1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the Fiscal Year Ended Commission File Number 1-1169 December 31, 1999 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) Registrants telephone number, including area code (330)438-3000 ___________________ Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered ______________________________ _______________________ Common Stock without par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None. 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 ___ ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]. 2 The aggregate market value of the voting stock held by all shareholders other than shareholders identified under item 12 of this Form 10-K as of February 18, 2000, was $705,101,600 (representing 50,364,400 shares). Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of February 18, 2000. Common Stock without par value--61,119,617 shares (representing a market value of $855,674,638). DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the year ended December 31, 1999, are incorporated by reference into Parts I and II. Portions of the proxy statement for the annual meeting of shareholders to be held on April 18, 2000, are incorporated by reference into parts III and IV. Exhibit Index may be found on Pages 20 through 23. 3 PART I ______ Item 1. Description of Business ________________________________ General _______ As used herein the term "Timken" or the "company" refers to The Timken Company and its subsidiaries unless the context otherwise requires. Timken, an outgrowth of a business originally founded in 1899, was incorporated under the laws of Ohio in 1904. Products ________ Timken's products are divided into two industry segments. The first includes anti-friction bearings; the second industry segment is steel. Anti-friction bearings constitute Timken's principal industry product. Basically, the tapered roller bearing made by Timken is its principal product in the anti-friction industry segment. It consists of four components: (1) the cone or inner race, (2) the cup or outer race, (3) the tapered rollers which roll between the cup and cone, and (4) the cage which serves as a retainer and maintains proper spacing between the rollers. These four components are manufactured or purchased and are sold in a wide variety of configurations and sizes. Sensing devices are added to the basic tapered roller bearing and sold to sport utility vehicle and light truck markets. Matching bearings to service requirements of customers' applications requires engineering, and oftentimes sophisticated analytical techniques. The design of every tapered roller bearing made by Timken permits distribution of unit pressures over the full length of the roller. This fact, coupled with its tapered design, high precision tolerance and proprietary internal geometry and premium quality material, provides a bearing with high load carrying capacity, excellent friction-reducing qualities and long life. Timken also produces super precision ball and roller bearings for use in aerospace, medical / dental, computer disk drives and other markets having high precision applications. These bearings are mostly produced at Timken Aerospace & Super Precision Bearings, a subsidiary of the company. They utilize ball and straight rolling elements and are in the super precision end of the general ball and straight roller bearing product range in the bearing industry. A majority of Timken Aerospace & Super Precision Bearings' products are special custom-designed bearings and spindle assemblies. They often involve specialized materials and coatings for use in applications that subject the bearings to extreme operating conditions of speed and temperature. 4 Products (cont.) ________________ Other bearing products manufactured by Timken include cylindrical, spherical, straight and ball bearings for industrial markets. These bearings feature non-tapered rolling elements. In addition, Timken produces custom-designed products called SpexxTM performance Bearings. The product line includes both tapered and cylindrical roller bearings and provides cost-effective solutions for selective applications. The company produces the Timken IsoClassTM brand of tapered roller bearings, which gives Timken access to 95% of the market for ISO tapered roller bearings, which are about one half of today's total tapered roller bearing market. In addition to bearing products, Timken provides bearing reconditioning services for industrial and railroad markets, both globally and domestically. Steel products include steels of low and intermediate alloy, vacuum- processed alloys, tool steel and some carbon grades. These are available in a wide range of solid and tubular sections with a variety of finishes. The company also produces custom-made steel products including precision steel components for automotive and industrial customers. The development of the precision steel components business has provided the company with the opportunity to further expand its market for tubing and capture more higher-value steel sales. This also enables the company's traditional tubing customers in the automotive and bearing industries to take advantage of higher-performing components that cost less than those they now use. This activity is a growing portion of the Steel business. Sales and Distribution ______________________ Timken's products in the bearing industry segment are sold principally by its own sales organization. A major portion of the shipments are made directly from Timken's plants and the balance from warehouses located in a number of cities in the United States, Canada, England, France, Germany, Mexico, Singapore, Argentina and Australia. These warehouse inventories are augmented by authorized distributor and jobber inventories throughout the world that provide local availability when service is required. The company operates an Export Service Center in Atlanta, Georgia, which specializes in the export of tapered roller bearings for the replacement markets in the Caribbean, Central and South America and other regions. Timken's tapered roller bearings and other bearing types are used in general industry and in a wide variety of products including passenger cars, trucks, railroad cars and locomotives, machine tools, rolling mills and farm and construction equipment. Timken Aerospace & Super Precision Bearings' products, which are at the super precision end of the general ball and straight roller bearing segment, are used in aircraft, missile guidance systems, computer peripherals, and medical / dental instruments. 5 Sales and Distribution (cont.) ______________________________ In January 2000, the company announced that distribution activities will be moved from existing warehousing and shipping facilities in Germany, England, France and Italy to a central warehouse in Strasbourg, France, which will be operated by an external service provider. This initiative is expected to reduce employment at the facilities by approximately 60 positions. These job reductions will be implemented through a combination of voluntary departures and redundancies. The existing sales offices at all locations will continue providing service to customers. In the U.K., a smaller warehouse facility will be established to serve local requirements. A significant portion of Timken's steel production is consumed in its bearing operations. In addition, sales are made to other anti-friction bearing companies and to the aircraft, automotive and truck, construction, forging, oil and gas drilling and tooling industries. In addition, sales are made to steel service centers. Timken's steel products are sold principally by its own sales organization. Most orders are custom made to satisfy specific customer applications and are shipped directly to customers from Timken's steel manufacturing plants. Timken has a number of customers in the automotive industry including both manufacturers and suppliers. However, Timken feels that because of the size of that industry, the diverse bearing applications, and the fact that its business is spread among a number of customers, both foreign and domestic, in original equipment manufacturing and aftermarket distribution, its relationship with the automotive industry is well diversified. Timken has entered into individually negotiated contracts with some of its customers in both the bearing and steel segments. These contracts may extend for one or more years and, if a price is fixed for any period extending beyond current shipments, customarily include a commitment by the customer to purchase a designated percentage of its requirements from Timken. Contracts extending beyond one year that are not subject to price adjustment provisions do not represent a material portion of Timken's sales. Timken does not believe that there is any significant loss of earnings risk associated with any given contract. Industry Segments _________________ The company has two reportable segments: Bearings and Steel. Segment information in Note 12 of the Notes to Consolidated Financial Statements and Information by Industry and Geographic Area on pages 32 and 33 of the Annual Report to Shareholders for the year ended December 31, 1999, are incorporated herein by reference. Export sales from the U.S. and Canada are not separately stated since such sales amount to less than 10% of revenue. The company's Bearings business has historically participated in the worldwide bearing markets while Steel has concentrated on U.S. markets. 6 Industry Segments (cont.) _________________________ Timken's non-U.S. operations are subject to normal international business risks not generally applicable to domestic business. These risks include currency fluctuation, changes in tariff restrictions, and restrictive regulations by foreign governments including price and exchange controls. Competition ___________ Both the anti-friction bearing business and the steel business are extremely competitive. The principal competitive factors involved, both in the United States and in foreign markets, include price, product quality, service, delivery, order lead times and technological innovation. Timken manufactures an anti-friction bearing known as the tapered roller bearing. The tapered principle of bearings made by Timken permits ready absorption of both radial and axial loads in combination. For this reason, they are particularly well-adapted to reducing friction where shafts, gears or wheels are used. Timken also produces super precision ball and straight roller bearings at its Timken Aerospace & Super Precision Bearings subsidiary. With recent acquisitions, the company has selectively expanded its product line to include other bearing types. However, since the invention of the tapered roller bearing by its founder, Timken has maintained primary focus in its product and process technology on the tapered roller bearing segment. This has been important to its ability to remain one of the leaders in the world's bearing industry. This contrasts with the majority of Timken's major competitors who focus more heavily on other bearing types such as ball, straight roller, spherical roller and needle for the general industrial and automotive markets and are, therefore, less specialized in the tapered roller bearing segment. Timken competes with domestic manufacturers and many foreign manufacturers of anti-friction bearings. The anti-friction bearing business is intensely competitive in every country in which Timken competes. With the collapse of the former Soviet Union and the modernization of existing capacity in many countries, there remain substantial downward pricing pressures in the United States and other countries even during periods of significant demand in the United States and other markets. Moreover, international price discrimination by certain of Timken's foreign competitors and the continued absorption of antidumping duties by companies related to the foreign producers in the United States create additional pricing pressures in the United States. Imports of tapered roller bearings into the United States in 1999 were $237 million or approximately 16 percent of the domestic tapered roller bearing market. In addition, Timken estimates the tapered roller bearings contained as components of foreign automobiles and heavy equipment produced outside the United States and imported into this country to be approximately $205 million in 1999. 7 Competition (cont.) ______________________________ To address the problem of injurious dumping by various foreign competitors, the company has pursued its legal rights in the United States and in other parts of the world for many years. In the United States, antidumping orders are outstanding from cases brought by the company in the early 1970s and in 1986. The antidumping finding issued in 1976 pertains to tapered roller bearings from Japan that have an outside diameter of 4 inches or less but excluding unfinished components or parts. The finding does not apply to one major Japanese producer. In August 1986, the company filed an antidumping petition on behalf of the U.S. tapered roller bearing industry with both the U.S. International Trade Commission and the U.S. Department of Commerce alleging that imports of tapered roller bearings (including unfinished parts and components from six countries (China, Romania, Yugoslavia, Italy, Hungary and Japan) to the extent not covered by the 1976 finding) were being sold at less than fair value in the United States and were causing material injury to the domestic industry. The U.S. Department of Commerce found that product from each of the countries was being sold in the United States at less than fair value or "dumped," and the U.S. International Trade Commission found such imports were causing injury to the domestic industry. The Commerce Department's notice also identified the amount by which selling prices of the foreign producers were less than fair value. This amount is expressed as a weighted average percentage for each company investigated and is often referred to as the "final margin" for a particular time period. The final margins for Japanese producers as originally calculated in 1986-87 were approximately 36 percent for the major producers. Final margins for producers in other countries varied but were above 100% for one foreign producer. If requested by foreign producers, importers or domestic producers, the dumping margins (if any) will be examined for a more recent time period. Substantial dumping margins have been found for most or all of the major producers in Japan for most years since the antidumping orders issued. On March 6, 2000, the U.S. Department of Commerce issued final margins for companies investigated for the 1997-98 time period, finding dumping margins that ranged from 1.80% to 23.36%. Significant dumping margins continue to be found for certain producers from other countries covered by orders. For some countries covered by the orders, imports have declined or ceased. Some foreign producers and exporters / resellers have ceased dumping. The orders were revoked for Yugoslavia in 1995 and for Italy in 1996 as well as for selected individual producers in the other orders over time. Importers are required to post a cash deposit with the U.S. Customs Service equal to the final margin from the most recent period that has been published for a particular foreign producer from a country where an order remains outstanding. If no dumping is found or the amount of dumping is less than the cash deposit, the importer receives a refund with interest. If the dumping found in the review is greater than the amount posted as a cash deposit, the difference must be paid to the U.S. Customs Service with interest. 8 Competition (cont.) ______________________________ Timken has remained deeply concerned about the persistence of unfair trade practices in its major markets and has participated in the administrative review process in the United States and elsewhere to assure that conditions of fair trade are restored if possible. The company has pursued and continues to pursue legislative changes to neutralize the price depressing effect of duty absorption that has continued in the United States for more than 20 years in some cases. The existence of the orders reduces the commercial harm that would otherwise be experienced by the company from the continued dumping practices of certain foreign competitors. The industry's antidumping duty orders covering imports of tapered roller bearings from Japan, China, Hungary and Romania are currently in the process of being reviewed by U.S. government agencies to determine whether dumping and injury to the domestic industry are likely to continue or recur if the orders were to be revoked. These reviews commenced in April, 1999, and should conclude by the end of the second quarter 2000. The company is actively participating in the proceedings. If the U.S. government determines that dumping and injury are likely to continue or recur, the antidumping duty finding and orders will continue in place for another five years. If, however, a determination is made that injury to the domestic industry is unlikely to continue or recur with respect to any of the four countries covered, the finding or order will be revoked with respect to that country. If, following the revocation of such an order, injurious dumping does continue or recur, contrary to the finding of the government, the improved conditions of fair trade of tapered roller bearings in the U.S., which resulted from existing orders, would deteriorate. If injurious dumping does occur, such dumping could have a material adverse effect on the company's business, financial condition or results of operations. Timken manufactures carbon and alloy seamless tubing, carbon and alloy steel solid bars, tool steels and other custom-made specialty steel products. Specialty steels are characterized by special chemistry, tightly controlled melting and precise processing. Maintaining high standards of product quality and reliability while keeping production costs competitive is essential to Timken's ability to compete in the specialty steel industry with domestic and foreign steel manufacturers. Backlog _______ The backlog of orders of Timken's domestic and overseas operations is estimated to have been $1.04 billion at December 31, 1999, and $1.22 billion at December 31, 1998. Actual shipments are dependent upon ever-changing production schedules of the customer. Accordingly, Timken does not believe that its backlog data and comparisons thereof as of different dates are reliable indicators of future sales or shipments. 9 Raw Materials _____________ The principal raw materials used by Timken in its North American plants to manufacture bearings are its own steel tubing and bars and purchased strip steel. Outside North America the company purchases raw materials from local sources with whom it has worked closely to assure steel quality according to its demanding specifications. In addition, Timken Desford Steel, in Leicester, England is a major source of raw materials for many Timken plants in Europe. The principal raw materials used by Timken in steel manufacturing are scrap metal, nickel and other alloys. Timken believes that the availability of raw materials and alloys are adequate for its needs, and, in general, it is not dependent on any single source of supply. Research ________ Timken's major research center, located in Stark County, Ohio near its largest manufacturing plant, is engaged in research on bearings, steels, manufacturing methods and related matters. Research facilities are also located at the Timken Aerospace & Super Precision Bearings New Hampshire plants, the Duston, England plant, the Latrobe, Pennsylvania plant and the facilities in Bangelore, India and Yokohama, Japan. Expenditures for research, development and testing amounted to approximately $50,000,000 in 1999, $48,000,000 in 1998, and $43,000,000 in 1997. The company's research program is committed to the development of new and improved bearing and steel products, as well as more efficient manufacturing processes and techniques and the expansion of application of existing products. Environmental Matters _____________________ The company continues to protect the environment and comply with environmental protection laws. The company has invested in pollution control equipment and updated plant operational practices. In 1999, the company reissued its environmental policy, revised in accordance with ISO 14001 environmental management system requirements, and committed to be- coming ISO 14001 certified within the next several years. The company believes it has established adequate reserves to cover its environmental expenses and has a well-established environmental compliance audit program, which includes a proactive approach to bringing its domestic and international units to higher standards of environmental performance. This program measures performance against local laws as well as to standards that have been established for all units worldwide. It is difficult to assess the possible effect of compliance with future requirements that differ from existing ones. As previously reported, the company is unsure of the future financial impact to the company that could result from the United States Environmental Protection Agency's (EPA's) final rules to tighten the National Ambient Air Quality Standards for fine particulate and ozone. This continues to be true in view of the fact that the rules have now been remanded by the federal courts for further consideration by the EPA. 10 Environmental Matters (cont.) _____________________________ The company and certain of its U.S. subsidiaries have been designated as potentially responsible parties (PRP's) by the United States EPA for site investigation and remediation at certain sites under the Comprehensive Environmental Response, Compensation and Liability Act (Superfund). The claims for remediation have been asserted against numerous other entities, which are believed to be financially solvent and are expected to fulfill their proportionate share of the obligation. Management believes any ultimate liability with respect to all pending actions will not materially affect the company's operations, cash flows or consolidated financial position. The Timken Aerospace & Super Precision Bearings subsidiary has two environmental projects at its manufacturing locations in New Hampshire. The company has provided for the costs of these projects, which to date have been $3.8 million. A portion of these costs is being recovered from a former owner of the property. Future operating and maintenance costs are expected to be $1.4 million. The company has environmental projects at two of its manufacturing locations in Ohio. A remediation system was installed at the Columbus plant in 1998 and at the oil house site in Canton in December 1999. The company has pro- vided for the cost of these projects which to date have been $3.8 million. A portion of the cost of the oil house project is being recovered from the Ohio Petroleum Underground Storage Tank Release Compensation Board. Future operating and maintenance costs are expected to be approximately $1.2 million. Patents, Trademarks and Licenses ________________________________ Timken owns a number of United States and foreign patents, trademarks and licenses relating to certain of its products. While Timken regards these as items of importance, it does not deem its business as a whole, or either industry segment, to be materially dependent upon any one item or group of items. Employment __________ At December 31, 1999, Timken had 20,856 associates. Thirty-six percent of Timken's U.S. associates are covered under collective bargaining agreements. None of Timken's U.S. associates are covered under collective bargaining agreements that expire within one year. Executive Officers of the Registrant ____________________________________ The officers are elected by the Board of Directors normally for a term of one year and until the election of their successors. All officers have been employed by Timken or by a subsidiary of the company during the past five-year period. The Executive Officers of the company as of February 18, 2000, are as follows: 11 Current Position and Previous Name Age Positions During Last Five Years ___________________ ___ ____________________________________________ W. R. Timken, Jr. 61 1994 Chairman - Board of Directors; 1997 Chairman, President and Chief Executive Officer; Director; 1999 Chairman and Chief Executive Officer; Director; Officer since 1968. J. W. Griffith 46 1994 Vice President - Manufacturing - Bearings - North America; 1996 Vice President - Bearings - North American Automotive, Rail, Asia Pacific and Latin America; 1998 Group Vice President - Bearings - North American Automotive, Asia Pacific and Latin America; 1999 President and Chief Operating Officer; Officer since 1996. R. L. Leibensperger 61 1994 Vice President - Technology; 1995 Executive Vice President and President - Bearings; 1997 Executive Vice President, Chief Operating Officer and President - Bearings; Officer since 1986. B. J. Bowling 58 1994 Executive Vice President - Latrobe Steel Company; 1995 President - Latrobe Steel Company; 1996 Executive Vice President and President - Steel; 1997 Executive Vice President, Chief Operating Officer and President - Steel; Officer since 1996. M. C. Arnold 43 1994 General Manager - Asheboro Plant; 1996 Director - Manufacturing and Technology - Europe, Africa and West Asia; 1997 Director - Bearing Business Process Advancement; 1998 Vice President - Bearings - Business Process Advancement; 2000 President - Industrial; Officer since 2000. S. B. Bailey 40 1995 Director - Finance; 1999 Director - Finance and Treasurer; Officer since 1999. L. R. Brown 64 1994 Vice President and General Counsel; Secretary; 1998 Senior Vice President and General Counsel; Secretary; 1999 Senior Vice President and General Counsel; Officer since 1990 (retires March 31, 2000). 12 Current Position and Previous Name Age Positions During Last Five Years ___________________ ___ ____________________________________________ W. R. Burkhart 34 1994 Attorney 1996 Corporate Attorney 1997 Legal Counsel - Europe, Africa and West Asia; 1998 Director of Affiliations and Acquisitions 2000 Senior Vice President and General Counsel Officer since 2000 (Effective April 1, 2000). V. K. Dasari 33 1994 Manager - Cup Operations - Small Industrial Bearing - Canton; 1995 Project Manager - Global Industrial Segment Strategy; 1996 Director - Manufacturing and Technology - Tata Timken Limited; 1998 Deputy Managing Director - Tata Timken Limited; 1999 Managing Director - Tata Timken Limited; 2000 President - Rail; Officer since 2000. D. J. Demerling 49 1994 General Manager - Bucyrus Operations; 1996 Stanford Sloan Fellow; 1997 President - MPB Corporation; 2000 President - Aerospace and Super Precision; Officer since 2000. J. T. Elasser 47 1994 Deputy Managing Director - Bearings - Europe, Africa and West Asia; 1995 Managing Director - Bearings - Europe, Africa and West Asia; 1996 Vice President - Bearings - Europe, Africa and West Asia; 1998 Group Vice President - Bearings - Rail, Europe, Africa and West Asia; 1999 Senior Vice President - Corporate Development; Officer since 1996. K. P. Kimmerling 42 1994 General Manager - Primary Operations and Engineering - Latrobe Steel Company; 1995 President - Canadian Timken Ltd.; 1996 Vice President - Manufacturing - Steel; 1998 Group Vice President - Alloy Steel; 1999 President - Automotive; Officer since 1998. G. E. Little 56 1994 Vice President - Finance; Treasurer; 1998 Senior Vice President - Finance; Treasurer; 1999 Senior Vice President - Finance; Officer since 1990. 13 Current Position and Previous Name Age Positions During Last Five Years ___________________ ___ ____________________________________________ S. J. Miraglia, Jr. 49 1994 Director - Manufacturing - Europe, Africa and West Asia; 1996 Vice President - Bearings - North American Industrial and Super Precision; 1998 Group Vice President - Bearings - North American Industrial and Super Precision; 1999 Senior Vice President - Technology; Officer since 1996. S. A. Perry 54 1994 Vice President - Human Resources and Logistics; 1998 Senior Vice President - Human Resources, Purchasing and Communications; Officer since 1993. H. J. Sack 45 1994 Vice President - Manufacturing - Steel; 1996 President - Latrobe Steel Company; 1998 Group Vice President - Specialty Steel and President - Latrobe Steel Company; 1999 Group Vice President - Specialty Steel and President - Timken Latrobe Steel; Officer since 1998. M. J. Samolczyk 44 1994 President - Canadian Timken, Limited; 1995 General Manager - Sales and Marketing - Bearings - North America - Mobile Industrial; 1995 General Manager - Sales and Marketing - Bearings - North America - Industrial; 1996 Vice President - Sales and Marketing - Industrial - Original Equipment; 1998 Vice President and General Manager - Precision Steel Components; 2000 President - Precision Steel Components; Officer since 2000. S. A. Scherff 45 1994 Director - Legal Services and Assistant Secretary; 1999 Corporate Secretary; Officer since 1999. J. J. Schubach 63 1994 Vice President - Strategic Management; 1996 Vice President - Strategic Management and Continuous Improvement; 1998 Senior Vice President - Strategic Management and Continuous Improvement; Officer since 1984. 14 Current Position and Previous Name Age Positions During Last Five Years ___________________ ___ ____________________________________________ T. W. Strouble 61 1994 Vice President - Sales and Marketing - Bearings - North and South America; 1995 Vice President - Technology; 1998 Senior Vice President - Technology 2000 Senior Vice President - E-Business; Officer since 1995. W. J. Timken 57 1994 Vice President; Director; Officer since 1992. 15 Item 2. Properties ___________________ Timken has bearing and steel manufacturing facilities at several locations in the United States. Timken also has bearing manufacturing facilities in several countries outside the United States. The aggregate floor area of these facilities worldwide is approximately 14,230,000 square feet, all of which, except for approximately 503,000 square feet, is owned in fee. The facilities that are not owned are are leased by the company. The buildings occupied by Timken are principally of brick, steel, reinforced concrete and concrete block construction, all of which are suitably equipped and in satisfactory operating condition. Timken's bearing manufacturing facilities in the United States are located in Ashland, Bucyrus, Canton, Columbus and New Philadelphia, Ohio; Altavista, Virginia; Asheboro and Iron Station, North Carolina; Carlyle, Illinois; South Bend, Indiana; Gaffney, South Carolina; Keene and Lebanon, New Hampshire; Winchester, Kentucky; Knoxville, Tennessee; Lenexa, Kansas; North Little Rock, Arkansas; Ogden, Utah and Orange, California. These facilities, including the research facility in Canton, Ohio, and warehouses at plant locations, have an aggregate floor area of approximately 4,929,000 square feet. Timken's bearing manufacturing plants outside the United States are located in Benoni, South Africa; Cogozzo, Italy; Colmar, France; Duston, Northampton and Wolverhampton, England; Medemblik, The Netherlands; Ploesti, Romania; Sao Paulo, Brazil; Singapore; Jamshedpur, India; Sosnowiec, Poland; St. Thomas, Canada and Yantai, China. The facilities, including warehouses at plant locations, have an aggregate floor area of approximately 3,564,000 square feet. Timken's steel manufacturing facilities in the United States are located in Canton, Eaton, Wauseon and Wooster, Ohio; Columbus, North Carolina; Franklin and Latrobe, Pennsylvania. These facilities have an aggregate floor area of approximately 5,023,000 square feet. Timken's steel manufacturing facility outside the United States is located in Leicester, England. This facility has an aggregate floor area of approximately 590,000 square feet. Timken also has a tool steel finishing and distribution facility in Sheffield, England. This facility has an aggregate floor area of approximately 124,000 square feet. In addition to the manufacturing and distribution facilities discussed above, Timken owns warehouses and steel distribution facilities in the United States, Canada, England, France, Scotland, Singapore, Germany, Mexico, Argentina and Australia, and leases several relatively small warehouse facilities in cities throughout the world. During the first half of 1999, plant utilization in the Bearings business' industrial plants continued at relatively low levels due to global industrial market weakness. This situation was further impacted by aggressive actions to reduce inventories. By midyear, with inventory reduction complete, utilization levels improved slightly. Automotive plant utilization was at capacity throughout the year fueled by continuing strong automotive market demand. 16 Properties (cont.) __________________ During 1999, plant utilization in the Steel business continued at low levels due to market weakness in the industrial, oil country and service center markets. Utilizations improved slightly at year-end as these markets showed some improvement. In the third quarter, the company completed the start-up phase of its new rolling mill at the Harrison Steel Plant in Canton, Ohio. In March 1999, the company increased its ownership of Timken India Limited (formerly Tata Timken Limited) by acquiring the 40 percent stake held by The Tata Iron and Steel Company Limited of India. The transaction was approved by the Indian government and completed in March. Timken India Limited consists of a manufacturing facility in Jamshedpur, India, which includes floor space of approximately 121,000 square feet and six sales offices, also located in India. In the second quarter of 1999, the company completed the closing of its manufacturing operations in Australia, rationalizing the production of certain automotive products to Timken plants in Canada and Brazil. In January 2000, the company announced that distribution activities will be moved from existing warehousing and shipping facilities in Germany, England, France and Italy to a central warehouse in Strasbourg, France, which will be operated by an external service provider. This initiative is expected to reduce employment at the facilities by approx- imately 60 positions. These job reductions will be implemented through a combination of voluntary departures and redundancies. The existing sales offices at all locations will continue providing service to customers. In the U.K., a smaller warehouse facility will be established to serve local requirements. Item 3. Legal Proceedings __________________________ Not Applicable Item 4. Submission of Matters to a Vote of Security Holders ____________________________________________________________ No matters were submitted to a vote of security holders during the fourth quarter ended December 31, 1999. 17 PART II _______ Item 5. Market for Registrant's Common Equity and Related Stockholder ______________________________________________________________________ Matters _______ The company's common stock is traded on the New York Stock Exchange (TKR). The estimated number of record holders of the company's common stock at December 31, 1999, was 8,792. The estimated number of shareholders at December 31, 1999, was 42,907. High and low stock prices and dividends for the last two years are presented in the Quarterly Financial Data schedule on Page 1 of the Annual Report to Shareholders for the year ended December 31, 1999, and are incorporated herein by reference. Item 6. Selected Financial Data ________________________________ The Summary of Operations and Other Comparative Data on Pages 34-35 of the Annual Report to Shareholders for the year ended December 31, 1999, is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and ________________________________________________________________________ Results of Operations _____________________ Management's Discussion and Analysis of Financial Condition and Results of Operations on Pages 17-24 of the Annual Report to Shareholders for the year ended December 31, 1999, is incorporated herein by reference. In March 2000, the company announced an acceleration of its global restructuring to position the company for profitable growth, streamline operations, reduce costs and improve European profitability. This re- structuring is expected to save the company approximately $35 million annually before taxes by the end of 2001. Implementation, employee severance and non-cash impairment charges of $55 million before taxes are expected over the next year. The company's bearing manufacturing facility in Duston, England will be refocused to specialize and fuel growth in advanced automotive bearings, roller production and formed products reflecting currently strong automotive demand. The restructuring is expected to reduce the Duston site workforce of approximately 1100 to about 800. The Western European restructuring will increase manufacturing at lower cost facilities in Eastern Europe, which have been growing rapidly. Included in the restructuring is the outsourcing and consolidation of Timken distri- bution operations in Europe, which was announced in January. It also includes actions to reduce production costs in the company's steel operations in Europe and redefine the company's operations in Asia. 18 Item 7A. Quantitative and Qualitative Disclosures About Market Risk ____________________________________________________________________ Information appearing under the caption "Management's Discussion and Analysis of Other Information" appearing on page 23 of the Annual Report to Shareholders for the year ended December 31, 1999, is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data ____________________________________________________ The Quarterly Financial Data schedule included on Page 1, the Consolidated Financial Statements of the registrant and its subsidiaries on Pages 18-24, the Notes to Consolidated Financial Statements on Pages 25-33, and the Report of Independent Auditors on Page 33 of the Annual Report to Shareholders for the year ended December 31, 1999, are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting ____________________________________________________________________ and Financial Disclosure ________________________ Not applicable. 19 PART III ________ Item 10. Directors and Executive Officers of the Registrant ____________________________________________________________ Required information is set forth under the caption "Election of Directors" on Pages 4-8 of the proxy statement issued in connection with the annual meeting of shareholders to be held April 18, 2000, and is incorporated herein by reference. Information regarding the executive officers of the registrant is included in Part I hereof. Item 11. Executive Compensation ________________________________ Required information is set forth under the caption "Executive Compensation" on Pages 11-22 of the proxy statement issued in connection with the annual meeting of shareholders to be held April 18, 2000, and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management ________________________________________________________________________ Required information regarding Security Ownership of Certain Beneficial Owners and Management, including institutional investors owning more than 5% of the company's Common Stock, is set forth under the caption "Beneficial Ownership of Common Stock" on Pages 9-10 of the proxy statement issued in connection with the annual meeting of shareholders to be held April 18, 2000, and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions ________________________________________________________ Required information is set forth under the caption "Election of Directors" on Pages 4-8 of the proxy statement issued in connection with the annual meeting of shareholders to be held April 18, 2000, and is incorporated herein by reference. 20 PART IV _______ Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. ___________________________________________________________________________ (a)(1) and (2) - The response to this portion of Item 14 is submitted as a separate section of this report. (3) Listing of Exhibits Exhibit _______ (3)(i) Amended Articles of Incorporation of The Timken Company (Effective April 16, 1996) were filed with Form S-8 dated April 16, 1996 and are incorporated herein by reference. (3)(ii) Amended Regulations of The Timken Company effective April 21, 1987, were filed with Form 10-K for the period ended December 31, 1992, and are incorporated herein by reference. (4) Credit Agreement dated as of July 10, 1998 among The Timken Company, as Borrower, Various Financial Institutions, as Banks, and Keybank National Association, as Agent was filed with Form 10-Q for the period ended June 30, 1998, and is incorporated herein by reference. (4.1) Indenture dated as of April 24, 1998, between The Timken Company and The Bank of New York, which was filed with Timken's Form S-3 registration statement which became effective April 24, 1998, and is incorporated herein by reference. (4.2) Indenture dated as of July 1, 1990, between Timken and Ameritrust Company of New York, which was filed with Timken's Form S-3 registration statement dated July 12, 1990, and is incorporated herein by reference. (4.3) First Supplemental Indenture, dated as of July 24, 1996, by and between The Timken Company and Mellon Bank, N.A. was filed with Form 10-Q for the period ended September 30, 1996, and is incorporated herein by reference. (4.4) The company is also a party to agreements with respect to other long-term debt in total amount less than 10% of the registrant's consolidated total assets. The registrant agrees to furnish a copy of such agreements upon request. 21 Listing of Exhibits (cont.) ___________________________ Management Contracts and Compensation Plans ___________________________________________ (10) The Management Performance Plan of The Timken Company for Officers and Certain Management Personnel was filed with Form 10-K for the period ended December 31, 1997, and is incorporated herein by reference. (10.1) The form of Deferred Compensation Agreement entered into with James W. Griffith, W. R. Timken, Jr., R. L. Leibensperger and B. J. Bowling was filed with Form 10-Q for the period ended September 30, 1995, and is incorporated herein by reference. (10.2) The Timken Company 1996 Deferred Compensation Plan for officers and other key employees, amended and restated as of April 20, 1999 was filed with Form 10-Q for the period ended March 31, 1999, and is incorporated herein by reference. (10.3) The Timken Company Long-Term Incentive Plan for officers and other key employees as amended and restated as of December 20, 1995, and approved by shareholders April 16, 1996, was filed as Appendix A to Proxy Statement dated March 6, 1996, and is incorporated herein by reference. (10.4) The 1985 Incentive Plan of The Timken Company for Officers and other key employees as amended through December 17, 1997 was filed with Form 10-K for the period ended December 31, 1997, and is incorporated herein by reference. (10.5) The form of Severance Agreement entered into with all Executive Officers of the company was filed with Form 10-K for the period ended December 31, 1996, and is incorporated herein by reference. Each differs only as to name and date executed. (10.6) The form of Death Benefit Agreement entered into with all Executive Officers of the company was filed with Form 10-K for the period ended December 31, 1993, and is incorporated herein by reference. Each differs only as to name and date executed. (10.7) The form of Indemnification Agreements entered into with all Directors who are not Executive Officers of the company was filed with Form 10-K for the period ended December 31, 1990, and is incorporated herein by reference. Each differs only as to name and date executed. 22 Listing of Exhibits (cont.) ___________________________ (10.8) The form of Indemnification Agreements entered into with all Executive Officers of the company who are not Directors of the company was filed with Form 10-K for the period ended December 31, 1990, and is incorporated herein by reference. Each differs only as to name and date executed. (10.9) The form of Indemnification Agreements entered into with all Executive Officers of the company who are also Directors of the company was filed with Form 10-K for the period ended December 31, 1990, and is incorporated herein by reference. Each differs only as to name and date executed. (10.10) The form of Employee Excess Benefits Agreement entered into with all active Executive Officers, certain retired Executive Officers, and certain other key employees of the company was filed with Form 10-K for the period ended December 31, 1991, and is incorporated herein by reference. Each differs only as to name and date executed, except Mr. Brown who will be given additional service. (10.11) The Amended and Restated Supplemental Pension Plan of The Timken Company as adopted March 16, 1998 was filed with Form 10-K for the period ended December 31, 1997, and is incorporated herein by reference. (10.12) Amendment to the Amended and Restated Supplemental Pension Plan of the Timken Company executed on December 29, 1998 was filed with Form 10-K for the period ended December 31, 1998, and is incorporated herein by reference. (10.13) The form of The Timken Company Nonqualified Stock Option Agreement for nontransferable options as adopted on April 21, 1998 was filed with Form 10-Q for the period ended March 31, 1998, and is incorporated herein by reference. (10.14) The form of The Timken Company Nonqualified Stock Option Agreement for transferable options as adopted on April 21, 1998 was filed with Form 10-Q for the period ended March 31, 1998, and is incorporated herein by reference. (10.15) The form of The Timken Company Nonqualified Stock Option Agreement for transferable options as adopted on November 18, 1998 was filed with Form 10-K for the period ended December 31, 1998, and is incorporated herein by reference. (10.16) The Timken Company Deferral of Stock Option Gains Plan effective as of April 21, 1998 was filed with Form 10-Q for the period ended March 31, 1998, and is incorporated herein by reference. 23 Listing of Exhibits (cont.) ___________________________ (10.17) The Consulting Agreement entered into with Joseph F. Toot, Jr. was filed with Form 10-K for the period ended December 31, 1997, and is incorporated herein by reference. (10.18) The form of The Timken Company Performance Share Agreement entered into with W. R. Timken, Jr., R. L. Leibensperger and B. J. Bowling was filed with Form 10-K for the period ended December 31, 1997, and is incorporated herein by reference. (10.19) The Timken Company Senior Executive Management Performance Plan effective January 1, 1999, and approved by shareholders April 20, 1999 was filed as Appendix A to Proxy Statement dated February 24, 1999, and is incorporated herein by reference. (10.20) The Timken Company Nonqualified Stock Option Agreement entered into with James W. Griffith and adopted on December 16, 1999. (10.21) The Timken Company Promissory Note entered into with James W. Griffith and dated December 17, 1999. (12) Ratio of Earnings to Fixed Charges (13) Annual Report to Shareholders for the year ended December 31, 1999, (only to the extent expressly incorporated herein by reference). (21) A list of subsidiaries of the registrant. (23) Consent of Independent Auditors. (24) Power of Attorney (27) Financial Data Schedule (b) Reports on Form 8-K: None (c) and (d) The exhibits are contained in a separate section of this report. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE TIMKEN COMPANY By /s/ W. R. Timken, Jr. By /s/ G. E. Little ________________________________ ________________________________ W. R. Timken, Jr., G. E. Little Director and Chairman and Chief Senior Vice President - Finance Executive Officer (Principal Financial and Accounting Officer) Date March 29, 2000 Date March 29, 2000 ________________________________ _______________________________ Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ Stanley C. Gault* By /s/ John M. Timken, Jr.* ______________________________ _______________________________ Stanley C. Gault Director John M. Timken, Jr. Director Date March 29, 2000 Date March 29, 2000 By /s/ J. Clayburn La Force, Jr.* By /s/ W. J. Timken* ______________________________ _______________________________ J. Clayburn La Force, Jr., Director W. J. Timken Director Date March 29, 2000 Date March 29, 2000 By /s/ James W. Griffith* By /s/ Joseph F. Toot, Jr.* ______________________________ _______________________________ James W. Griffith, Director Joseph F. Toot, Jr. Director Date March 29, 2000 Date March 29, 2000 By /s/ John A. Luke, Jr.* By /s/ Martin D. Walker* ______________________________ _______________________________ John A. Luke, Jr. Director Martin D. Walker Director Date March 29, 2000 Date March 29, 2000 By /s/ Robert W. Mahoney* By /s/ Alton W. Whitehouse* ______________________________ _______________________________ Robert W. Mahoney Director Alton W. Whitehouse, Director Date March 29, 2000 Date March 29, 2000 By /s/ Jay A. Precourt* ______________________________ Jay A. Precourt Director Date March 29, 2000 By /s/ G. E. Little ___________________________________ G. E. Little, attorney-in-fact By authority of Power of Attorney filed as Exhibit 24 hereto Date March 29, 2000