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Sales for the fourth quarter of 2001 were $ 573.6 million -- the lowest of any quarter since the mid-1990s -- compared with $ 631.7 million in the fourth quarter a year ago. Fourth-quarter net income, while higher than in the same period a year ago, benefited from a $ 31 million payment resulting from the U.S. Continued Dumping and Subsidy Offset Act (CDSOA), which requires that tariffs collected on dumped imports be directed to the industries harmed. Net income for the fourth quarter of 2001 was $ 1.2 million versus $ 0.9 million in the fourth quarter a year ago.
Both fourth quarters included previously announced pretax restructuring and reorganization charges -- $ 10.3 million in 2001 and $ 11.3 million in 2000. Excluding the CDSOA payment and the special pretax charges, the fourth quarter of 2001 would have resulted in a net loss of $ 13.9 million compared with 2000 fourth quarter net income of $ 11.4 million.
For the year 2001, Timken reported sales of $ 2.4 billion compared with $ 2.6 billion in 2000 -- a decrease of 8 percent. "While demand was weak and sales were down $ 200 million in the worst U.S. industrial manufacturing recession since the 1930s, we managed to hold our loss for the full year to $ 5.6 million, excluding special items," said W.R. Timken, Jr., chairman and CEO. "This reflects the aggressive actions we took during the year. We lowered inventories and controlled other costs to generate cash, which reduced debt by nearly $ 100 million in the fourth quarter, including special payments and charges. As production levels were lowered to cut inventories, it significantly reduced operating results in the fourth quarter."
The company took pretax restructuring and implementation charges of $ 67.3 million in 2001 and $ 38.9 million in 2000. Excluding the impact of these special charges and the CDSOA payment, the company would have reported a net loss of $ 5.6 million for 2001 versus 2000 net income of $ 74.6 million. Including these special items, the company reported a loss of $ 41.7 million in 2001 compared with net income of $ 45.9 million in 2000.
Year-end debt was $ 497.0 million -- a debt to capital ratio of 38.9 percent -- versus $ 514.6 million a year ago. Debt was reduced in the fourth quarter by $ 93.3 million. Cash increased by more than $ 20 million during the year.
During 2001, the company continued its transformation to a more globally focused, high-performance organization, launching a global restructuring of manufacturing operations.
"In 2001, we reduced our workforce by 8 percent -- half of which comprised structural reductions. We reduced floor space for bearing manufacture by 350,000 square feet -- or 4 percent -- and we achieved annualized savings of about $ 21 million," said James W. Griffith, president and COO. "The weakness in our markets allowed us to accelerate the pace of our restructuring, which increased expenses in 2001, but will reduce planned expenses commensurately in 2002. Last year, we also made three acquisitions and created new affiliations and joint ventures, which we expect to provide growth opportunities as we expand our range of products and services."
During 2001, lower investment performance, which reflected lower stock market returns, and lower interest rates reduced the company's pension fund asset values and increased the company's defined benefit pension liability. While this non-cash item did not affect net income, it reduced shareholder equity by $ 122.5 million.
Automotive Bearings Business Results
Despite weakening demand in Europe, the Automotive Bearings Business reported net sales in the fourth quarter of $ 185.3 million versus $ 184.4 million a year