 million or $0.68 per diluted share on sales of $1.91 billion
from $12.1 million or $0.20 per diluted share on sales of $1.87 billion.
Including these items, the company had net income of $2.3 million or $0.04 per
diluted share in the first nine months of 2002 versus a loss of ($42.9) million
or a loss of ($0.71) per diluted share a year ago.
-3-
THE FOLLOWING SEGMENT RESULTS EXCLUDE RESTRUCTURING AND REORGANIZATION CHARGES
AND GOODWILL AMORTIZATION.
AUTOMOTIVE BEARINGS' RESULTS
Automotive third quarter EBIT was $2.1 million on sales of $207.1 million
compared to a loss of ($7.9) million on sales of $176.5 million a year ago.
Widespread incentive programs on light vehicles from automotive manufacturers
and changing environmental regulations on heavy trucks drove North American
demand in the third quarter. North American light and heavy truck production
showed strong increases over the prior year, while demand in Europe and the rest
of the world was flat. New light truck platforms that include Timken bearings
also boosted North American sales.
Improved automotive performance reflected the favorable impact of both
strong sales volume and the company's restructuring initiatives. This was
partially offset by additional manufacturing costs necessary to meet high levels
of demand while the company restructures its automotive supply chain and
currency exchange losses.
For the first nine months, Automotive EBIT was $21.0 million on sales of
$630.0 million compared to a loss of $9.4 million on sales of $565.8 million for
the same period in 2001.
INDUSTRIAL BEARINGS' RESULTS
Third-quarter Industrial EBIT was $18.1 million on sales of $217.2 million
compared to $9.8 million on sales of $214.1 million a year ago. While sales
increased only slightly compared to last year, an improved mix of higher-margin
industrial products, the cost reduction impact of restructuring initiatives, and
an inventory write-up contributed to strong EBIT performance. Improvement in
global industrial markets continues to be slow. Global aerospace markets remain
weak versus last year's levels, and military demand has not increased
substantially.
-4-
In the first nine months, Industrial achieved EBIT of $37.7 million on
sales of $658.2 million, which was about even with last year's EBIT on greater
sales of $678.0 million.
STEEL BUSINESS RESULTS
The Steel Business reported third quarter EBIT of $5.6 million on net
sales, including intersegment sales, of $246.8 million. This compares with EBIT
of $1.6 million on sales of $222.1 million in last year's third quarter. The
improved performance reflected strong shipments to the automotive industry,
higher capacity utilization and improved efficiency. Strong sales to automotive
customers were offset by continuing weak sales to other sectors. While raw
material costs increased slightly during the quarter, the Steel Business
continued to control costs and to improve productivity.
For the first nine months of 2002, Steel's EBIT was $32.3 million on sales
of $740.6 million versus $19.7 million on sales of $744.3 million last year.
OUTLOOK
"The automotive sector continues to be strong, but we expect some seasonal
impact in the fourth quarter and slowing demand in the heavy truck segment
because of emissions regulations for trucks taking effect in October," said Mr.
Griffith. Industrial markets are recovering slowly, and we expect the recovery
to continue at this slow pace into next year. Our operating improvements have
had a positive impact on our performance this year, and they have us
well-prepared for the economic upturn."
The Timken Company (NYSE: TKR) (http://www.timken.com) is a leading
international manufacturer of highly engineered bearings, alloy and specialty
steels and components, as well as a provider of related products and services.
With operations in 24 countries, the company employs about 18,100 people
worldwide and reported 2001 sales of U.S. $2.4 billion.
-5-
The company will conduct a teleconference on October 17 at 8:30 a.m.
Eastern Daylight Time on its third quarter earnings. Dial 706-634-0975
(reference Timken) or link to www.timken.com for the Web cast. Replay will be
available at 706-645-9291, beginning at 11:30 a.m. EDT, October 17 through 11:59
p.m. EDT, October 24, 2002. Access Code 4717573.
NOTE: 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. 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 the impact on
operations of general economic conditions, the cyclicality of the company's
business, customer demand and the company's ability to achieve the benefits of
its ongoing restructuring and cost-reduction programs. These and additional
factors are described in greater detail in the company's 2001 Annual Report,
page 39, the Annual Report on Form 10-K for the year ended December 31, 2001 and
the quarterly reports on Form 10-Q for the periods ended March 31 and June 30,
2002. The company undertakes no obligation to update or revise any
forward-looking statement.
#####
CONSOLIDATED STATEMENT OF INCOME AS REPORTED
------------------------------------------------------------------------------------------------------------------------------------
(THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA) 3Q 02 3Q 01 NINE MONTHS 02 Nine Months 01
-----------------------------------------------------------------------------------------------------------------------------------
Net sales $628,591 $577,698 $1,905,177 $1,873,603
Cost of products sold 515,271 483,995 1,543,833 1,544,037
Goodwill amortization - 1,535 - 4,614
Reorganization expenses - cost of products sold 2,058 1,217 7,139 4,904
-----------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT $111,262 $90,951 $354,205 $320,048
Selling, administrative & general expenses (SG&A) 84,999 85,474 259,212 273,978
Reorganization expenses - SG&A 2,383 1,354 7,167 2,677
Impairment and restructuring 7,703 24,639 24,986 49,405
-----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) $16,177 ($20,516) $62,840 ($6,012)
Other expense (3,415) (2,476) (12,490) (5,371)
-----------------------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INTEREST AND TAXES (EBIT) $12,762 ($22,992) $50,350 ($11,383)
Interest expense (8,072) (8,432) (23,996) (25,813)
Interest income 294 573 991 1,670
-----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $4,984 ($30,851) $27,345 ($35,526)
Provision for income taxes 3,147 (319) 12,360 7,358
-------------------------------------------------------------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE $1,837 ($30,532) $14,985 ($42,884)
Cumulative effect of change in accounting principle (net of
income tax benefit of $7,786) (12,702) - (12,702) -
-------------------------------------------------------------------
NET (LOSS) INCOME ($10,865) ($30,532) $2,283 ($42,884)
===================================================================
EARNINGS PER SHARE:
INCOME (LOSS) BEFORE ACCOUNTING CHANGE $0.03 ($0.51) $0.25 ($0.71)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE ($0.21) - ($0.21) -
-------------------------------------------------------------------
EARNINGS PER SHARE ($0.18) ($0.51) $0.04 ($0.71)
===================================================================
EARNINGS PER SHARE-ASSUMING DILUTION:
INCOME (LOSS) BEFORE ACCOUNTING CHANGE $0.03 ($0.51) $0.25 ($0.71)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE ($0.21) - ($0.21) -
-------------------------------------------------------------------
EARNINGS PER SHARE-ASSUMING DILUTION ($0.18) ($0.51) $0.04 ($0.71)
===================================================================
Average Shares Outstanding 61,091,924 59,958,690 60,459,277 59,979,699
Average Shares Outstanding-assuming dilution 61,430,256 60,086,662 60,998,543 60,156,778
===================================================================================================================================
CONSOLIDATED STATEMENT OF INCOME ADJUSTED (1)
---------------------------------------------------------------- -----------------------------------------------------------------
(THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA) 3Q 02 3Q 01 NINE MONTHS 02 Nine Months 01
---------------------------------------------------------------- ----------------------------------------------------------------
Net sales $628,591 $577,698 $1,905,177 $1,873,603
Cost of products sold 515,271 483,995 1,543,833 1,544,037
Goodwill amortization - - - -
Reorganization expenses - cost of products sold - - - -
---------------------------------------------------------------- ----------------------------------------------------------------
GROSS PROFIT $113,320 $93,703 $361,344 $329,566
Selling, administrative & general expenses (SG&A) 84,999 85,474 259,212 273,978
Reorganization expenses - SG&A - - - -
Impairment and restructuring - - - -
---------------------------------------------------------------- ----------------------------------------------------------------
OPERATING INCOME (LOSS) $28,321 $8,229 $102,132 $55,588
Other expense (3,415) (2,476) (12,490) (5,371)
---------------------------------------------------------------- ----------------------------------------------------------------
EARNINGS BEFORE INTEREST AND TAXES (EBIT) $24,906 $5,753 $89,642 $50,217
Interest expense (8,072) (8,432) (23,996) (25,813)
Interest income 294 573 991 1,670
---------------------------------------------------------------- ----------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $17,128 ($2,106) $66,637 $26,074
Provision for income taxes 6,497 (286) 25,338 14,018
----------------------------------------------------------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE $10,631 ($1,820) $41,299 $12,056
Cumulative effect of change in accounting principle (net of
income tax benefit of $7,786) - - - -
----------------------------------------------------------------
NET (LOSS) INCOME $10,631 ($1,820) $41,299 $12,056
================================================================
EARNINGS PER SHARE:
INCOME (LOSS) BEFORE ACCOUNTING CHANGE $0.17 ($0.03) $0.68 $0.20
CUMULATIVE EFFECT OF ACCOUNTING CHANGE - - - -
----------------------------------------------------------------
EARNINGS PER SHARE $0.17 ($0.03) $0.68 $0.20
================================================================
EARNINGS PER SHARE-ASSUMING DILUTION:
INCOME (LOSS) BEFORE ACCOUNTING CHANGE $0.17 ($0.03) $0.68 $0.20
CUMULATIVE EFFECT OF ACCOUNTING CHANGE - - - -
----------------------------------------------------------------
EARNINGS PER SHARE-ASSUMING DILUTION $0.17 ($0.03) $0.68 $0.20
================================================================
Average Shares Outstanding 61,091,924 59,958,690 60,459,277 59,979,699
Average Shares Outstanding-assuming dilution 61,430,256 60,086,662 60,998,543 60,156,778
================================================================ ================================================================
BUSINESS SEGMENTS
-----------------------------------------------------------------------------------------------------------------------------------
(THOUSANDS OF U.S. DOLLARS) 3Q 02 3Q 01 NINE MONTHS 02 Nine Months 01
------------------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE BEARINGS
Net sales to external customers $207,136 $176,518 $630,009 $565,761
Impairment and restructuring 2,550 23,597 17,011 23,858
Reorganization expenses 2,604 848 7,678 1,280
Goodwill amortization - 23 - 69
Earnings before interest and taxes (EBIT) * ($3,081) ($32,351) ($3,644) ($34,557)
EBIT Margin -1.5% -18.3% -0.6% -6.1%
INDUSTRIAL BEARINGS
Net sales to external customers $217,232 $214,130 $658,230 $678,041
Impairment and restructuring 4,330 641 7,226 24,343
Reorganization expenses 1,837 1,723 6,628 5,279
Goodwill amortization - 1,201 - 3,613
Earnings before interest and taxes (EBIT) * $11,953 $6,186 $23,857 $4,422
EBIT Margin 5.5% 2.9% 3.6% 0.7%
STEEL
Net sales to external customers $204,223 $187,050 $616,938 $629,801
Intersegment sales 42,623 35,007 123,655 114,484
------------------------------------------------------------------
Total net sales $246,846 $222,057 $740,593 $744,285
Impairment and restructuring 823 401 749 1,204
Reorganization expenses - - - 1,023
Goodwill amortization - 311 - 932
Earnings before interest and taxes (EBIT) * $4,769 $911 $31,530 $16,522
EBIT Margin 1.9% 0.4% 4.3% 2.2%
BUSINESS SEGMENTS
-----------------------------------------------------------------------------------------------------------------------------------
(THOUSANDS OF U.S. DOLLARS) 3Q 02 3Q 01 NINE MONTHS 02 Nine Months 01
------------------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE BEARINGS
Net sales to external customers $207,136 $176,518 $630,009 $565,761
Impairment and restructuring - - - -
Reorganization expenses - - - -
Goodwill amortization - - - -
Earnings before interest and taxes (EBIT) * $2,073 ($7,883) $21,045 ($9,350)
EBIT Margin 1.0% -4.5% 3.3% -1.7%
INDUSTRIAL BEARINGS
Net sales to external customers $217,232 $214,130 $658,230 $678,041
Impairment and restructuring - - - -
Reorganization expenses - - - -
Goodwill amortization - - - -
Earnings before interest and taxes (EBIT) * $18,120 $9,751 $37,711 $37,657
EBIT Margin 8.3% 4.6% 5.7% 5.6%
STEEL
Net sales to external customers $204,223 $187,050 $616,938 $629,801
Intersegment sales 42,623 35,007 123,655 114,484
----------------------------------------------------------------------
Total net sales $246,846 $222,057 $740,593 $744,285
Impairment and restructuring - - - -
Reorganization expenses - - - -
Goodwill amortization - - - -
Earnings before interest and taxes (EBIT) * $5,592 $1,623 $32,279 $19,681
EBIT Margin 2.3% 0.7% 4.4% 2.6%
*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 restructuring and
reorganization charges for all quarters shown, elimination of goodwill
amortization in 2001 and cumulative effect of change in accounting
principle recognized in 2002.
-------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS For the three months ended For the nine months ended
SEPT 30 Sept 30 SEPT 30 Sept 30
(THOUSANDS OF U.S. DOLLARS) 2002 2001 2002 2001
-------------------------------------------------------------------------------------------------------------------------
CASH PROVIDED (USED)
OPERATING ACTIVITIES
Net Income (Loss) ($10,865) ($30,532) $2,283 ($42,884)
Adjustments to reconcile net income to net cash provided
by operating activities:
Cumulative effect of accounting change 12,702 - $12,702 -
Depreciation and amortization 37,101 37,794 110,956 114,015
Provision (credit) for deferred income taxes (476) (6,259) 23,557 (7,196)
Stock issued in lieu of cash to employee benefit plans (788) 289 4,628 1,319
Non-cash impact of impairment and restructuring charges (4,297) 19,583 (13,368) 40,344
Changes in operating assets and liabilities:
Accounts receivable 5,075 19,195 (64,254) (20,809)
Inventories (11,757) 7,938 (35,222) 22,003
Other assets 10,537 (2,038) (6,766) (26,297)
Accounts payable and accrued expenses 18,852 (43,017) 46,094 (49,773)
Foreign currency translation 4,714 1,077 8,446 4,801
----------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $60,798 $4,030 $89,056 $35,523
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net ($13,222) ($21,859) (33,849) (61,832)
Acquisitions - - (6,751) (1,170)
----------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES ($13,222) ($21,859) ($40,600) ($63,002)
FINANCING ACTIVITIES
Cash dividends paid to shareholders ($7,841) ($10,786) (23,481) (32,388)
Purchase of treasury shares - (2,795) - (2,795)
Payments on long-term debt (35,449) (495) (36,872) (1,487)
Proceeds from issuance of long-term debt - 76,092 - 76,110
Short-term debt activity - net 1,356 (33,230) 14,462 4,828
----------------------------------------------------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES ($41,934) 28,786 ($45,891) $44,268
Effect of exchange rate changes on cash $76 (694) 855 (1,801)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 5,718 10,263 3,420 14,988
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $31,094 $15,652 $33,392 $10,927
----------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $36,812 $25,915 $36,812 $25,915
==========================================================
------------------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET SEPT 30 Dec 31
(THOUSANDS OF U.S. DOLLARS) 2002 2001
------------------------------------------------------------------------------------------------------------------
ASSETS
Cash & cash equivalents $36,812 $33,392
Accounts receivable 376,416 307,759
Refundable income taxes - 15,103
Deferred income taxes 42,790 42,895
Inventories 464,394 429,231
------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS $920,412 $828,380
Property, plant & equipment 1,237,407 1,305,345
Other assets 384,224 399,359
------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $2,542,043 $2,533,084
==================================================================================================================
LIABILITIES
Accounts payable & other liabilities $263,303 $258,001
Short-term debt & commercial paper 131,432 128,864
Accrued expenses 272,242 254,291
------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES $666,977 $641,156
Long-term debt 350,515 368,151
Accrued pension cost 270,179 317,297
Accrued postretirement benefits 413,319 406,568
Other non-current liabilities 21,980 18,177
------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $1,722,970 $1,751,349
SHAREHOLDERS' EQUITY 819,073 781,735
------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,542,043 $2,533,084
==================================================================================================================
SIGNATURE
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
----------------------------------
Name: William R. Burkhart
Title: Senior Vice President and
General Counsel
Dated: October 16, 2002