Exhibit 99.1
Unaudited Pro Forma Statement of Operations
For the Six Months Ended June 30, 2003
(In thousands of U.S. dollars, except per share data)
The Timken
Company Torrington Pro Forma
Historical Historical* Adjustments Pro Forma
------------ ------------ ------------ ------------
Net sales $ 1,828,260 $ 152,688 $ (1,445) (a) $ 1,979,503
Cost of products sold 1,539,925 140,481 71 (b) 1,680,477
------------ ------------ ------------ ------------
Gross profit 288,335 12,207 (1,516) 299,026
Selling, administrative and general expenses 240,468 16,555 18 $ 257,041
Impairment and restructuring charges 853 - - (c) 853
------------ ------------ ------------ ------------
Operating income (loss) 47,014 (4,348) (1,534) 41,132
Interest expense (23,275) (1,589) (748)(d) (25,612)
Interest income 418 - - 418
Other income (expense) 1,276 (13) - 1,263
------------ ------------ ------------ ------------
Income (loss) before income taxes 25,433 (5,950) (2,282) 17,201
Provision for income taxes 10,173 (468) (912)(f) 8,793
------------ ------------ ------------ ------------
Net income (loss) $ 15,260 $ (5,482) $ (1,370) $ 8,408
============ ============ ============ ============
Earnings per share $ 0.19 $ 0.11
Earnings per share - assuming dilution $ 0.19 $ 0.11
Average shares outstanding 79,198,167 79,198,167
Average shares outstanding - assuming dilution 79,402,600 79,402,600
* The Torrington Statement of Operations is for the period from January 1,
2003 to February 15, 2003.
Unaudited Pro Forma Statement of Operations
For the Year Ended December 31, 2002
(In thousands of U.S. dollars, except per share data)
The Timken
Company Torrington Pro Forma
Historical Historical Reclassifications* Adjustments Pro Forma
---------- ---------- ------------------ ----------- ---------
Net sales $ 2,550,075 $ 1,215,952 $ - $ (9,375) (a) $ 3,756,652
Cost of products sold 2,080,498 979,350 35,300 (6,974)(b) 3,088,174
----------- ----------- ---------- --------- --------
Gross profit 469,577 236,602 (35,300) (2,401) 668,478
Selling, administrative and general expenses 358,866 123,448 ** - (1,385)(c) 480,929
Impairment and restructuring charges 32,143 3,040 - - 35,183
----------- ----------- ---------- --------- --------
Operating (loss) income 78,568 110,114 (35,300) (1,016) 152,366
Interest expense (31,540) (16,439) - (6,374)(d) (54,353)
Interest income 1,676 - - - 1,676
Receipt of US Continuous Dumping and Subsidy
Offset Act payment 50,202 - 68,130 (68,130)(e) 50,202
Other income (expense) (13,388) 37,488 (32,830) - (8,730)
----------- ----------- ---------- --------- --------
Income before income taxes and cumulative effect
of change in accounting principle 85,518 131,163 - (75,520) 141,161
Provision for income taxes 34,067 53,708 - (30,292)(f) 57,483
----------- ----------- ---------- --------- --------
Income before cumulative effect of change in
accounting principle $ 51,451 $ 77,455 $ - $ (45,228) $ 83,678
=========== =========== ========== ========= ========
Before cumulative effect of change in accounting
principle:
Earnings per share $ 0.84 $ 1.01
Earnings per share - assuming dilution $ 0.83 $ 1.00
Average shares outstanding 61,128,005 61,128,005
Shares issued to Ingersoll-Rand - 9,395,973 9,395,973
Shares issued to public - 12,650,000 12,650,000
------------ ------------ -----------
61,128,005 22,045,973 83,173,978 (g)
============ ============ ===========
Average shares outstanding - assuming dilution 61,635,339 - 61,635,339
Shares issued to Ingersoll-Rand - 9,395,973 9,395,973
Shares issued to public - 12,650,000 12,650,000
------------ ------------ -----------
61,635,339 22,045,973 83,681,312 (g)
============ ============ ===========
* Certain amounts related to Torrington have been reclassified to conform
with Timken's presentation.
** Amount includes $21.7 million for the year ended December 31, 2002 of
allocated Ingersoll-Rand costs for srvices provided to Torrington.
Notes to Unaudited Pro Forma Statement of Operations
(a) Reflects the elimination of sales by Timken to Torrington.
(b) Reflects the following:
Jun. 30, 2003 Dec. 31, 2002
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i) Elimination of cost of products sold by Timken to Torrington. $ (1,173) $ (8,166)
ii) Adjustment to reduce depreciation expense for property, plant and
equipment purchased in the acquisition, based on a composite useful
life of 12 years. (862) (13,366)
iii) Adjustment to recognize additional pension expense. 1,775 6,282
iv) Expense associated with the write-up of acquired inventory based on
the preliminary asset valuation. - 6,254
v) Amortization of acquired identifiable intangible assets based on the
preliminary asset valuation and related useful lives. 1,100 6,600
vi) Elimination of periodic postretirement benefits costs related to
retirees not assumed by Timken in the acquisition and adjustment to
increase postretirement benefits costs related to active employees
acquired based on Timken plan provisions. (769) (4,578)
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$ 71 $ (6,974)
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(c) Reflects the following: Jun. 30, 2003 Dec. 31, 2002
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i) Adjustment to recognize additional pension expense. $ 17 $ 141
ii) Elimination of periodic postretirement benefits costs related to
retirees not assumed by Timken in the acquisition and adjustment to
increase postretirement benefits costs related to active employees
acquired based on Timken plan provisions. 1 (1,526)
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$ 18 $ (1,385)
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(d) Reflects interest expense on the pro forma acquisition debt instruments, as follows: Jun. 30, 2003 Dec. 31, 2002
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i) $250.0 million aggregate principal amount of unsecurred senior notes at 5.75% $(1,935) $ (14,375)
ii) $186.1 million in borrowings under our new senior credit facility at 2.78% (663) (5,173)
iii) Commitment fee on $313.9 million of unused revolver at 0.375% (164) (1,177)
iv) $125.0 million in borrowings under our new accounts receivable facility at 1.80% (303) (2,250)
v) Elimination of Torrington's interest expense 2,213 16,439
vi) Eliminate of commercial paper interset expense at 1.80% 104 162
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$ (748) $ (6,374)
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(e) Reflects the elimination of receipts under the US Continuous Dumping and
Subsidy Offset Act (the "Act"). Pursuant to the Agreement, all amounts
received under the Act for 2002 were retained by Ingersoll-Rand. Eighty
percent (80%) of any amounts received by Torrington under the Act for 2003
and 2004 will be paid to Ingersoll-Rand.
(f) Reflects the income tax effects of the pro forma adjustments, based on an
effective tax rate of 40%.
(g) Reflects Timken's average shares outstanding and average shares outstanding
- assuming dilution, based on (i) 9,395,973 shares issued to Ingersoll-Rand
and 12,650,000 shares issued to the public and (ii) a per share price of
$14.90.