C:\ELINK\02filing\Jul1902Lisa8K\e8k07192002
1.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): July 19, 2002
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THE TIMKEN COMPANY
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(Exact name of registrant as specified in charter)
Ohio 1-1169 34-0577130
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1835 Dueber Avenue, S.W., Canton, Ohio 44706-2798
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (330) 438-3000
ITEM 5. OTHER EVENTS
Press Releases
On July 18, 2002, The Timken Company issued the following press release:
Earnings Up
The Timken Company Announces Second Quarter Results
CANTON, Ohio, July 18, 2002 -- The Timken Company (NYSE: TKR) today
reported second quarter 2002 earnings of $0.28 per diluted share, excluding
restructuring and reorganization charges and goodwill amortization, on
sales of $660.8 million compared to $0.05 per diluted share and sales of
$634.4 million a year ago. Earnings were above consensus analyst estimates
of $0.27 per share.
Earnings before interest and taxes (EBIT) increased 91 percent to
$34.5 million in the second quarter from $18.1 million a year ago, as
margins rose to 5.2 percent from 2.8 percent last year.
"The path we have taken for the last 18 months continues to strengthen our
financial performance," said W.R. Timken, Jr., chairman and chief executive
officer. "While we are benefiting from ongoing strength in the automotive
industry, we also are deriving strength from internal performance in terms
of increasing productivity and manufacturing efficiencies. Indeed,
although certain of our industrial markets continue to lag, we expect to
continue realizing gains from our manufacturing strategy work and cost
reduction efforts."
Including the special charges, the company reported second quarter net
income of $4.0 million or $0.07 per diluted share versus a net loss last
year of $14.6 million or a loss of $0.24 per share.
The company's restructuring initiatives have achieved an annualized savings
rate of $58 million and are on target to produce an annualized savings rate
of $80 million by the end of 2002. The company has reduced employment by
nearly 2,000 positions since the beginning of 2001 -- with about 1,100
resulting from these initiatives and the remainder due to economic
conditions.
Despite similar sales performance in the first six months, net income ex-
cluding special items more than doubled from a year ago to $30.7 million
or $0.51 per diluted share from $13.9 million or $0.23 per diluted share.
Including special items, the company had net income of $13.1 million or
$0.22 per diluted share in the first half of 2002 versus a loss of
$12.4 million or a loss of $0.21 per diluted share a year ago.
The following segment results exclude restructuring and reorganization
charges and goodwill amortization.
Automotive Bearings' Results
Automotive second-quarter EBIT was $3.7 million compared to $0.1 million a
year ago. Results in the second quarter were helped by increased volume,
the impact of the company's ongoing manufacturing restructuring and admin-
istrative cost reductions. Automotive performance would have been even
stronger except for currency exchange losses, constrained capacity due to
moving equipment between facilities as a result of the manufacturing
restructuring and one-time costs incurred with the addition of new after-
market distributors.
Sales in the second quarter increased 12 percent to $219.2 million from
$195.0 million a year ago due to continued strong demand in North America,
including new platform launches designed with Timken bearings. Sales
outside North America were up slightly.
For the first half, EBIT was $19.0 million on sales of $422.9 million com-
pared to a loss of $1.5 million in 2001 on sales of $389.2 million.
Late in the quarter, the Automotive Business formed a joint venture in the
U.S. with two Japanese companies for producing hot forged and machined
rings for high-volume bearing manufacture. The joint venture will acquire
the assets of Timken's Winchester, Kentucky plant, supporting the company's
manufacturing strategy to reduce asset intensity.
Industrial Bearings' Results
Second quarter EBIT in Industrial was $16.3 million versus $11.3 million
last year. Volume improvement, the impact of the restructuring and admini-
strative cost reductions accounted for the increase.
General industrial markets strengthened, but were offset by weaker demand
in aerospace and rail sectors. Second quarter sales of industrial bearings
were up slightly to $228.1 million compared to $221.9 million a year ago.
In the first half, EBIT was $19.6 million on sales of $441.0 million versus
$27.9 million on sales of $463.9 million in the first half of 2001.
At the end of the quarter, the Industrial Business sold the Ashland, Ohio,
tooling plant as part of the manufacturing restructuring.
Steel Business Results
Despite flat sales, the Steel Business significantly improved EBIT as a
result of tight cost controls and increased productivity. EBIT was
$14.6 million versus $7.0 million in last year's second quarter. Steel's
second quarter net sales, including intersegment sales, were $255.4 million
-- about even with the second quarter of last year. Robust sales to the
automotive sector and increased market share were offset by declining sales
to other sectors.
For the first half, Steel's EBIT was $26.7 million in the first half of
2002 on sales of $493.7 million versus $18.1 million on sales of
$522.2 million for the first half of 2001.
Outlook
"Industrial activity in the second half of this year should be stronger
than last year's second half, but the industrial recovery is proceeding
slowly. We haven't yet begun to see appreciable improvement in many
industrial segments. We continue to experience a strong automotive sector,
although we expect some seasonal adjustment in the second half," said
W .R. Timken, Jr. "Results exceeded our expectations for the first six
months and were well ahead of last year, and operating improvements will
continue to drive our performance. We foresee a much stronger second half
performance for The Timken Company than last year."
The Timken Company (NYSE: TKR) (http://www.timken.com) is a leading inter-
national manufacturer of highly engineered bearings, alloy and specialty
steels and components, as well as a provider of related products and
services. With operations in 24 countries, the company employs about
18,500 people worldwide and reported 2001 sales of U.S. $2.4 billion.
The company will conduct a teleconference on Thursday, July 18 at 1 p.m.
Eastern Time on its second quarter earnings. Dial 706-634-0975 (reference
Timken) or link to http://www.timken.com for the Web cast. Replay will be
available at 706-645-9291, beginning at 4 p.m. Eastern Time, July 18
through 11:59 p.m. Eastern Time, July 26, 2002. Access Code 4717573.
NOTE: Certain statements in this news release (including statements
regarding the company's forecasts, beliefs and expectations) that are not
historical in nature are "forward-looking" statements within the meaning
of the Private Securities Litigation Reform Act of 1995. The company
cautions that actual results may differ materially from those projected
or implied in forward-looking statements due to a variety of important
factors, including general economic conditions, customer demand and the
company's ability to achieve the benefits of its ongoing restructuring
programs. These and additional factors are described in greater detail in
the company's 2001 Annual Report, page 39, the Annual Report on Form 10-K
for the year ended December 31, 2001 and the Form 10-Q for the quarterly
period ended March 31, 2002. The company undertakes no obligation to update
or revise any forward-looking statement.
CONSOLIDATED STATEMENT OF INCOME AS REPORTED
(Thousands of U.S. dollars,
except share data) Six Months Six Months
2Q 02 2Q 01 02 01
Net sales $660,829 $634,389 $1,276,586 $1,295,905
Cost of products sold 533,746 521,686 1,028,562 1,060,042
Goodwill amortization 0 1,535 0 3,079
Reorganization expenses -
cost of products sold 2,782 85 5,081 3,687
Gross Profit $124,301 $111,083 $242,943 $229,097
Selling, administrative &
general expenses (SG&A) 90,965 92,939 174,213 188,504
Reorganization expenses -
SG&A 2,040 350 4,784 1,323
Impairment and restructuring 14,226 16,859 17,283 24,766
Operating Income $17,070 $935 $46,663 $14,504
Other income (expense) (1,607) (1,685) (9,075) (2,895)
Earnings Before Interest
and Taxes (EBIT) $15,463 ($750) $37,588 $11,609
Interest expense (7,889) (8,487) (15,924) (17,381)
Interest income 317 608 697 1,097
Income Before Income
Taxes $7,891 ($8,629) $22,361 ($4,675)
Provision for income taxes 3,931 5,945 9,213 7,677
Net (Loss) Income $3,960 ($14,574) $13,148 ($12,352)
Earnings Per Share $0.07 ($0.24) $0.22 ($0.21)
Earnings Per Share-
assuming dilution $0.07 ($0.24) $0.22 ($0.21)
Average Shares Outstanding 60,239,065 60,015,025 60,092,322 59,999,194
Average Shares Outstanding
-assuming dilution 61,038,029 60,276,721 60,732,056 60,200,827
CONSOLIDATED STATEMENT OF INCOME ADJUSTED (1)
(Thousands of U.S. dollars,
except share data) Six Months Six Months
2Q 02 2Q 01 02 01
Net sales $660,829 $634,389 $1,276,586 $1,295,905
Cost of products sold 533,746 521,686 1,028,562 1,060,042
Goodwill amortization 0 0 0 0
Reorganization expenses -
cost of products sold 0 0 0 0
Gross Profit $127,083 $112,703 $248,024 $235,863
Selling, administrative &
general expenses (SG&A) 90,965 92,939 174,213 188,504
Reorganization expenses -
SG&A 0 0 0 0
Impairment and restructuring 0 0 0 0
Operating Income $36,118 $19,764 $73,811 $47,359
Other income (expense) (1,607) (1,685) (9,075) (2,895)
Earnings Before Interest
and Taxes (EBIT) $34,511 $18,079 $64,736 $44,464
Interest expense (7,889) (8,487) (15,924) (17,381)
Interest income 317 608 697 1,097
Income Before Income
Taxes $26,939 $10,200 $49,509 $28,180
Provision for income taxes 10,116 7,163 18,763 14,304
Net (Loss) Income $16,823 $3,037 $30,746 $13,876
Earnings Per Share $0.28 $0.05 $0.51 $0.23
Earnings Per Share-
assuming dilution $0.28 $0.05 $0.51 $0.23
Average Shares Outstanding 60,239,065 60,015,025 60,092,322 59,999,194
Average Shares Outstanding
-assuming dilution 61,038,029 60,276,721 60,732,056 60,200,827
(1) "Adjusted" statements exclude the impact of restructuring and
reorganization charges for all quarters shown and elimination of
goodwill amortization in 2001.
BUSINESS SEGMENTS AS REPORTED
Six Months Six Months
(Thousands of U.S. dollars) 2Q 02 2Q 01 02 01
Automotive Bearings
Net sales to external customers $219,177 $194,986 $422,873 $389,243
Impairment and restructuring 12,529 179 14,461 261
Reorganization expenses 2,931 138 5,074 432
Goodwill amortization 0 23 0 46
Earnings before interest and taxes
(EBIT) * ($11,776) ($220) ($563) ($2,206)
EBIT Margin -5.4% -0.1% -0.1% -0.6%
Industrial Bearings
Net sales to external customers $228,058 $221,917 $440,998 $463,911
Impairment and restructuring 1,940 16,309 2,896 23,702
Reorganization expenses 1,891 297 4,791 3,556
Goodwill amortization 0 1,204 0 2,412
Earnings before interest and taxes
(EBIT) * $12,510 ($6,538) $11,904 ($1,764)
EBIT Margin 5.5% -2.9% 2.7% -0.4%
Steel
Net sales to external customers $213,594 $217,486 $412,715 $442,751
Intersegment sales 41,759 37,000 81,032 79,477
Total net sales $255,353 $254,486 $493,747 $522,228
Impairment and restructuring (243) 371 (74) 803
Reorganization expenses 0 0 0 1,023
Goodwill amortization 0 308 0 621
Earnings before interest and taxes
(EBIT) * $14,811 $6,329 $26,761 $15,611
EBIT Margin 5.8% 2.5% 5.4% 3.0%
* Automotive Bearings, Industrial Bearings and Steel EBIT do not equal
Consolidated EBIT due to intersegment adjustments which are eliminated
upon consolidation.
BUSINESS SEGMENTS ADJUSTED (1)
Six Months Six Months
(Thousands of U.S. dollars) 2Q 02 2Q 01 02 01
Automotive Bearings
Net sales to external customers $219,177 $194,986 $422,873 $389,243
Impairment and restructuring 0 0 0 0
Reorganization expenses 0 0 0 0
Goodwill amortization 0 0 0 0
Earnings before interest and taxes
(EBIT) * $3,684 $120 $18,972 ($1,467)
EBIT Margin 1.7% 0.1% 4.5% -0.4%
Industrial Bearings
Net sales to external customers $228,058 $221,917 $440,998 $463,911
Impairment and restructuring 0 0 0 0
Reorganization expenses 0 0 0 0
Goodwill amortization 0 0 0 0
Earnings before interest and taxes
(EBIT) * $16,341 $11,272 $19,591 $27,906
EBIT Margin 7.2% 5.1% 4.4% 6.0%
Steel
Net sales to external customers $213,594 $217,486 $412,715 $442,751
Intersegment sales 41,759 37,000 81,032 79,477
Total net sales $255,353 $254,486 $493,747 $522,228
Impairment and restructuring 0 0 0 0
Reorganization expenses 0 0 0 0
Goodwill amortization 0 0 0 0
Earnings before interest and taxes
(EBIT) * $14,568 $7,008 $26,687 $18,058
EBIT Margin 5.7% 2.8% 5.4% 3.5%
* Automotive Bearings, Industrial Bearings and Steel EBIT do not equal
Consolidated EBIT due to intersegment adjustments which are eliminated
upon consolidation.
(1) "Adjusted" statements exclude the impact of restructuring and
reorganization charges for all quarters shown and elimination of
goodwill amortization in 2001.
CONSOLIDATED STATEMENT OF CASH FLOWS For the six months ended
June 31 June 31
(Thousands of U.S. dollars) 2002 2001
Cash Provided (Used)
OPERATING ACTIVITIES
Net Income (Loss) $13,148 ($12,352)
Adjustments to reconcile net income 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
Non-cash impact of impairment and
restructuring charges (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 $31,493
INVESTING 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 0 18
Short-term debt activity - net 13,106 38,058
Net Cash (Used) Provided by
Financing Activities ($3,957) $15,482
Effect 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
CONSOLIDATED BALANCE SHEET June 30 Dec 31
(Thousands of U.S. dollars) 2002 2001
ASSETS
Cash & cash equivalents $31,094 $33,392
Accounts receivable 382,943 307,759
Refundable income taxes 14,208 15,103
Deferred income taxes 43,964 42,895
Inventories 458,793 429,231
Total Current Assets $931,002 $828,380
Property, plant & equipment 1,264,026 1,305,345
Other assets 408,036 399,359
Total Assets $2,603,064 $2,533,084
LIABILITIES
Accounts payable & other liabilities $296,415 $258,001
Short-term debt & commercial paper 148,800 128,864
Accrued expenses 274,811 254,291
Total Current Liabilities $720,026 $641,156
Long-term debt 367,996 368,151
Accrued pension cost 290,380 317,297
Accrued postretirement benefits 411,656 406,568
Deferred income taxes 0 0
Other non-current liabilities 23,782 18,177
Total Liabilities $1,813,840 $1,751,349
SHAREHOLDERS' EQUITY 789,224 781,735
Total Liabilities and
Shareholders' Equity $2,603,064 $2,533,084
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the under-
signed hereunto duly authorized.
THE TIMKEN COMPANY
By: /s/ Glenn A. Eisenberg
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Glenn A. Eisenberg
Executive Vice President -
Finance & Administration
Dated: July 19, 2002