6309 Monarch Park Place, Suite 203
Niwot, CO 80503, USA
Phone (303) 443-5060
Toll free (888) 742-5060
Net income for the 2002 fourth quarter was $36.5 million versus $1.2 million in the fourth quarter a year ago, when the economy was particularly weak. Sales were $644.9 million, 12 percent above the $573.6 million recorded a year ago, despite a 2002 fourth quarter decline in U.S. industrial production and a still sluggish U.S. and global economy. However, strong automotive markets in North America, the impact of our manufacturing strategy initiative and the benefits of the higher Continued Dumping and Subsidy Offset Act (CDSOA) payment improved results in the fourth quarter.
Excluding CDSOA income, restructuring and reorganization costs and adjustments for goodwill amortization, the company reported fourth quarter earnings of $12 million or $0.19 per diluted share versus a loss of $11.4 million or $0.19 per diluted share a year ago.
"While improved volumes related to a strong automotive industry helped sales growth, the transformation in all three of our company's business segments also contributed significantly to the bottom line," said James W. Griffith, president and CEO. "A continued emphasis on reducing costs, creating a network of focused factories and successfully introducing new products and services resulted in strengthened profitability despite a struggling economy."
For the year 2002, Timken reported sales of $2.6 billion, a 4 percent increase from 2001. The company had income before the cumulative effect of an accounting change of $51.4 million or $0.83 per diluted share in 2002 versus a loss of $41.7 million or $0.69 per diluted share in 2001. Including a goodwill impairment write-off of $12.7 million after taxes in the third quarter reflecting the cumulative effect of an accounting change, the company had net income of $38.7 million or $0.62 per diluted share in 2002.
Excluding CDSOA income, restructuring and reorganization costs, adjustments for goodwill amortization and the cumulative effect of the accounting change, the company reported net income of $53.3 million or $0.87 per diluted share versus $0.7 million or $0.01 per diluted share a year ago.
In 2002 and 2001, the company received payments resulting from the CDSOA, which requires that tariffs collected on dumped imports be directed to the industries harmed. This special payment (net of expenses) was $50.2 million in 2002 versus $29.6 million in 2001. Despite World Trade Organization objections to the CDSOA payments, the company continues to believe the U.S. law is appropriate and justified. Payments under CDSOA are made to eligible domestic producers only when dumping continues after an anti-dumping order is issued.
Timken's manufacturing strategy and salaried workforce reduction initiatives announced in 2001 have met the $80 million annual rate of savings projection targeted for 2002. The company expects to reach the $120 million of annual savings projected for the end of 2004 from these initiatives. Restructuring and reorganization costs associated with these initiatives were completed in 2002. The cumulative program costs of $107.4 million were within the range announced in the second quarter of 2001.
Net debt at the end of 2002 was $379.2 million, down $84.4 million from $463.6 million at the end of 2001. This reduction resulted from improved profitability, prudent capital spending and the CDSOA payment.
As part of the company's long-term pension funding strategy, in 2002 Timken contributed $106.4 million to its domestic pension plans, $54.5 million of which was company common stock. As a result of a negative 6 percent return on the company's domestic pension investments and a reduction in its discount rate from 7.5 to 6.6 percent, Timken recorded a $401.6 million minimum pension liability increase. This