1.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 FORM 10Q
[X]Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended June 30, 2002
Commission File No. 1-1169
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
(330) 438-3000
Registrant's telephone number, including area code
Not Applicable
Former name, former address and former fiscal year if changed
since last report.
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
___ ___
Common shares outstanding at June 30, 2002, 60,421,178.
PART I. FINANCIAL INFORMATION 2.
THE TIMKEN COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
June 30 Dec 31
2002 2001
ASSETS ---------- ----------
Current Assets (Thousands of dollars)
Cash and cash equivalents........................... $31,094 $33,392
Accounts receivable, less allowances,
(2002-$16,046; 2001-$14,976)........................ 382,943 307,759
Refundable income taxes............................. 14,208 15,103
Deferred income taxes............................... 43,964 42,895
Inventories (Note 2) ............................... 458,793 429,231
---------- ----------
Total Current Assets...................... 931,002 828,380Property, Plant and Equipment....................... 2,965,755 2,971,793
Less allowances for depreciation................... 1,701,729 1,666,448
---------- ----------
1,264,026 1,305,345Goodwill (Note 8)................................... 149,828 150,041
Intangible pension asset............................ 136,118 136,118
Intangible assets (Note 8).......................... 5,224 5,058
Deferred income taxes............................... 14,764 27,164
Other assets........................................ 102,102 80,978
---------- ----------
Total Assets.................................. $2,603,064 $2,533,084
========== ==========LIABILITIES
Current Liabilities
Accounts payable and other liabilities.............. $296,415 $258,001
Short-term debt and commercial paper................ 148,800 128,864
Accrued expenses.................................... 274,811 254,291
---------- ----------
Total Current Liabilities................. 720,026 641,156Noncurrent Liabilities
Long-term debt (Note 3) ............................ 367,996 368,151
Accrued pension cost................................ 290,380 317,297
Accrued postretirement benefits cost................ 411,656 406,568
Other noncurrent liabilities........................ 23,782 18,177
---------- ----------
Total Noncurrent Liabilities.............. 1,093,814 1,110,193Shareholders' Equity (Note 4)
Common stock........................................ 254,279 248,863
Earnings invested in the business................... 754,918 757,410
Accumulated other comprehensive loss................ (219,973) (224,538)
---------- ----------
Total Shareholders' Equity................ 789,224 781,735 Total Liabilities and Shareholders' Equity.... $2,603,064 $2,533,084
========== ==========
PART I. FINANCIAL INFORMATION Continued 3.
THE TIMKEN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Six Months Ended Three Months Ended
June 30 June 30 June 30 June 30
2002 2001 2002 2001
---------- ---------- ---------- ----------
(Thousands of dollars, except per share data)
Net sales................................................... $1,276,586 $1,295,905 $660,829 $634,389
Cost of products sold....................................... 1,033,643 1,066,808 536,528 523,306
---------- ---------- ---------- ----------
Gross Profit............................................. 242,943 229,097 124,301 111,083Selling, administrative and general expenses................ 178,997 189,827 93,005 93,289
Impairment and restructuring charges (Note 5)............... 17,283 24,766 14,226 16,859
---------- ---------- ---------- ----------
Operating Income......................................... 46,663 14,504 17,070 935Interest expense............................................ (15,924) (17,381) (7,889) (8,487)
Interest income............................................. 697 1,097 317 608
Other expense............................................... (9,075) (2,895) (1,607) (1,685)
---------- ---------- ---------- ----------
Income (Loss) Before Income Taxes........................ 22,361 (4,675) 7,891 (8,629)
Provision for income taxes (Note 6)......................... 9,213 7,677 3,931 5,945
---------- ---------- ---------- ----------
Net Income (Loss)........................................ $ 13,148 $ (12,352) 3,960 $(14,574)
========== ========== ========== ========== Earnings Per Share * .................................... $0.22 $(0.21) $0.07 $(0.24)
Earnings Per Share - assuming dilution **............... $0.22 $(0.21) $0.07 $(0.24)
Dividends Per Share...................................... $0.26 $0.36 $0.13 $0.18
========== ========== ========== ==========* Average shares outstanding............................... 60,092,322 59,999,194 60,239,065 60,015,025
** Average shares outstanding - assuming dilution........... 60,732,056 60,200,827 61,038,029 60,276,721
PART I. FINANCIAL INFORMATION Continued 4.
THE TIMKEN COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
Cash Provided (Used) June 30 June 30
2002 2001
------- -------
OPERATING ACTIVITIES (Thousands of dollars)
Net Income (Loss)......................................$ 13,148 $(12,352)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization......................... 73,855 76,221
Provision (credit) for deferred income taxes.......... 24,033 (937)
Stock issued in lieu of cash to employee benefit plans 5,416 1,030
Change in impairment and restructuring charges - net.. (9,071) 20,761
Changes in operating assets and liabilities:
Accounts receivable.................................. (69,329) (40,004)
Inventories.......................................... (23,465) 14,065
Other assets......................................... (17,304) (24,259)
Accounts payable and accrued expenses................ 27,243 (6,756)
Foreign currency translation......................... 3,732 3,724
------- -------
Net Cash Provided by Operating Activities........... 28,258 31,493INVESTING ACTIVITIES
Purchases of property, plant and equipment - net...... (20,627) (39,973)
Acquisitions.......................................... (6,751) (1,170)
------- -------
Net Cash Used by Investing Activities............... (27,378) (41,143)FINANCING ACTIVITIES
Cash dividends paid to shareholders................... (15,640) (21,602)
Payments on long-term debt............................ (1,423) (992)
Proceeds from issuance of long-term debt.............. - 18
Short-term debt activity - net........................ 13,106 38,058
------- -------
Net Cash (Used) Provided by Financing Activities.... (3,957) 15,482Effect of exchange rate changes on cash................ 779 (1,107)
(Decrease) increase in Cash and Cash Equivalents....... (2,298) 4,725
Cash and Cash Equivalents at Beginning of Period....... 33,392 10,927
------- -------
Cash and Cash Equivalents at End of Period............. $31,094 $15,652
======= =======
PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited) 5.
Note 1 -- Basis of Presentation
The accompanying consolidated condensed financial statements (unaudited) for
the Timken Company (the "company") have been prepared in accordance with the
instructions to Form 10-Q and do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) and disclosures considered necessary
for a fair presentation have been included. For further information, refer to
the consolidated financial statements and footnotes included in the company's
annual report on Form 10-K for the year ended December 31, 2001. Certain
amounts have been reclassified to conform with current year presentation.
6/30/02 12/31/01
Note 2 -- Inventories -------- --------
(Thousands of dollars)
Finished products $188,838 $180,533
Work-in-process and raw materials 232,892 212,040
Manufacturing supplies 37,063 36,658
-------- --------
$458,793 $429,231
======== ========
An actual valuation of inventory under the LIFO method can be made only at the
end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on manage-
ment's estimates of expected year-end inventory levels and costs. Because
these are subject to many forces beyond management's control, interim results
are subject to the final year-end LIFO inventory valuation.
6/30/02 12/31/01
Note 3 -- Long-term Debt -------- --------
(Thousands of dollars)
State of Ohio Pollution Control Revenue Refunding Bonds,
maturing on July 1, 2003. The variable interest
rate is tied to the bank's tax exempt weekly interest
rate. The rate at June 30, 2002 is 1.30%. $17,000 $17,000
State of Ohio Water Development Revenue Refunding
Bond, maturing on May 1, 2007. The variable interest
rate is tied to the bank's tax exempt weekly interest
rate. The rate at June 30, 2002 is 1.30%. 8,000 8,000
State of Ohio Air Quality and Water Development Revenue
Refunding Bonds, maturing on November 1, 2025. The
variable interest rate is tied to the bank's tax
exempt weekly interest rate. The rate at
June 30, 2002 is 1.20%. 21,700 21,700
State of Ohio Water Development Authority Solid Waste
Revenue Bonds, maturing on July 1, 2032. The
variable interest rate is tied to the bank's tax
exempt weekly interest rate. The rate at
June 30, 2002 is 1.35%. 24,000 24,000
Fixed Rate Medium-Term Notes, Series A, due at various
dates through May, 2028 with interest rates ranging
from 6.20% to 7.76%. 327,000 327,000
Other 11,814 12,885
-------- --------
409,514 410,585
Less: Current Maturities 41,518 42,434
-------- --------
$367,996 $368,151
======== ========
PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited)
Continued 6.
Note 4 -- Shareholders' Equity 6/30/02 12/31/01
-------- --------
Class I and Class II serial preferred stock (Thousands of dollars)
without par value:
Authorized -- 10,000,000 shares each class
Issued - none $ - $ -
Common Stock without par value:
Authorized -- 200,000,000 shares
Issued (including shares in treasury)
2002 - 63,082,626 shares
2001 - 63,082,626 shares
Stated Capital 53,064 53,064
Other paid-in capital 251,238 256,423
Less cost of Common Stock in treasury
2002 - 2,661,448 shares
2001 - 3,226,544 shares 50,023 60,624
-------- --------
$254,279 $248,863
======== ========
An analysis of the change in capital and earnings invested in the business is as follows:
Common Stock Earnings Accumulated
Other Invested Other
Stated Paid-In in the Comprehensive Treasury
Capital Capital Business Loss Stock Total
------- -------- -------- ---------- -------- ----------
(Thousands of dollars)
Balance December 31, 2001 $53,064 $256,423 $757,410 ($224,538) ($60,624) $781,735Net Income 13,148 13,148
Foreign currency translation adjustment 5,637 5,637
Change in fair value of derivative
financial instruments (159) (159)
Reclassification adjustments - contract
settlements (913) (913)
----------
Total comprehensive income 17,713Dividends - $.26 per share (15,640) (15,640)
Stock Options, employee benefit and dividend
reinvestment plans:
Treasury - issued 565,096 shares (5,185) 10,601 5,416
------- -------- -------- ---------- -------- ----------
Balance June 30, 2002 $53,064 $251,238 $754,918 ($219,973) ($50,023) $789,224
======= ======== ======== ========== ======== ==========The total comprehensive income (loss) for the three months ended June 30, 2002 and 2001 was $ 9,387,000 and
($14,066,000) respectively. Total comprehensive loss for the six months ended June 30, 2001 was ($24,286,000).
PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited) 7.
Continued
Note 5 -- Impairment and Restructuring Charges
In April 2001, the company announced a strategic global refocusing of its
manufacturing operations to establish a foundation for accelerating the
company's growth initiatives. This second phase of the company's
transformation includes creating focused factories for each product line or
component, replacing specific manufacturing processes with state-of-the-art
processes through the company's global supply chain, rationalizing production
to the lowest total cost plants in the company's global manufacturing system
and implementing lean manufacturing process redesign. The company also
announced its intention to close bearing plants in Columbus, Ohio and Duston,
England, and to sell a tooling plant in Ashland, Ohio. To implement these
actions, the company expects to take approximately $100 - $110 million in
severance, impairment and implementation charges from 2001 through the end of
2002.
As a result of the market weakness experienced in 2001, the company accelerated
the strategic refocusing of its manufacturing operations and took steps to
further reduce capital spending, delay or scale back certain projects and
reduce salaried employment. As a result, the Columbus bearing plant ceased
manufacturing operations in November 2001, and the Duston plant is expected to
cease manufacturing operations by September 2002. Additionally, on June 30,
2002, the company sold its Ashland plant to Ashland Precision Tooling, LLC.
The company targeted an annualized pretax rate of savings of approximately
$100 million by the end of 2004 as a result of this program. Through June 30,
2002, the company achieved estimated annual savings of $58 million. The
following chart details the breakdown by segment of the $14.2 million in
restructuring and impairment charges incurred during the second quarter ended
June 30, 2002 (in millions of dollars):
Auto Industrial Steel Total
Restructuring: ------- ---------- ------- -------
Separation costs $ 0.3 $ 0.6 $ - $ 0.9
Exit costs 0.6 - - 0.6
------- ---------- ------- -------
$ 0.9 $ 0.6 $ - $ 1.5Impaired assets:
Property, plant and equipment $ 12.0 $ - $ - $ 12.0
Special charges:
SFAS No. 88/106 curtailment $ - $ 1.7 $ - $ 1.7
Reversal of separation cost $ (0.4) $ (0.4) $ (0.2) $ (1.0)
------- ---------- ------- -------
$ 12.5 $ 1.9 $ (0.2) $ 14.2
======= ========== ======= =======
The second quarter of 2002 Automotive Bearings Business impaired assets charge
related to the Duston plant closure. The majority of the Automotive and
Industrial restructuring costs also related to the Duston and Columbus plant
closures, respectively. Second quarter 2002 charges also included severance
and special curtailment expenses (pension and postretirement benefits) related
to certain Ashland plant associates. The reversal of separation costs related
to associates who were previously included in the severance accrual but for
PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited) 8.
Continued
Note 5 -- Impairment and Restructuring Charges (continued)
whom severance will not be paid as these associates subsequently retired or
found other employment. Implementation charges for the quarter ended
June 30, 2002 totaled $4.8 million, classified as cost of products sold of
$2.8 million and selling, administrative and general expenses of $2.0 million.
Cumulative restructuring and impairment charges related to the second phase of
restructuring by segment as of June 30, 2002 are as follows(in millions of
dollars):
Auto Industrial Steel Total
Restructuring: ------- ---------- ------- -------
Separation costs $ 26.6 $ 4.6 $ 1.5 $ 32.7
Exit costs 1.5 1.0 - 2.5
------- ---------- ------- -------
$ 28.1 $ 5.6 $ 1.5 $ 35.2Impaired assets:
Property, plant and equipment $ 14.1 $ 0.9 $ - $ 15.0
Special charges:
SFAS No. 88/106 curtailment $ - $ 16.8 $ - $ 16.8
Reversal of separation cost $ (0.4) $ (0.4) $ (0.2) $ (1.0)
------- ---------- ------- -------
$ 41.8 $ 22.9 $ 1.3 $ 66.0
======= ========== ======= =======
Cumulative implementation charges related to the second phase of restructuring
as of June 30, 2002 totaled $17.9 million, classified as cost of products sold
of $9.2 million and selling, administrative and general expenses of
$8.7 million. As of June 30, 2002, the remaining severance accrual balance was
$11.2 million, including $0.3 million in additional expense incurred during the
second quarter, offset by the accrual reversal of $1.0 million. Total payments
made during the second quarter of 2002 totaled $2.8 million.From the announcement in April 2001 to June 30, 2002, 1,496 associates left the
company. Of that number, 1,075 people were from the Duston and Columbus
plants, Canton bearing plants, Canadian Timken Ltd., and associates included in
the worldwide salaried workforce for whom severance has been paid. In addition,
78 associates left the company as of June 30, 2002 as a result of the sale of
the Ashland plant. The remaining 343 associates retired or voluntarily left
the company, and their positions have been eliminated.
In June 2002, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring)." SFAS
No. 146 is effective for exit and disposal activities that are initiated after
December 31, 2002. It is currently the company's policy to recognize restruct-
uring costs as announced in April 2001 in accordance with EITF Issue No. 94-3.
PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited) 9.
Continued
Note 6 -- Income Tax Provision Six Months Ended Three Months Ended
June 30 June 30 June 30 June 30
2002 2001 2002 2001
-------- -------- -------- --------
U.S. (Thousands of dollars)
Federal $ 5,876 $ 5,241 $ 1,657 $ 6,047
State & Local 1,137 (499) 408 (387)
Foreign 2,200 2,935 1,866 285
------- ------- ------- -------
$ 9,213 $ 7,677 $ 3,931 $ 5,945
======= ======= ======= =======The income tax rate exceeds the U.S. statutory rate primarily due to state and
local taxes and current foreign net operating losses for which no current tax
benefit is being realized.
Note 7 -- Segment Information
(Thousands of Dollars) Six Months Ended Three Months Ended
June 30 June 30 June 30 June 30
Automotive Bearings 2002 2001 2002 2001
-------- -------- -------- --------
Net sales to external customers $422,873 $389,243 $219,177 $194,986
Depreciation and amortization 17,193 18,059 8,619 9,123
Goodwill Amortization - 46 - 23
Impairment and restructuring charges 14,461 261 12,529 179
Earnings before interest and taxes (563) (2,206) (11,776) (220)Industrial Bearings
Net sales to external customers $440,998 $463,911 $228,058 $221,917
Depreciation and amortization 22,782 21,979 11,521 10,992
Goodwill Amortization - 2,412 - 1,204
Impairment and restructuring charges 2,896 23,702 1,940 16,309
Earnings before interest amd taxes 11,904 (1,764) 12,510 (6,538)
Steel
Net sales to external customers $412,715 $442,751 $213,594 $217,486
Intersegment sales 81,032 79,477 41,759 37,000
Depreciation and amortization 33,881 33,104 16,954 16,673
Goodwill Amortization - 621 - 308
Impairment and restructuring charges (74) 803 (243) 371
Earnings before interest and taxes 26,761 15,611 14,811 6,329
Profit Before Taxes
Total EBIT for reportable segments 38,102 11,641 15,545 (429)
Interest expense (15,924) (17,381) (7,889) (8,487)
Interest income 697 1,097 317 608
Intersegment adjustments (514) (32) (82) (321)
Income before income taxes 22,361 (4,675) 7,891 (8,629)
PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited) 10.
Continued
Note 8 - Change in Method of Accounting
Effective January 2002, the company adopted SFAS No. 142, "Goodwill and Other
Intangible Assets." In accordance with SFAS No. 142, goodwill and indefinite
lived intangible assets are no longer amortized but are reviewed at least
annually for impairment. The application of the nonamortization provisions is
expected to result in an increase in annual net income of $6.1 million, of
which $1.5 million is related to the second quarter. Changes in the estimated
useful lives of intangible assets will not result in a material change to net
income. Intangible assets that are separable and have a definite life will
continue to be amortized over their estimated useful lives.
As part of the adoption, the company evaluated the impairment of indefinite
lived intangible assets and determined that none were impaired based on
estimations in market value. Fair value of each of the company's five
reporting units was determined by discounted cash flows and validated with
various market-comparable approaches. Based on preliminary results, which are
currently under review, the company estimates the transitional impairment loss
to be between $25 - $30 million before taxes, the majority of which is related
to the Steel Business. Once the review has been completed, the related
transitional impairment loss is expected to be recorded in the third quarter of
2002 as a non-cash charge and reflected as the cumulative effect of a change in
accounting principle.
Prior to the adoption of SFAS No. 142, amortization expense was recorded for
goodwill and other intangible assets. The following table reflects reported net
income for the first six months of 2002 adjusted for purposes of comparison:
(Thousands of Dollars) Six Months Ended
June 30 June 30
2002 2001
-------- --------
Reported net income (loss) $13,148 $(12,352)
Plus: Goodwill and indefinite lived intangible
asset amortization, net of tax - 2,430
-------- --------
Adjusted net income (loss) $13,148 $ (9,922)
======== ========
PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited) 11.
Continued
Note 8 - Change in Method of Accounting (continued)
Six Months Ended
June 30 June 30
2002 2001
-------- --------
Earnings per share (basic and diluted):
Reported net income $ 0.22 $ (0.21)
Plus: Goodwill and indefinite lived intangible
asset amortization, net of tax - 0.04
-------- --------
Adjusted net income $ 0.22 $ (0.17)The changes in the carrying amount of goodwill and indefinite lived intangible
assets for the quarter ended June 30, 2002 are as follows:
(Thousands of Dollars) Balance Balance
12/31/01 Reclass Other 6/30/02
-------- ---------- -------- --------
Goodwill:
Automotive $ 1,577 $ - $ (33) $ 1,544
Industrial 120,426 (1,219) 303 119,510
Steel 28,038 - 736 28,774
-------- ---------- --------- --------
$150,041 $ (1,219) $ 1,006 $149,828The indefinite lived intangible assets are immaterial.
The following table displays intangible assets subject to amortization, and not
subject to amortization as of June 30, 2002 and December 31, 2001:
(Thousands of Dollars) As of June 30, 2002
Gross Net
Carrying Accumulated Carrying
Amount Amortization Amount
-------- ------------ --------
Amortized intangible assets:
Industrial trademarks $ 597 $ 343 $ 254
Industrial land use rights 4,484 819 3,665
Industrial know-how transfer 416 335 81
Steel know-how transfer 169 - 169
-------- ----------- --------
$ 5,666 $ 1,497 $ 4,169
======== =========== ========Unamortized intangible assets:
Goodwill $149,828 $ - $149,828
Automotive land use rights 106 - 106
Industrial license agreements 949 - 949
-------- ----------- --------
$150,883 $ - $150,883
======== =========== ========
Total Intangible Assets $156,549 $ 1,497 $155,052
======== =========== ========
PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited) 12.
Continued
Note 8 - Change in Method of Accounting (continued)
As of December 31, 2001
Gross Net
Carrying Accumulated Carrying
Amount Amortization Amount
-------- ------------ --------
Amortized intangible assets:
Industrial trademarks $ 532 $ 289 $ 243
Industrial land use rights 4,484 798 3,686
Industrial know-how transfer 417 341 76
-------- ----------- --------
$ 5,433 $ 1,428 $ 4,005
======== =========== ========Unamortized intangible assets:
Goodwill $197,329 $ 47,288 $150,041
Automotive land use rights 108 - 108
Industrial license agreements 1,042 97 945
-------- ----------- --------
$198,479 $ 47,385 $151,094
======== =========== ========
Total Intangible Assets $203,912 $ 48,813 $155,099
======== =========== ========Amortization expense for intangible assets was approximately $72,000 for the
three months ended June 30, 2002, and is estimated to be approximately
$370,000 annually for the next five fiscal years.
13.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
- ---------------------
The Timken Company reported net sales of $660.8 million for the second quarter
of 2002, an increase of 4.2% from $634.4 million in the same quarter a year
ago. The company reported net income of $4.0 million for the second quarter of
2002 compared to a net loss of $14.6 million in the second quarter of 2001. In
the second quarter of 2002, the company incurred total pretax restructuring and
implementation charges of $19.0 million. These charges included $14.2 million
related to impairment and restructuring charges and $4.8 million related to
implementation expenses, which were reflected in the company's cost of products
sold and selling, administrative and general expenses for the quarter. The
second quarter of 2001 included pretax charges of $17.3 million. Of this,
$16.8 million represented impairment and restructuring charges and $0.5 million
represented implementation charges. In addition, net income for the second
quarter of 2002 was favorably impacted by the discontinuation of goodwill
amortization, which was $1.5 million in second quarter of 2001.
The company's second quarter 2002 results benefited from continued strength in
the automotive industry for both Automotive Bearings and Steel. North American
light truck production continued to be strong in the second quarter of 2002.
However, industrial markets around the world have shown few signs of recovery.
Rail demand remains weak and aerospace demand has recently weakened,
particularly in Europe. The company's higher earnings performance in the
second quarter of 2002 also reflected cost reductions achieved through its
ongoing restructuring of manufacturing operations and lower administrative
spending levels.
Gross profit was $124.3 million (18.8% of net sales) in the second quarter of
2002, compared to $111.1 million (17.5% of net sales) in the same period a year
ago. Although second quarter 2002 results included implementation charges of
$2.8 million compared to $0.1 million in the same period a year ago, gross
profit performance improved due to higher sales volume, cost containment and
savings generated from the company's manufacturing strategy initiatives. In
addition, the second quarter 2002 gross profit was favorably impacted by the
discontinuation of goodwill amortization, which was $1.5 million in second
quarter of 2001.
Selling, administrative and general expenses were $93.0 million (14.0% of net
sales) in the second quarter of 2002, compared to $93.3 million (14.6% of net
sales) recorded in the second quarter of 2001. Although there was an increase
in implementation charges of $1.7 million in the second quarter of 2002
compared to the same period a year ago, as well as increased performance-based
pay reserves, this increase was more than offset by savings related to the
salaried workforce reduction and continuing focused control on discretionary
spending.
In April 2001, the company announced a strategic global refocusing of its
manufacturing operations to establish a foundation for accelerating the
company's growth initiatives. This second phase of the company's transformation
includes creating focused factories for each product line or component,
replacing specific manufacturing processes with state-of-the-art processes
14.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)through the company's global supply chain, rationalizing production to the
lowest total cost plants in the company's global manufacturing system and
implementing lean manufacturing process redesign. The company also announced
its intention to close bearing plants in Columbus, Ohio and Duston, England,
and to sell a tooling plant in Ashland, Ohio. To implement these actions, the
company expects to take approximately $100 - $110 million in severance, impair-
ment and implementation charges from 2001 through the end of 2002.
As a result of the market weakness experienced in 2001, the company accelerated
the strategic refocusing of its manufacturing operations and took steps to
further reduce capital spending, delay or scale back certain projects and
reduce salaried employment. As a result, the Columbus bearing plant ceased
manufacturing operations in November 2001, and the Duston plant is expected to
cease manufacturing operations by September 2002. Additionally, on June 30,
2002, the company sold its Ashland plant to Ashland Precision Tooling, LLC.
The company targeted an annualized pretax rate of savings of approximately
$100 million by the end of 2004 as a result of this program. Through June 30,
2002, the company achieved estimated annual savings of $58 million.
The following chart details the breakdown by segment of the $14.2 million in
restructuring and impairment charges incurred during the second quarter ended
June 30, 2002 (in millions of dollars):
Auto Industrial Steel Total
Restructuring: ------- ---------- ------- -------
Separation costs $ 0.3 $ 0.6 $ - $ 0.9
Exit costs 0.6 - - 0.6
------- ---------- ------- -------
$ 0.9 $ 0.6 $ - $ 1.5
Impaired assets:
Property, plant and equipment $ 12.0 $ - $ - $ 12.0Special charges:
SFAS No. 88/106 curtailment $ - $ 1.7 $ - $ 1.7
Reversal of separation cost $ (0.4) $ (0.4) $ (0.2) $ (1.0)
------- ---------- ------- -------
$ 12.5 $ 1.9 $ (0.2) $ 14.2
======= ========== ======== =======The second quarter of 2002 Automotive Bearings Business impaired assets charge
related to the Duston plant closure. The majority of the Automotive and
Industrial restructuring costs also related to the Duston and Columbus plant
closures, respectively. Second quarter 2002 charges also included severance and
special curtailment expenses (pension and postretirement benefits) related to
certain Ashland plant associates. The reversal of separation costs related to
associates who were previously included in the severance accrual but for whom
severance will not be paid as these associates subsequently retired or found
other employment. Implementation charges for the quarter ended June 30, 2002
totaled $4.8 million. Of these charges, $2.8 million were classified as cost of
products sold and $2.0 million as selling, administrative and general expenses.
15.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)Cumulative restructuring and impairment charges related to the second phase of
restructuring by segment as of June 30, 2002 are as follows (in millions of
dollars):
Auto Industrial Steel Total
Restructuring: ------- ---------- ------- -------
Separation costs $ 26.6 $ 4.6 $ 1.5 $ 32.7
Exit costs 1.5 1.0 - 2.5
------- ---------- ------- -------
$ 28.1 $ 5.6 $ 1.5 $ 35.2
Impaired assets:
Property, plant and equipment $ 14.1 $ 0.9 $ - $ 15.0Special charges:
SFAS 88/106 curtailment $ - $ 16.8 $ - $ 16.8
Reversal of separation cost $ (0.4) $ (0.4) $ (0.2) $ (1.0)
------- ---------- ------- -------
$ 41.8 $ 22.9 $ 1.3 $ 66.0
======= ========== ======= =======Cumulative implementation charges related to the second phase of restructuring
as of June 30, 2002 totaled $17.9 million. Of these charges, $9.2 million were
classified as cost of products sold and $8.7 million as selling, administrative
and general expenses. As of June 30, 2002, the remaining severance accrual
balance was $11.2 million, including $0.3 million in additional expense
incurred during the second quarter, offset by the accrual reversal of
$1.0 million. Total payments made during the second quarter of 2002 totaled
$2.8 million.
From the announcement in April 2001 to June 30, 2002, 1,496 associates left the
company as a result of the restructuring and salaried workforce reduction. Of
that number, 1,075 people were from the Duston and Columbus plants, Canton
bearing plants, Canadian Timken Ltd., and associates included in the worldwide
salaried workforce for whom severance has been paid. In addition, 78 associates
left the company as of June 30, 2002 as a result of the sale of the Ashland
plant. The remaining 343 associates retired or voluntarily left the company,
and their positions have been eliminated.
Other expense recorded in the second quarter of 2002 was comparable to the same
quarter a year ago.
The income tax rate exceeds the U.S. statutory rate primarily due to state and
local taxes and current foreign net operating losses for which no current tax
benefit is being realized.
Automotive Bearings
The Automotive Bearings Business includes products for passenger cars, light
and heavy trucks and trailers. Global Automotive Bearings' sales for the second
quarter of 2002 increased 12.4% to $219.2 million, from $195.0 million in the
second quarter of 2001. This increase reflected continued strength in vehicle
production in North America and new automotive platforms launched using Timken
16.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)products. North American light truck production is up 9% year-to-date from
2001. It is projected that light truck production will increase 8% in 2002
from 2001 levels. Medium and heavy truck production globally continues to be
weak. In North America, medium and heavy truck production is down 11% year-to-
date versus 2001. For 2002, North American medium and heavy truck production
for the second half is expected to increase 41% over 2001 levels, and approx-
imately 2% over the 2000 level. In the near-term, North American demand for
heavy trucks continues to be favorably impacted by the pre-buys related to the
October 1, 2002 emissions change. The company expects demand for heavy trucks
to decline significantly in the fourth quarter of 2002. Latin American auto-
motive markets continue to be negatively impacted by the current economic and
political situations in that region.
Excluding $15.5 million and $0.3 million in restructuring and implementation
charges for the second quarters of 2002 and 2001, respectively, and before
interest and taxes, Automotive Bearings' had earnings of $3.7 million, compared
to $0.1 million in 2001's second quarter. Including for these charges, Auto-
motive Bearings' had a loss before interest and taxes of $11.8 million,
compared with a loss before interest and taxes of $0.2 million in the second
quarter of 2001. The increase in EBIT, excluding restructuring and
implementation charges, resulted from increased sales volume compared to the
same period a year ago, increased savings enhanced by the manufacturing
strategy and salaried cost reduction initiatives and aggressive business cost
control. These increases more than offset the adverse impact of operating
inefficiencies resulting from capacity constraints caused by equipment
rationalization related to the manufacturing strategy initiative, an unexpected
four-day shutdown in the heat treat operations of a plant in Europe and costs
incurred to meet higher-than-expected customer demand.
Automotive Bearings' selling, administrative and general expenses in the second
quarter of 2002 were comparable to the same period a year ago. Although
performance-based pay reserves increased as a result of stronger EBIT
performance in 2002, this increase was offset by the savings realized from the
salaried cost reduction initiatives and continuing focus on business cost
spending.
On April 8, 2002, the company and NSK Ltd. announced they agreed to form a
joint venture to build a plant near Shanghai, China to manufacture certain
tapered roller bearing product lines. Construction of the plant is expected to
begin later in 2002, and production is scheduled to start early in 2004.
Ownership of this joint venture, Timken-NSK Bearings (Suzhou) Co. Ltd., will be
divided evenly between the company and NSK Ltd.
The company announced on June 27, 2002 that it had entered into a joint venture
to supply forged and machined rings for bearing manufacture with two Japan-
based companies: Sanyo Special Steel Co., Ltd. and Showa Seiko Co., Ltd. The
joint venture, Advanced Green Components, LLC, will operate as an independent
manufacturing business. It will acquire the assets of the company's Winchester,
Kentucky plant, and is expected to be operational in the third quarter of 2002.
17.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)Industrial Bearings
The Industrial Bearings Business includes industrial, rail, aerospace and super
precision products as well as emerging markets in China, India and Central and
Eastern Europe. Industrial Bearings' net sales for the second quarter of 2002
were $228.1 million, an increase of 3% over the second quarter 2001 net sales
of $221.9 million. Although general industrial demand strengthened in the
second quarter of 2002, this strength was offset by weaker demand from aero-
space and rail customers. Rail demand is expected to remain depressed and
aerospace demand shows no near-term signs of improvement as customers reduce
build rates. Industrial Bearings' demand in the second half of 2002 is
expected to be stronger than the second half of 2001, but the industrial sector
recovery is proceeding slowly.
Excluding $3.8 million and $16.6 million in restructuring and implementation
charges for the second quarters of 2002 and 2001, respectively, Industrial
Bearings' EBIT was $16.3 million, up from $11.3 million in second quarter of
2001. Including these charges and goodwill amortization of $1.2 million in the
second quarter of 2001, Industrial Bearings' EBIT for the second quarter was
$12.5 million, compared to a loss of $6.5 million in the second quarter of
2001. The increase in EBIT reflected slightly higher sales to North American
and European customers and efficiency improvements from the manufacturing
strategy and salaried cost reduction initiatives as well as aggressive business
cost control. Also, the second quarter 2002 EBIT was favorably impacted by the
discontiuation of goodwill amortization.
Industrial Bearings' selling, administrative and general expenses in the second
quarter of 2002 were comparable to the same period a year ago. The business has
been focusing on controlling discretionary spending and realizing savings from
the salaried cost reduction initiatives, which offset the increased
performance-based pay reserves as a result of stronger EBIT performance in the
second quarter of 2002.
On June 30, 2002, the company sold its Ashland plant to Ashland Precision
Tooling, LLC. As a result of this sale, 81 associates previously employed by
the company became employees of Ashland Precision Tooling, LLC.
Steel
Steel's net sales, including intersegment sales, of $255.4 million in second
quarter of 2002 were flat compared to net sales of $254.5 million in the same
quarter a year ago. Sales to automotive and general industrial customers in
the second quarter of 2002 increased 24% and 17%, respectively, compared to
second quarter of 2001. However, sales to other customers continue to be
sluggish. Sales to the bearing industry, other than automotive suppliers, were
weak and aerospace sales decreased 20% compared to the same period a year ago.
Additionally, sales to oil country and steel service center customers decreased
nearly 40%.
The company expects sales to the automotive segment to remain strong through
the third quarter of 2002. Third quarter sales to general industrial customers
18.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
and to steel service centers are expected to be higher than 2001. Aerospace
sales are expected to drop as customers cut the production of passenger planes.
Excluding Steel's portion of a reversal of restructuring and implementation
charges of $0.2 million, Steel's EBIT for the second quarter of 2002 was
$14.6 million. This compares with EBIT of $7.0 million in the second quarter of
2001, excluding restructuring and implementation charges of $0.4 million and
goodwill amortization of $0.3 million. Including restructuring and
reorganization charges and goodwill amortization, Steel EBIT was $14.8 million,
compared to $6.3 million a year ago. The increase in EBIT was the result of
continuing cost-control actions. Steel has reduced purchasing costs through a
combination of price reductions, substitute products and reduced consumption.
Although scrap and alloy costs increased in the second quarter of 2002 compared
to the same period a year ago, electricity and natural gas costs were lower
than in the second quarter of 2001 and contributed to the improved EBIT
performance. Additionally, second quarter 2002 labor productivity increased
compared to second quarter 2001 due to efficiency improvements and increased
production levels. In the second half of 2002, the company expects scrap and
alloy costs to remain higher than second half of 2001.
Steel's selling, administrative and general expenses in the second quarter of
2002 were flat compared to the same period a year ago as a result of continued
business cost spending control, which offset the increase in performance-based
pay reserves as a result of stronger EBIT performance in 2002 compared to the
first half of 2001.
Financial Condition
- -------------------
Total assets as shown on the Consolidated Condensed Balance Sheets increased by
approximately $70 million from December 31, 2001. Inventory balances at the
end of the second quarter, 2002 increased approximately 7% compared to year-end
2001 levels. The company's number of days' supply in inventory as of June 30,
2002 was 112 days compared to 105 days as of December 31, 2001. Total Bearings'
number of days' supply in inventory increased four days while Steel's inventory
increased thirteen days. The increase in Bearings' inventories was primarily
caused by the higher automotive sales volume and the effect of fluctuations
in currency exchange rates. The increase in Steel's inventories in second
quarter of 2002 was a result of the increase in operating levels to meet
increased customer demand and anticipated plant shutdowns during the third
quarter. The Steel number of days' supply in inventory as of December 31, 2001
was extremely low as the result of the depressed customer demand in the fourth
quarter of 2001. Accounts receivable have increased by $75.2 million since
December 31, 2001. The increase is due primarily to the timing of customer
payments and increase in sales levels. The number of days' sales in receivables
at June 30, 2002 was comparable to December 31, 2001, which was 51 days.
Although the accounts receivable balance increased from December 31, 2001, the
2002 first half customer sales average increased significantly from fourth
quarter 2001's depressed sales levels.
As shown on the Consolidated Condensed Statement of Cash Flows, the increase in
inventories used $23.5 million of cash during the first half of 2002. The
19.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)increase in other assets used $17.3 million in cash during the first half of
2002. This was primarily due to the funding of the e-business joint ventures
and other affiliations as well as the recording of a receivable on June 30
related to the sale of the Ashland plant fixed assets. Accounts payable and
accrued expenses provided $27.2 million of cash in the first half of 2002,
primarily due to an increase in amounts payable to suppliers and an increase
in the amounts reserved for performance-based pay due to the company's better
performance in the first half of 2002. This increase in accounts payable and
accrued expenses was offset by the restructuring accrual payments made during
the first six months of 2002. Purchases of property, plant and equipment, net
used $20.6 million of cash in the first six months of 2002, below the
$40.0 million spent during the same period in 2001.
The 39.6% debt-to-total-capital ratio at June 30, 2002 was higher than the
38.9% at year-end 2001. Debt increased by $19.8 million during the first half
of 2002, to $516.8 million at June 30, 2002. The increase in total debt was
used primarily to fund increases in working capital. The company expects that
any cash requirements for operations in excess of cash generated from operating
activities will be met by short-term borrowing and issuance of medium-term
notes. The company continues to focus on working capital management and
discretionary spending.
The company's contractual debt obligations and contractual commitments
outstanding as of June 30, 2002 are as follows (in millions):
Payments Due by Period
-------------------------------------------------
Total Less than 1 1-3 years 4-5 After 5
year years years
------ ----------- --------- ------- ---------
Long-term Debt $409.5 $41.5 $27.0 $103.1 $237.9
Commercial Paper $ 21.0 $21.0 - - -
Other Lines of Credit $ 86.3 $86.3 - - -
Credit
Operating Leases $ 57.1 $13.3 $21.9 $5.7 $ 16.2The company's capital lease obligations are immaterial. At June 30, 2002, the
company had available $279.0 million through an unsecured $300.0 million
revolving credit agreement with a group of banks. As of the end of July 2002,
the company is the guarantor of a $23.5 million letter of credit for Pel
Technologies, LLC.
Total shareholders' equity has increased by approximately $7.5 million since
December 31, 2001. The increase in equity was primarily the result of net
income of $13.1 million, a non-cash foreign currency translation adjustment of
$5.6 million, a $5.4 million favorable adjustment related to the issuance of
the company's treasury shares, a non-cash adjustment of $1.0 million related to
outstanding and settled derivative instruments and the payment of $15.6 million
in dividends. Although the Brazilian Real and Argentine Peso continued to
devalue during the first six months of 2002, the adverse impact on the foreign
currency translation adjustment was more than offset by the strength of
20.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)currencies against the US dollar in many of the countries in which the company
operates.
During the second quarter of 2002, the company did not purchase any shares of
its common stock under the company's 2000 common stock purchase plan. This plan
authorizes the company to buy in the open market or in privately negotiated
transactions up to 4 million shares of common stock, which are to be held as
treasury shares and used for specified purposes. The company may exercise
this authorization until December 31, 2006. The company does not expect to not
be active in repurchasing shares under this plan in the near-term.
Other Information
- -----------------
In the second quarter of 2000, the U.S. International Trade Commission (ITC)
voted to revoke the industry's antidumping orders on imports of tapered roller
bearings from Japan, Romania and Hungary. The ITC determined that revocation
of the antidumping duty orders on tapered roller bearings from those countries
was not likely to lead to continuation or recurrence of material injury to the
domestic industry within a reasonably foreseeable time. The ITC upheld the
antidumping duty order against China. The company has filed an appeal of the
ITC's decision regarding Japan, which is still pending.
On March 5, 2002, President Bush announced that the U.S. would impose tariffs
on hot and cold-finished bar imports. The remedy for these product categories
is three years of tariffs at 30%, 24% and 18%. Hot-rolled bars are a major
product line for the company's Steel business, which also manufactures some
cold-finished bar products. Steel made in Mexico, Canada and developing
nations are generally exempt from the tariffs announced. No relief was granted
with respect to tool steels, which is a major product line for the Timken
Latrobe Steel subsidiary in Latrobe, Pennsylvania.
Assets and liabilities of subsidiaries, other than Timken Romania, which is
considered to operate in a highly inflationary economy, are translated at the
rate of exchange in effect on the balance sheet date; income and expenses are
translated at the average rates of exchange prevailing during the quarter.
Related translation adjustments are reflected as a separate component of
accumulated other comprehensive loss. Foreign currency gains and losses
resulting from transactions and the translation of financial statements are
included in the results of operations.
Foreign currency exchange losses included in the company's operating results
for the second quarter of 2002 totaled $0.7 million, compared to $2.1 million
in the same year-ago period. For the first half of 2002, the company recorded
a non-cash foreign currency translation adjustment of $5.6 million that
increased shareholders' equity, compared to a non-cash foreign currency
translation adjustment of $11.5 million that decreased equity in the first half
of 2001. Although the Brazilian Real and Argentine Peso continued to devalue
during the first six months of 2002, the adverse impact was more than offset by
the strength of currencies against the US dollar in many of the countries in
which the company operates. The opposite was true during the first six months
of 2001 when the company was negatively impacted by continued weakening of
currencies.
21.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
On July 31, 2002, the board of directors declared a quarterly cash dividend of
$0.13 per share payable September 3, 2002 to shareholders of record as of
August 16, 2002. This is the 321st consecutive dividend in over 80 years paid
on the common stock of the company.
On July 29, 2002, the board of directors elected James W. Griffith chief
executive officer. He continues to serve the company as president and as a
director. Roger W. Lindsay, senior vice president - human resources and
organizational advancement was elected by the board of directors on July 31,
2002 as an officer of the company.
In June 2002, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No.
146 is effective for exit and disposal activities that are initiated after
December 31, 2002. It is currently the company's policy to recognize
restructuring costs as announced in April 2001 in accordance with EITF Issue
No. 94-3.
Change in Method of Accounting:
Effective January 2002, the Company adopted SFAS No. 142, "Goodwill and Other
Intangible Assets." In accordance with SFAS No. 142, goodwill and indefinite
lived intangible assets are no longer amortized but are reviewed at least
annually for impairment. The application of the nonamortization provisions is
expected to result in an increase in annual net income of $6.1 million, of
which $1.5 million is related to the second quarter. Changes in the estimated
useful lives of intangible assets will not result in a material increase to net
income. Intangible assets that are separable and have a definite life will
continue to be amortized over the estimated useful lives.
In accordance with the adoption of SFAS No. 142, the company evaluated the
impairment of indefinite lived intangible assets and determined that none were
impaired based on estimations in market value. Fair value for each of the
company's five reporting units was determined by discounted cash flows and
validated with various market-comparable approaches. Based on preliminary
results, which are currently under review, the company estimates the
transitional impairment loss to be between $25 - $30 million before taxes, the
majority of which is primarily related to the Steel Business. Once the review
has been completed, the related transitional impairment loss is expected to be
recorded in the third quarter as a non-cash charge and reflected as the
cumulative effect of a change in accounting principle.
Refer to Note 8 on page 10 of "Notes to Financial Statements (Unaudited)" for
further discussion of this change in method of accounting.
Certain statements set forth in this document (including the company's fore-
casts, beliefs and expectations) that are not historical in nature are
22.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)"forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995. The company cautions readers that actual
results may differ materially from those projected or implied in forward-
looking statements made by or on behalf of the company due to a variety of
important factors, such as:
a) changes in world economic conditions, including additional adverse effects
from terrorism or hostilities. This includes the potential instability of
governments and legal systems in countries in which the company or its
customers conduct business and significant changes in currency valuations.
b) the effects of changes in customer demand on sales, product mix, and prices.
This includes the effects of customer strikes, the impact of changes in
industrial business cycles and whether conditions of fair trade continue in
the U.S. market, in light of the ITC voting in second quarter 2000 to revoke
the antidumping orders on imports of tapered roller bearings from Japan,
Romania and Hungary.
c) competitive factors, including changes in market penetration, increasing
price competition by existing or new foreign and domestic competitors, the
introduction of new products by existing and new competitors, and new tech-
nology that may impact the way the company's products are sold or
distributed.
d) changes in operating costs. This includes the effect of changes in the
company's manufacturing processes; changes in costs associated with varying
levels of operations; changes resulting from inventory management and cost
reduction initiatives and different levels of customer demands; the effects
of unplanned work stoppages; changes in the cost of labor and benefits; and
the cost and availability of raw materials and energy.
e) the success of the company's operating plans, including its ability to
achieve the benefits from its global restructuring, manufacturing trans-
formation, and administrative cost reduction as well as its ongoing contin-
uous improvement and rationalization programs; its ability to integrate
acquisitions into company operations; the ability of acquired companies to
achieve satisfactory operating results; its ability to maintain appropriate
relations with unions that represent company associates in certain locations
in order to avoid disruptions of business and its ability to successfully
implement its new organizational structure.
f) unanticipated litigation, claims or assessments. This includes, but is not
limited to, claims or problems related to intellectual property, product
warranty and environmental issues.
g) changes in worldwide financial markets, to the extent they affect the com-
pany's ability or costs to raise capital, have an impact on the overall
performance of the company's pension fund investments and/or cause changes
in the economy which affect customer demand.
The company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.
23.Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
10 The form of The Timken Company 1996 Deferred Compensation
Plan Election Agreement for Deferral of Restricted Shares 10.1 Retirement Agreement entered into as of June 30, 2002
between the company and Gene E. Little 11 Computation of Per Share Earnings
12 Computation of Ratio of Earnings to Fixed Charges
99.1 Certification Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 signed on August 13, 2002 by the President and
Chief Executive Officer and the Executive Vice President -
Finance and Administration (b) Reports on Form 8-K:
On July 19, 2002, the company filed a Form 8-K regarding Other
Events, which contained a press release, dated July 18,2002
titled "The Timken Company Announces Second Quarter Results." A
consolidated statement of income, consolidated statement of cash
flows and balance sheet as of June 30, 2002 were included in the
filing.
24. (b) Reports on Form 8-K (continued):
On August 7, 2002, the company filed a Form 8-K regarding Other
Events and Regulation FD Disclosure, which contained the State-
ments under Oath of its President and Chief Executive Officer
and its Executive Vice President - Finance and Administration
regarding facts and circumstances relating to Exchange Act
Filings. No financial statements were filed. On July 17, 2002, the company filed a Form 8-K regarding Other
Events and Regulation FD Disclosure, which contained estimated
market data and industry trend information relating to a number
of industry segments in which the company sells bearing and
steel products. No financial statements were filed. On June 17, 2002, the company filed a Form 8-K regarding Other
Events and Regulation FD Disclosure, which contained estimated
market data and industry trend information relating to a number
of industry segments in which the company sells bearing and
steel products. No financial statements were filed. On May 20, 2002, the company filed a Form 8-K regarding Other
Events and Regulation FD Disclosure, which contained estimated
market data and industry trend information relating to a number
of industry segments in which the company sells bearing and
steel products. No financial statements were filed. On April 16, 2002, the company filed a Form 8-K regarding
Other Events, which contained a press release, dated April 16,
2002 titled "Earnings Up, Despite Sales Decline The Timken
Announces First Quarter Results." A consolidated statement of
income, consolidated statement of cash flows and balance sheet
as of March 31, 2002 were included in the filing. On April 15, 2002, the company filed a Form 8-K regarding
Other Events and Regulation FD Disclosure, which contained
estimated market data and industry trend information relating
to a number of industry segments in which the company sells
bearing and steel products. No financial statements were
filed. On April 8, 2002, the company filed a Form 8-K regarding
Other Events, which contained a press release, dated April 8,
2002 titled "Timken and NSK form joint venture to build plant
in China." No financial statements were filed.
25.
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 thereunto duly authorized.
The Timken Company
_______________________________
Date August 13, 2002 BY /s/ James W. Griffith
________________________ _______________________________
James W. Griffith
Chief Executive Officer,
President and Director
Date August 13, 2002 BY /s/ Glenn A. Eisenberg
________________________ _______________________________
Glenn A. Eisenberg
Executive Vice President - Finance and
Administration