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SECURITIES AND EXCHANGE COMMISSION 1.
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, 1993
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 (216) 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
Rights to Purchase 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].
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
21, 1994 was $937,729,464 (representing 25,868,399 shares).
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of February 21, 1994.
Common Stock without par value -- 30,857,651 shares (representing a market
___________________________________________________ value of $1,118,589,849)
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2.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended December 31,
1993 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 19, 1994 are incorporated by reference into parts III and IV.
Exhibit Index may be found on Pages 14 thru 16.
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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 and sold in a wide
variety of configurations and sizes. 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 tolerances and proprietary internal
geometry and premium quality material, provides a bearing with high load
carrying capacity, excellent friction-reducing qualities and long life.
With the acquisition of MPB Corporation in May 1990, Timken expanded into
the super precision ball and roller bearing business thus gaining access
to those portions of the Aerospace, Defense, Computer Disk Drive, and
other markets requiring high precision applications. MPB's products
utilizing balls and straight rolling elements are the super precision end
of the general ball and straight roller bearing product range in the
bearing industry. A majority of MPB's products are special
custom-designed bearings and spindle assemblies. They often involve
highly specialized materials and coatings for use in applications that
subject the bearings to extreme operating conditions of speed and
temperature.
During the second quarter of 1993, MPB Corporation, completed its
acquisition of equipment and inventory of the U.S. jet engine bearing
operations of The Torrington Company, a subsidiary of Ingersoll-Rand
Company. This purchase should enable MPB to offer an expanded line of
bearings for jet engine manufacturers and strengthen its position in the
aerospace markets it serves.
Steel products include steels of alloy, vacuum processed alloys,
intermediate alloy, low alloy and carbon grades, tool steels, and other
custom-made specialty steel products. These are available in a wide range
of solid and tubular sections with a variety of finishes.
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4.
Products (Cont.)
________________
Timken has been increasing the marketing of high volume semifinished
components to major customers produced from its own steel. This value
added activity is a small but growing portion of the business. In
September 1993, the company's Steel Business began operation of its St.
Clair Precision Tubing Components Plant in Eaton, Ohio. The facility
produces sub-components for automotive and industrial customers. The
development of the precision parts division provides the company with the
opportunity to further expand its market for tubing and capture more
higher-value steel sales. This will also enable 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.
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, Great Britain, France, Germany,
Canada, Mexico, and Argentina. These warehouse inventories are augmented
by authorized distributor and jobber inventories throughout the world
which 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 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. MPB's products, which are at the super precision end of the
general ball and straight roller bearing segment, are used in aircraft,
missle guidance systems, computer peripherals, and medical instruments.
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, forging, tooling and
oil and gas drilling 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 does have 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 to five years and, if a price is fixed for any period
extending beyond current shipments, customarily include a commitment by
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5.
Sales and Distribution (Cont.
_____________________________
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
_________________
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,
1993 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 Bearing Business has historically participated
in the worldwide bearing markets while the Steel Business has concentrated
on U.S. markets.
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.
The South African manufacturing unit, a small portion of the company's
non-U.S. operations, is subject to additional laws and regulations imposed
by the U.S. and South African governments.
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 adapted to reducing friction where shafts,
gears, or wheels are used. 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 a leader in the world's bearing
industry. This contrasts with the majority of its major competitors who
offer a wider variety of 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. Excess production capacity, weak
economies outside the U.S., and a strengthened U.S. dollar contribute to
these difficult market conditions. Particularly, the influx of tapered
roller bearings into the United States market from foreign producers was
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6.
Competition (Cont.)
___________________
reported by the United States Department of Commerce to be $195 million in
1993 or approximately 20 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 $105 million in 1993.
In August 1986, the company filed a petition on behalf of the U.S. tapered
roller bearing industry with both the International Trade Commission and
the Department of Commerce. The petition sought the imposition of
anti-dumping duties on imports of tapered roller bearings from Japan,
Italy, Yugoslavia, Romania, Hungary, and the People's Republic of China.
The 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 International Trade Commission found such imports were causing
injury to the domestic industry. The Department also identified the
amount by which selling prices in the United States are less than fair
value. This amount is expressed as a weighted average percentage known as
the final margin. The final margins for Japan as originally calculated in
1986 were approximately 36 percent. If requested, these margins are
reviewed by the Department of Commerce on an annual basis. The final
margins for Japan announced in 1993 for imports during 1992 ranged from
approximately 3 to 46 percent. The margins for the other countries range
from 0 to 37 percent. The Department of Commerce has not announced yet
final margins for imports during 1993. Importers are currently required
to post a cash deposit with the U.S. Customs Department equal to the
margin percentage times the export price of any imported product covered
by the dumping petition. To the extent such dumping continues, the
deposits would become the property of the U.S. government. Although
Timken will not receive any monetary award from such deposits, its benefit
has been and will continue to be, the reduction of unfair competition.
Timken manufactures carbon and alloy seamless tubing, carbon and alloy
steel solid bars and various solid shapes, 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.
The steel industry in which the company participates is extremely
competitive. Excess domestic production capacity, as well as the
importation of foreign produced products, results in severe pressure on
selling prices.
In May 1993, the U.S. Department of Commerce determined that Brazilian
steel was being dumped in the U.S. market at prices up to 27% below fair
value. This government action was in response to an anti-dumping petition
filed in 1992 by the company and Republic Engineered Steel, Inc. In July
1993, the International Trade Commission (ITC) ruled that domestic
producers of special quality finished hot-rolled steel bars are not being
injured by imports from Brazil. The company and Republic appealed this
ruling during the third quarter to the U.S. Court of International Trade
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7.
Competition (Cont.)
___________________
in New York. The company believes that the ITC ruled incorrectly and that
its determination is not supported by fact.
Backlog
_______
The backlog of orders of Timken's domestic and overseas operations is
estimated to have been $520 million at December 31, 1993 and $495 million
at December 31, 1992. 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.
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.
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 MPB New Hampshire Plants, the Duston, England plant and at
the Latrobe, Pennsylvania plant. Expenditures for research, development
and testing amounted to approximately $37,145,000 in 1993, $41,749,000 in
1992, and $40,905,000 in 1991. 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 focus on protecting the environment and
compliance with environmental protection laws. In doing so, the company
has invested in pollution control equipment and updated plant operational
practices. To the extent that the company's non-U.S. competitors are not
subject to similar laws and regulations in their home countries, the
company is placed at a competitive disadvantage.
It is very difficult to access the possible effect of compliance with
future requirements that may differ from existing ones. The company
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8.
Environmental Matters (Cont.)
_____________________________
believes that the effect of amendments to the Clean Air Act of 1990 on its
utility suppliers will increase its costs for electricity by $4 million to
$5 million annually by 1995. Furthermore, regulations related to these
amendments have been proposed that, if adopted, would mandate significant
changes in the way the company monitors air emissions. This would require
capital expenditures in excess of $1 million and the addition of
personnel. A large cross section of industries have expressed opposition
to the proposed regulations for a variety of reasons. It is possible that
the U.S. Environmental Protection Agency (EPA) may amend the regulations
before they are adopted, lessening substantially their impact on the
company.
The company and its U.S. subsidiaries are involved as potentially
responsible parties (PRP), as named by the EPA, for the clean-up of
hazardous waste at five non-company sites. It is believed the company's
share of liability for these sites would not be material to its financial
condition or results of operations because of the company's uncertain or
limited involvement at these sites and the number of other identified
PRPs. In 1993, the company and its Latrobe Steel subsidiary each
participated in one minor settlement agreement, which terminated their
respective clean-up obligations at two other sites.
The company's MPB Corporation subsidiary is engaged in environmental
clean-up projects at its manufacturing locations in New Hampshire. The
costs for these projects, estimated at slightly over $3 million, were
recorded previously. A portion of these costs will be recovered from a
former owner of the property. MPB has filed suit against its insurance
companies for reimbursement of clean-up costs. The full extent of
reimbursement cannot be estimated. In late 1993, MPB was notified by the
city of Keene, New Hampshire, that city officials were looking to MPB to
contribute to the costs of cleaning up alleged soil and groundwater
contamination of a city dump, which allegedly had been used by MPB along
with many others for industrial waste disposal. This is not a superfund
site. No specific monetary request has been made at this time.
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, 1993, Timken had 15,985 associates.
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9.
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, except
L. R. Brown and S. A. Perry, 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 21, 1994, are as follows:
Current Position and Previous
Name Age Positions During Last Five Years
____ ___ ______________________________________________
W. R. Timken, Jr. 55 1988 Chairman - Board of Directors;
Officer since 1968.
J. F. Toot, Jr. 58 1988 President;
1992 President and Chief Executive Officer;
Director; Officer since 1967.
P. J. Ashton 58 1988 Executive Vice President - Bearings;
1992 Executive Vice President and President -
Bearings;
Director; Officer since 1980.
C. H. West 59 1988 Executive Vice President - Steel;
1992 Executive Vice President and President -
Steel;
Director; Officer since 1982.
M. J. Amiel 62 1988 Managing Director - Bearings - Europe,
Africa and West Asia;
1989 Vice President - Bearings - Europe,
Africa and West Asia;
Officer since 1989.
S. A. Perry 48 1988 Director - Accounting and Controller;
1989 Director - Purchasing and Logistics;
1993 Vice President - Human Resources and
Logistics;
Officer since 1993.
L. R. Brown 58 1990 Vice President and General Counsel;
prior thereto Managing Partner, Day,
Ketterer, Raley, Wright & Rybolt - Law
Firm; Officer since 1990.
D. L. Hart 62 1988 Vice President - Bearings - North and
South America;
Officer since 1978.
R. L. Leibensperger 55 1988 Vice President - Technology;
Officer since 1986.
G. E. Little 50 1988 Director Finance and Assistant
Treasurer;
1990 Treasurer;
1992 Vice President - Finance & Treasurer;
Officer since 1990.
J. J. Schubach 57 1988 Vice President - Strategic Management;
Officer since 1984.
W. J. Timken 51 1988 Director - Human Resource Development;
1992 Vice President; Director; Officer since
1992.
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10.
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 10,916,000 square feet, all of
which, except for approximately 208,000 square feet, is owned in fee. 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 and distribution facilities in the United
States are located in Ashland, Bucyrus, Canton, Columbus and New
Philadelphia, Ohio; Gaffney, South Carolina; Lincolnton, North Carolina;
Altavista, Virginia; and Keene and Lebanon, New Hampshire. These
facilities, including the research facility in Canton, Ohio, and
warehouses at plant locations, have an aggregate floor area of
approximately 4,193,000 square feet. Timken's steel manufacturing and
distribution facilities in the United States are located in Canton, Eaton,
Wauseon and Wooster, Ohio; and Latrobe, Pennsylvania. These facilities
have an aggregate floor area of approximately 4,694,000 square feet.
Timken's bearing manufacturing plants outside the United States are
located in Daventry and Duston, England; Colmar, France; St. Thomas,
Canada; Benoni, South Africa; Sao Paulo and Santa Barbara, Brazil;
Ballarat, Australia; and Medemblik, The Netherlands. The facilities have
an aggregate floor area of approximately 2,029,000 square feet. In
addition to the manufacturing facilities discussed above, Timken owns
warehouses in the United States, Germany, Mexico and Argentina, and leases
several relatively small warehouse facilities in cities throughout the
world.
During 1993, the company's Steel Business experienced increased plant
utilization compared to 1992 as a result of increased sales in almost all
product lines. The company's Bearing Business experienced slightly lower
plant utilization during 1993. Continued reduction of inventories and
weak demand in certain market segments combined with recessionary
economies in Europe and Japan lowered plant utilization.
During the first quarter of 1993, the company announced that British
Timken's Daventry bearing manufacturing operations would be consolidated
into other plants by mid-1994. This action, which will result in improved
utilization of plant assets, was part of a streamlining process that the
company announced in December 1991. Anticipated consolidation costs were
accounted for in December 1991.
In June 1993, the company's Bearing Business announced that it was
resuming work on its 21st century bearing plant in Asheboro, North
Carolina. Start-up of the 145,000 square-foot plant is expected in the
third quarter of 1994.
In July 1993, the company's Steel Business announced the establishment of
a tubing components manufacturing facility in Eaton, Ohio. Production in
the 42,000 square-foot leased facility began in September.
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11.
Item 2. Properties (Cont.)
___________________________
In July 1993, the company's Latrobe Steel subsidiary announced plans to
establish a 90,000 square-foot facility near Franklin, Pennsylvania for
cold finishing of the company's specialty steel round bar products.
Start-up is planned for April 1994. The building will also provide for
warehousing and shipping functions.
The company is a forty percent shareholder in Tata Timken Limited, a joint
venture with The Tata Iron and Steel Company Limited. The joint venture
consists of a manufacturing facility in Jamshedpur, India, completed in
March of 1992, and four sales offices, also located in India.
The $1 billion capital expenditure program announced in March 1989 was
intended to cover the years through 1994. While more than $588 million
has been invested through 1993 encompassing the initiation of six new
bearing and steel facilities, the $1 billion in capital expenditures will
not be spent by the end of 1994.
At the time the program was announced, the company indicated that the
investment amounts and timing would be continually reviewed with the
intention of meeting economic conditions, both internal and external to
the company, as they developed. Finding less capital intensive
alternatives has been a major factor enabling the company to spend less.
Additionally, in 1990, the company entered the super precision bearing
business with the $195 million acquisition of MPB Corporation. Cost
reducing initiatives with less capital intensity have also received
priority over investments in some markets.
In December 1993, MPB announced the formation of MPB Singapore PTE. LTD.,
which will open a manufacturing facility in Singapore. This facility is
to be operational by early summer 1994. This will improve service to
MPB's existing Pacific Rim area customers and provide direct participation
in new growth markets and products.
Item 3. Legal Proceedings
__________________________
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the company or any
of its subsidiaries is a party or of which any of their property is the
subject. Reference is made to the Environmental Matters section on page
6.
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, 1993.
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12.
PART II
_______
Item 5. Market for the Registrant's Common Equity and Related Stock
____________________________________________________________________
Holder 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, 1993, was 20,684.
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, 1993, and is
incorporated herein by reference.
Item 6. Selected Financial Data
________________________________
The Summary of Operations and Other Comparative Data on Pages 34 and 35 of
the Annual Report to Shareholders for the year ended December 31, 1993, is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
________________________________________________________________________
Results of Operation
____________________
Management's Discussion and Analysis of Financial Condition and Results of
Operations on Pages 17-23 of the Annual Report to Shareholders for the
year ended December 31, 1993, 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, 1993, are incorporated herein
by reference.
Item 9. Changes in and Disagreements with Accountants
______________________________________________________
on Accounting and Financial Disclosure
______________________________________
Not applicable.
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13.
PART III
________
Item 10. Directors and Executive Officers of the Registrant
____________________________________________________________
Required information is set forth under the caption "Election of
Directors" on Pages 4-9 of the proxy statement issued in connection with
the annual meeting of shareholders to be held April 19, 1994, 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 12-17 of the proxy statement issued in connection
with the annual meeting of shareholders to be held April 19, 1994, 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, excluding 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 9-11 of the proxy
statement issued in connection with the annual meeting of shareholders to
be held April 19, 1994, 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 4-9 of the proxy statement issued in connection with
the annual meeting of shareholders to be held April 19, 1994, and is
incorporated herein by reference.
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14.
PART IV
_______
Item 14. Exhibits, Financial Statement Schedules, and Report 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 August 22, 1988) were filed with Form S-8
dated October 13, 1993, 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) First Amendment Agreement dated February 26, 1993, to the
restated credit agreement as amended December 31, 1991,
between Timken and certain banks was filed with Form 10-K
for the period ended December 31, 1992 and is
incorporated herein by reference.
(4.1) Credit Agreement amended as of December 31, 1991 between
Timken and certain banks was filed with Form 10-K for the
period ended December 31, 1991 and is incorporated herein
by reference.
(4.2) Rights Agreement dated as of December 18, 1986, as
amended and restated as of February 1, 1991 between
Timken and First Chicago Trust Company (formerly Morgan
Shareholder Services Trust Company) was filed with Form
8-K dated February 1, 1991, and is incorporated herein by
reference.
(4.3) 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.
(4.4) 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.
Management Contracts and Compensation Plans
___________________________________________
(10) The Management Performance Plan of The Timken Company for
Officers and Certain Management Personnel.
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15.
Exhibit (Cont.)
------------------------------------
(10.1) The Long Term Incentive Plan of The Timken Company for
officers and other key employees as approved by
shareholders April 21, 1992 was filed with Form 10-K for
the period ended December 31, 1992 and is incorporated
herein by reference.
(10.2) The 1985 Incentive Plan of The Timken Company for
Officers and other key employees as amended through April
16, 1991 was filed with Form 10-K for the period ended
December 31, 1991 and is incorporated herein by
reference.
(10.3a) The form of Severance Agreement entered into with
W. R. Timken, Jr. was filed with Form 10-K for the period
ended December 31, 1992 and is incorporated herein by
reference.
(10.3b) The form of Severance Agreement entered into with
Joseph F. Toot, Jr. was filed with Form 10-K for the
period ended December 31, 1992 and is incorporated herein
by reference.
(10.3c) The form of Severance Agreement entered into with
Peter J. Ashton was filed with Form 10-K for the
period ended December 31, 1992 and is incorporated herein
by reference.
(10.3d) The form of Severance Agreement entered into with
Charles H. West was filed with Form 10-K for the
period ended December 31, 1992 and is incorporated herein
by reference.
(10.3e) The form of Severance Agreement entered into with
Donald L. Hart.
(10.3f) The form of Severence Agreement entered into with all
Executive Officers of the company and certain other key
employees of the company and its subsidiaries. Each
differs only as to name and date executed.
(10.4) The form of Death Benefit Agreement entered into with all
Executive Officers of the company. Each differs only as
to name and date executed, except Mr. Amiel, who is a
non-resident.
(10.5) 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.
<PAGE>
<PAGE>
16.
Exhibit (Cont.)
_______________
(10.6) 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.
(10.7) 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.
(10.8) 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 and Mr. Amiel who is a non-resident.
(11) Computation of Per Share Earnings.
(13) Annual Report to Shareholders for the year ended December
31, 1993, (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
(b) Reports on Form 8-K:
None.
(c) The exhibits are contained in a separate section of this report.
<PAGE>
<PAGE>
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/ J. F. Toot, Jr. By /s/ G. E. Little
________________________________ _____________________________
J. F. Toot, Jr., Director; G. E. Little
President and Chief Executive Vice President - Finance
Officer (Principal Financial and
Accounting Officer)
Date March 29, 1994
________________________________ Date March 29, 1994
_____________________________
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/ Robert Anderson* By /s/ John M. Timken, Jr.*
__________________________________ _______________________________
Robert Anderson Director John M. Timken, Jr. Director
Date March 29, 1994 Date March 29, 1994
__________________________________ _______________________________
By /s/ Peter J. Ashton* By /s/ W. J. Timken*
__________________________________ _______________________________
Peter J. Ashton Director W. J. Timken Director
Date March 29, 1994 Date March 29, 1994
__________________________________ _______________________________
By /s/ Stanley C. Gault* By /s/ W. R. Timken, Jr.*
__________________________________ _______________________________
Stanley C. Gault Director W. R. Timken, Jr. Director
Chairman - Board of Directors
Date March 29, 1994 Date March 29, 1994
__________________________________ _______________________________
By /s/ J. Clayburn La Force, Jr.* By /s/ Charles H. West*
__________________________________ _______________________________
J. Clayburn La Force, Jr. Director Charles H. West Director
Date March 29, 1994 Date March 29, 1994
__________________________________ _______________________________
By /s/ Robert W. Mahoney* By /s/ Alton W. Whitehouse*
__________________________________ _______________________________
Robert W. Mahoney Director Alton W. Whitehouse Director
Date March 29, 1994 Date March 29, 1994
__________________________________ _______________________________
By /s/ James W. Pilz*
__________________________________ *By: /s/ G. E. Little
James W. Pilz Director _______________________________
Date March 29, 1994 G. E. Little, attorney-in-fact
__________________________________ by authority of Power of
Attorney filed as Exhibit 24
hereto
<PAGE>
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) AND (2), (c) AND (d)
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1993
THE TIMKEN COMPANY
CANTON, OHIO
<PAGE>
<PAGE>
FORM 10-K--ITEM 14(a)(1) AND (2)
THE TIMKEN COMPANY AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of The Timken Company
and subsidiaries, included in the annual report of the registrant to
its shareholders for the year ended December 31, 1993, are incorporated
by reference in Item 8.
Consolidated statements of income--Years ended December 31, 1993,
1992 and 1991
Consolidated balance sheets--December 31, 1993 and 1992
Consolidated statements of cash flows--Years ended December 31, 1993,
1992 and 1991
Consolidated statements of shareholders' equity--Years ended
December 31, 1993, 1992 and 1991
Notes to consolidated financial statements--December 31, 1993
The following consolidated financial statement schedules of The Timken
Company and subsidiaries are included in Item 14(d):
Schedule V--Property, plant and equipment
Schedule VI--Accumulated depreciation, depletion and amortization
of property, plant and equipment
Schedule VIII--Valuation and qualifying accounts
Schedule IX--Short-term borrowings
Schedule X--Supplementary income statement information
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and
therefore have been omitted.
<PAGE>
<PAGE>
Report of Independent Auditors
Board of Directors
The Timken Company
We have audited the consolidated balance sheets of The Timken
Company and subsidiaries as of December 31, 1993 and 1992, and
the related statements of income, shareholders' equity and cash
flows for each of the three years in the period ended
December 31, 1993. Our audits also included the financial
statement schedules listed in the index at Item 14(a). These
financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of The Timken Company and subsidiaries at
December 31, 1993 and 1992, and the consolidated results of their
operations and their cash flows for each of the three years in
the period ended December 31, 1993, in conformity with generally
accepted accounting principles. Also, in our opinion, the
related financial statement schedules, when considered in
relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth
therein.
As described in Note 2 to the financial statements, in 1993 the
Company changed its methods of accounting for postretirement
benefits, postemployment benefits and income taxes.
ERNST & YOUNG
Canton, Ohio
February 3, 1994
<PAGE>
<PAGE>
<TABLE>
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
THE TIMKEN COMPANY AND SUBSIDIARIES
Year Ended December 31, 1993
<CAPTION>
______________________________________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E COL. F
______________________________________________________________________________________________________
Balance at Balance
Beginning Additions Other Changes--Add at End
CLASSIFICATION of Period at Cost Retirements (Deduct)--Describe of Period
______________________________________________________________________________________________________
(Thousands of dollars)
<S> <C> <C> <C> <C> <C>
Land $ 18,268 $ 8 $ (341) $ (92)(1)<F1> $ 18,088
245 (2)<F2>
Buildings &
improvements 326,355 5,377 (1,740) (1,798)(1)<F1>
1,475 (3)<F3> 329,669
Machinery &
equipment 1,709,913 77,042 (22,844) (8,065)(1)<F1>
11,599 (3)<F3> 1,767,645
Fast depreciating
equipment 34,066 10,513 -0- (457)(1)<F1>
(11,875)(4)<F4> 32,247
________________________________________________________________________________
TOTAL $2,088,602 $ 92,940 $(24,925) $ (8,968) $2,147,649
________________________________________________________________________________
<FN>
<F1>
(1) The deduction is due to the effect of exchange rate changes on translating property, plant and
equipment of foreign subsidiaries and divisions in accordance with FASB Statement No. 52 "Foreign
Currency Translation."
<F2>
(2) The increase relates to assets transferred from "Miscellaneous Receivables and Other Assets."
<F3>
(3) The increase results from the adjustment of the remaining net-of-tax balances of MPB Corporation,
acquired in May 1990, to their pre-tax amounts upon adoption of FASB Statement No. 109
"Accounting for Income Taxes."
<F4>
(4) The deduction is due to amortization credited to the asset account and charged to operations.
<F5>
(5) The provision for depreciation is computed by the straight-line method using asset lives ranging
from 30 to 40 years for buildings and 3 to 20 years for machinery and equipment. Expenditures
for fast depreciating equipment are amortized by charges to operations on the basis of monthly
production or over their estimated useful lives.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
THE TIMKEN COMPANY AND SUBSIDIARIES
Year Ended December 31, 1992
<CAPTION>
______________________________________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E COL. F
______________________________________________________________________________________________________
Balance at Balance
Beginning Additions Other Changes--Add at End
CLASSIFICATION of Period at Cost Retirements (Deduct)--Describe of Period
______________________________________________________________________________________________________
(Thousands of dollars)
<S> <C> <C> <C> <C> <C>
Land $ 18,382 $ -0- $ (8) $ (106)(1)<F1> $ 18,268
Buildings &
improvements 329,344 3,798 (43) (5,194)(1)<F1>
(1,550)(2)<F2> 326,355
Machinery &
equipment 1,665,120 120,780 (10,136) (26,345)(1)<F1>
(39,506)(2)<F2> 1,709,913
Fast depreciating
equipment 34,290 12,972 (33) (828)(1)<F1>
(12,335)(3)<F3> 34,066
________________________________________________________________________________
TOTAL $2,047,136 $137,550 $(10,220) $(85,864) $2,088,602
________________________________________________________________________________
<FN>
<F1>
(1) The deduction is due to the effect of exchange rate changes on translating property, plant and
equipment of foreign subsidiaries and divisions in accordance with FASB Statement No. 52 "Foreign
Currency Translation."
<F2>
(2) The deduction represents the decommissioning of assets as a part of the restructuring program
initiated by the Company in 1991.
<F3>
(3) The deduction is due to amortization credited to the asset account and charged to operations.
<F4>
(4) The provision for depreciation is computed by the straight-line method using asset lives ranging
from 30 to 40 years for buildings and 3 to 20 years for machinery and equipment. Expenditures for
fast depreciating equipment are amortized by charges to operations on the basis of monthly
production or over their estimated useful lives.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
THE TIMKEN COMPANY AND SUBSIDIARIES
Year Ended December 31, 1991
<CAPTION>
______________________________________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E COL. F
______________________________________________________________________________________________________
Balance at Balance
Beginning Additions Other Changes--Add at End
CLASSIFICATION of Period at Cost Retirements (Deduct)--Describe of Period
______________________________________________________________________________________________________
(Thousands of dollars)
<S> <C> <C> <C> <C> <C>
Land $ 17,995 $ 375 $ -0- $ (30)(1)<F1>
42 (2)<F2> $ 18,382
Buildings &
improvements 297,093 24,650 (791) (606)(1)<F1>
8,998 (2)<F2> 329,344
Machinery &
equipment 1,565,726 107,921 (28,518) (3,074)(1)<F1>
23,065 (2)<F2> (1,665,120)
Fast depreciating
equipment 32,881 13,150 (69) (82)(1)<F1>
(11,590)(3)<F3> 34,290
_______________________________________________________________________________
TOTAL $1,913,695 $146,096 ($29,378) $ 16,723 $2,047,136
_______________________________________________________________________________
<FN>
<F1>
(1) The deduction is due to the effect of exchange rate changes on translating property, plant and
equipment of foreign subsidiaries and divisions in accordance with FASB Statement No. 52 "Foreign
Currency Translation."
<F2>
(2) The increase relates to assets transferred from "Miscellaneous Receivables and Other Assets."
<F3>
(3) The deduction is due to amortization credited to the asset account and charged to operations.
<F4>
(4) The provision for depreciation is computed by the straight-line method using asset lives ranging
from 30 to 40 years for buildings and 3 to 20 years for machinery and equipment. Expenditures
for fast depreciating equipment are amortized by charges to operations on the basis of monthly
production or over their estimated useful lives.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
THE TIMKEN COMPANY AND SUBSIDIARIES
Year Ended December 31, 1993
<CAPTION>
______________________________________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E COL. F
______________________________________________________________________________________________________
Additions
Balance at Charged To Balance
Beginning Costs and Other Changes--Add at End
DESCRIPTION of Period Expenses Retirements (Deduct)--Describe of Period
______________________________________________________________________________________________________
(Thousands of dollars)
<S> <C> <C> <C> <C> <C>
Buildings &
improvements $ 143,854 $ 16,544 $ (1,573) $ (862)(1)<F1> $ 157,963
Machinery &
equipment 895,744 86,771 (17,556) (3,680)(1)<F1>
3,743 (2)<F2> 965,022
________________________________________________________________________________
TOTAL $1,039,598 $103,315 $(19,129) $ (799) $1,122,985
________________________________________________________________________________
<FN>
<F1>
(1) The deduction is due to the effect of exchange rate changes on translating property, plant and
equipment of foreign subsidiaries and divisions in accordance with FASB Statement No. 52 "Foreign
Currency Translation."
<F2>
(2) The increase results from the adjustment of the remaining net-of-tax balances of MPB Corporation,
acquired in May 1990, to their pre-tax amounts upon adoption of FASB Statement No. 109,
"Accounting for Income Taxes."
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
THE TIMKEN COMPANY AND SUBSIDIARIES
Year Ended December 31, 1992
<CAPTION>
______________________________________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E COL. F
______________________________________________________________________________________________________
Additions
Balance at Charged To Balance
Beginning Costs and Other Changes--Add at End
DESCRIPTION of Period Expenses Retirements (Deduct)--Describe of Period
______________________________________________________________________________________________________
(Thousands of dollars)
<S> <C> <C> <C> <C> <C>
Buildings &
improvements $137,175 $10,314 $ (25) $ (2,488)(1)<F1> $ 143,854
(1,122)(2)<F2>
Machinery &
equipment 851,089 88,810 (7,685) (13,195)(1)<F1>
(23,275)(2)<F2> 895,744
________________________________________________________________________________
TOTAL $988,264 $99,124 $(7,710) $(40,080) $1,039,598
________________________________________________________________________________
<FN>
<F1>
(1) The deduction is due to the effect of exchange rate changes on translating property, plant and
equipment of foreign subsidiaries and divisions in accordance with FASB Statement No. 52 "Foreign
Currency Translation."
<F2>
(2) The deduction represents the decommissioning of assets as part of the restructuring program
initiated by the Company in 1991.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
THE TIMKEN COMPANY AND SUBSIDIARIES
Year Ended December 31, 1991
<CAPTION>
______________________________________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E COL. F
______________________________________________________________________________________________________
Additions
Balance at Charged To Balance
Beginning Costs and Other Changes--Add at End
DESCRIPTION of Period Expenses Retirements (Deduct)--Describe of Period
______________________________________________________________________________________________________
(Thousands of dollars)
<S> <C> <C> <C> <C> <C>
Buildings &
improvements $122,454 $10,015 $ 664 $ (316)(1)<F1>
5,686 (2)<F2> $137,175
Machinery &
equipment 765,676 84,687 21,259 (1,541)(1)<F1>
23,526 (2)<F2> 851,089
________________________________________________________________________________
TOTAL $888,130 $94,702 $21,923 $27,355 $988,264
________________________________________________________________________________
<FN>
<F1>
(1) The deduction is due to the effect of exchange rate changes on translating property, plant and
equipment of foreign subsidiaries and divisions in accordance with FASB Statement No. 52 "Foreign
Currency Translation."
<F2>
(2) The addition represents assets transferred from "Miscellaneous Receivables and Other Assets."
</TABLE>
<PAGE>
<PAGE>
<TABLE>
VIII--VALUATION AND QUALIFYING ACCOUNTS
THE TIMKEN COMPANY AND SUBSIDIARIES
<CAPTION>
_________________________________________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E
_________________________________________________________________________________________________________
Additions
_______________________
(1)<F1> (2)<F2>
Balance at Charged to Charged to Deductions
Beginning Costs and Other Accounts --Describe Balance at
DESCRIPTION of Period Expenses --Describe (3)<F3> End of Period
_________________________________________________________________________________________________________
(Thousands of dollars)
<S> <C> <C> <C> <C>
Year ended December 31, 1993:
Reserves and allowances
deducted from asset accounts:
Allowance for uncollectible
accounts $4,948 $ 2,655 $1,311 $ 6,292
Valuation allowance on
deferred tax assets - $20,224 - 20,224
______ _______ _______ ______ _______
$4,948 $ 2,655 $20,224 $1,311 $26,516
______ _______ _______ ______ _______
Year ended December 31, 1992:
Reserves and allowances deducted
from asset accounts--Allowance
for uncollectible accounts $4,920 $ 2,204 $2,176 $ 4,948
______ _______ ______ _______
Year ended December 31, 1991:
Reserves and allowances deducted
from asset accounts--Allowance
for uncollectible accounts $4,039 $ 1,953 $1,072 $ 4,920
______ _______ ______ _______
<FN>
<F1>
(1) Provision for uncollectible accounts included in expenses.
<F2>
(2) The increase relates to the adoption of FASB Statement No. 109, "Accounting for Income Taxes."
<F3>
(3) Actual accounts written off against the allowance--net of recoveries.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE IX--SHORT-TERM BORROWINGS
THE TIMKEN COMPANY AND SUBSIDIARIES
<CAPTION>
______________________________________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E COL. F
______________________________________________________________________________________________________
Maximum Average Weighted
Weighted Amount Amount Average
Balance Average Outstanding Outstanding Interest
CATEGORY OF AGGREGATE at End Interest During the During the Rate During
SHORT-TERM BORROWINGS of Period Rate Period Period the Period
______________________________________________________________________________________________________
(Thousands of dollars)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Short-term debt (1)<F1> $ 32,129 6.2% $ 75,584 $ 40,415 7.7%
Commercial paper (2)<F2> 62,907 10.2% 103,790 79,056 7.8%
Year ended December 31, 1992:
Short-term debt (1)<F1> $ 64,423 6.5% $ 64,423 $ 38,830 8.2%
Commercial paper (2)<F2> 71,730 8.4% 143,395 121,353 8.4%
Year ended December 31, 1991:
Short-term debt (1)<F1> $ 64,116 7.3% $ 64,116 $ 42,391 8.5%
Commercial paper (2)<F2> 70,865 8.1% 126,181 95,323 8.4%
<FN>
<F1>
(1) Short-term debt represents borrowings under a line-of-credit borrowing arrangement in the United
States which will be reviewed for renewal in August 1996 and bank borrowings for operations
outside the United States.
<F2>
(2) Commercial paper matures generally one to six months from date of issue with no provisions for
the extension of its maturity.
<F3>
(3) The average amount outstanding during the period was computed by dividing the total of month-end
outstanding principal balances by 12.
<F4>
(4) The weighted average interest rate during the period was computed by dividing actual interest
expense by average short-term obligations outstanding.
</TABLE>
<PAGE>
<PAGE>
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
THE TIMKEN COMPANY AND SUBSIDIARIES
___________________________________________________________________________
COL. A COL. B
___________________________________________________________________________
Item Charged to Costs and Expenses
___________________________________________________________________________
(Thousands of dollars)
Year Ended December 31
1993 1992 1991
_________________________________
Maintenance and repairs (1) $167,838 $173,731 $168,985
Taxes, other than payroll and income
taxes--real and personal property $ 15,306 $ 16,109 $ 16,613
(1) The amounts shown for maintenance and repairs include material, labor
and overhead as well as a portion of the costs reported as depreciation,
amortization and taxes. It is not practicable to separate such
information.
Amounts for depreciation and amortization of intangibles, royalties, and
advertising costs are not presented as such amounts are less than 1% of
total sales and revenues.
<PAGE>
Exhibit 10
December 21, 1993
THE TIMKEN COMPANY
MANAGEMENT PERFORMANCE PLAN
PURPOSE
The purpose of The Timken Company (the "Company") Management
Performance Plan (the "Plan") is to promote the profitable growth
of the Company by:
Providing rewards for achieving increasing levels of return
on capital.
Recognizing corporate, business unit and individual
performance achievement.
Attracting, motivating and retaining superior executive
talent.
ADMINISTRATION
It is the responsibility of senior management of the Company to
execute the provisions of the Plan. Based on senior management
recommendations, the Compensation Committee (the "Committee")
approves financial goals, participation, target bonus awards,
actual bonus awards, timing of payment and other actions
necessary to the administration of the Plan.
PARTICIPATION
The participant group includes Company executive officers and
other key employees of the Company and its subsidiaries in
positions having a point value in excess of 1000 points based on
the Company's job evaluation process.
PERFORMANCE TARGETS
The primary Corporate performance measure will be Return on
Invested Capital, one measure of which is Earnings Before
Interest and Taxes (EBIT) divided by Beginning Invested Capital
(BIC). A positive Return on Invested Capital will be required to
generate a Total Corporate Fund ("Total Fund") automatically.
At the beginning of each year, corporate targets for Return on
Invested Capital as it relates to the Cost of Capital will be
set. The degree of achievement of these targets will determine
the size of the Total Fund.
Business unit targets will be set using EBIT/BIC and other
measures developed by senior management. Achievement of these
<PAGE>
<PAGE>
Page 2
targets will affect the adjustment to the Business Unit Funds
used to arrive at the Final Corporate Fund ("Final Fund").
In addition, at the beginning of each year, the Committee will
specify any other financial or non-financial measures that will
be used to evaluate Corporate or Business Unit performance for
the coming year. When Corporate financial performance results
are not achieved, the Committee, at its discretion, can approve
payment of up to 25% of the target amount for the achievement of
performance results that position the Company strategically for
the future in such areas as:
- Sales growth (customer value).
- Earnings growth.
- Productivity growth.
- Improvement of shareholder return.
- Reduction of fixed costs.
- Cash generation.
- Debt reduction.
- Quality.
- Financial performance exceeding that of peer/competitor
companies.
- Successful start-up of new facility.
- Successful acquisition/divestiture.
- Recruitment and development of excellent associates with
emphasis on diversity.
BONUS OPPORTUNITY
Each position is assigned a target bonus expressed as a
percentage of annual base salary.
The target bonus amounts are as follows:
POSITION TARGET BONUS
CEO, Chairman 55%
Executive
Grades: 45%
E-25, E-26 40%
E-23, E-24 35%
E-21, E-22
Point Values:
Above 1700 30%
1400 to 1700 25%
1000 to 1400 20%
The full target bonus opportunity represents an appropriate bonus
award if performance standards are met in the following areas:
- Corporate return on invested capital.
- Business unit return on invested capital.
<PAGE>
<PAGE>
Page 3
- Individual performance against preset goals.
The actual bonus payment will reflect a mix of these components
as appropriate for each position:
- CEO and Chairman ---100% Corporate.
- Presidents of Business Units ---50% Corporate and 50% their
respective Business Unit.
- Vice President-Bearings-NASA and Vice President-Bearings-
EAWA ---30% Corporate and 70% Bearing Business.
- Other Business Unit participants ---25% Corporate and 75%
Business Unit.
- Vice Presidents of Corporate Centers and other Corporate
Center participants ---50% Corporate, 25% Bearing Business
and 25% Steel Business.
Any exceptions to these allocations will be determined by senior
management.
BONUS FUND
The Total Corporate Target Fund ("Target Fund") is derived by
multiplying the annual salary of each approved participant as of
November 1 of the Plan year times the Target Bonus percentage and
summing.
The Target Fund is adjusted as follows for the achievement of
corporate financial and non-financial performance goals to arrive
at the Total Fund:
- Reflect corporate financial goals by reference to a table
relating corporate financial achievement and a multiplier,
not to exceed 130%, to be applied to the Target Fund.
- Reflect corporate non-financial goals with an additional
adjustment of plus or minus 25% based on a mixture of
objective and subjective factors.
The Total Fund will not exceed 150% of the Target Fund.
If threshold levels of performance are not achieved, the
Committee can establish, at its discretion, a Total Fund up to
25% of the Target Fund for achievement of results that
successfully position the Company strategically for the future.
The Total Fund is allocated to Corporate and Business Unit Funds
using the allocations established for each approved participant.
The Business Unit Funds are adjusted by plus or minus 25% to
reflect the achievement of Business Unit EBIT/BIC goals and other
non-financial goals to arrive at the Final Fund.
<PAGE>
<PAGE>
Page 4
Individual bonus amounts are adjusted for achievement of
individual performance goals as follows:
Outstanding performance 120%
All expectations met and some exceeded 110%
All expectations met 100%
Most expectations met 90% or less
Most expectations not met 0%
Adjustments for individual performance will not affect the size
of the Final Fund.
BONUS PAYMENTS
At the end of the year, senior management will determine whether
Corporate performance has exceeded the threshold for creating a
bonus fund. Senior management will recommend to the Committee
the Total Fund and Final Fund based on its assessment of
performance achievement at Corporate, Business Unit and
individual levels. The Committee may make further adjustments to
the fund or any individual bonus amount based on its assessment
of financial and non-financial performance.
Awards under the Plan will be paid in cash or stock.
One hundred percent of awards under the Plan will be included in
pension earnings and earnings for the purpose of calculating
401(k) plan benefits. Awards will not be included for purposes
of any other employee benefit plans.
tma/150EXC
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EXHIBIT 10.3e
AMENDED AND RESTATED
SEVERANCE AGREEMENT
This Amended and Restated Severance Agreement (the
"Agreement") is dated as of the 28th day of February, 1991, between
The Timken Company, an Ohio corporation, and Donald L. Hart (the
"Employee").
RECITALS
________
The Employee is a key employee of The Timken Company (the
"Company") and has made and is expected to continue to make major
contributions to the profitability, growth and financial strength of
the Company.
The Company and the Employee entered into a Severance
Agreement ("Severance Agreement") dated as of March 24, 1987, and now
desire to amend and restate such Severance Agreement.
The Company wishes to induce its key employees to remain in
the employment of the Company and to assure itself of continuity of
management in the event of any threatened or actual change in control
of the Company. The Company recognizes that a termination of
employment may occur following a change in control in circumstances
where the Employee should receive additional compensation for
services theretofore rendered and for other good reasons, the
appropriate amount of which would be difficult to ascertain. Hence,
the Company has agreed to provide as severance benefits the amounts
set forth herein.
NOW, THEREFORE, in consideration of the premises, including
the Release provided for in Section 6 hereof, the Company and the
Employee hereby agree to amend and restate the Severance Agreement to
read as follows:
1. DEFINITIONS:
1.1 LIMITED PERIOD: The term "Limited Period" shall
mean that period of time commencing on the date of a Change in
Control and continuing for a period of three years.
1.2 NOTICE OF TERMINATION: The term "Notice of
Termination" shall mean a written notice delivered to the Employee in
the manner specified in Section 8 of this Agreement, which notice
indicates the specific termination provision in this Agreement relied
upon and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employee's
employment.
1.3 CHANGE IN CONTROL: The term "Change in Control"
shall mean the occurrence of any of the following events:
(a) All or substantially all of the assets of the Company
are sold or transferred to another corporation or
entity, or the Company is merged, consolidated or
reorganized into or with another corporation or entity,
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with the result that upon conclusion of the transaction
less than 51% of the outstanding securities entitled to
vote generally in the election of Directors or other
capital interests of the acquiring corporation or entity
are owned, directly or indirectly, by the shareholders
of the Company generally prior to the transaction; or
(b) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report), each
as promulgated pursuant to the Securities Exchange Act
of 1934 (the "Exchange Act"), disclosing that any person
(as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of
securities representing 30% or more of the combined
voting power of the then-outstanding voting securities
of the Company; or
(c) The Company shall file a report or proxy statement with
the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to Item 1 of Form
8-K thereunder or Item 5(f) of Schedule 14A thereunder
(or any successor schedule, form or report or item
therein) that a change in control of the Company has or
may have occurred or will or may occur in the future
pursuant to any then-existing contract or transaction;
or
(d) The individuals who, at the beginning of any period of
two consecutive calendar years, constituted the
Directors of the Company cease for any reason to
constitute at least a majority thereof unless the
nomination for election by the Company's stockholders of
each new Director of the Company was approved by a vote
of at least two-thirds of the Directors of the Company
still in office who were Directors of the Company at the
beginning of any such period.
1.4 COMPANY TERMINATION EVENT: The term "Company
Termination Event" shall mean the termination, prior to any Employee
Termination Event, of the employment of the Employee by the Company in
any of the following events:
(a) The Employee's death during the Limited Period;
(b) If the Employee shall become eligible during the Limited
Period to receive and begins actually to receive
long-term disability benefits under The Long Term
Disability Program of The Timken Company (the "LTD
Plan") or any successor plan as in effect immediately
prior to the date the Change in Control occurred in an
amount not less than the benefits provided by such plans
as in effect as of such date; or
(c) For Cause. Termination shall be deemed to have been for
"Cause" only if based on the fact that the Employee has
done any of the following acts during the Limited Period
and such is materially harmful to the Company:
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(i) An intentional act of fraud, embezzlement or theft
in connection with his duties with the Company and
resulting or intended to result directly or
indirectly in substantial personal gain to the
Employee at the expense of the Company;
(ii)Intentional wrongful disclosure of secret
processes or confidential information of the
Company or a subsidiary; or
(iii)Intentional wrongful engagement in any Competitive
Activity which would constitute a material breach
of the duty of loyalty.
For purposes of this Agreement, the term "Competitive Activity" shall
mean the Employee's participation, without the written consent of an
officer of the Company, in the management of any business enterprise
if such enterprise engages in substantial and direct competition with
the Company and such enterprise's sales of any product or service
competitive with any product or service of the Company amounted to 25%
of such enterprise's net sales for its most recently completed fiscal
year and if the Company's net sales of said product or service
amounted to 25% of the Company's net sales for its most recently
completed fiscal year. "Competitive Activity" shall not include (i)
the mere ownership of securities in any enterprise and exercise of
rights appurtenant thereto or (ii) participation in management of any
enterprise or business operation thereof other than in connection with
the competitive operation of such enterprise.
For purposes of this Agreement, no act, or failure to act, on the part
of the Employee shall be deemed "intentional" unless done or omitted
to be done, by the Employee not in good faith and without reasonable
belief that his action or omission was in or not opposed to the best
interest of the Company. Notwithstanding the foregoing, the Employee
shall not be deemed to have been terminated for "Cause" hereunder
unless and until there shall have been delivered to the Employee a
copy of a resolution duly adopted by the affirmative vote of not less
than three-quarters of the Directors then in office at a meeting of
the Directors called and held for such purpose (after reasonable
notice to the Employee and an opportunity for the Employee, together
with his counsel, to be heard before the Directors), finding that, in
the good faith opinion of the Directors, the Employee had committed an
act set forth in paragraph (c) of this Section and specifying the
particulars thereof in detail. Nothing herein shall limit the right
of the Employee or his beneficiaries to contest the validity or
propriety of any such determination.
1.5 EMPLOYEE TERMINATION EVENT: The term "Employee
Termination Event" shall mean the termination of the employment of the
Employee (including a decision to retire if eligible under The 1984
Retirement Plan for Salaried Employees of The Timken Company [the
"Retirement Plan"]) by the Employee in any of the following events:
(a) A determination by the Employee made in good faith that
upon or after the occurrence of a Change in Control:
(i) a significant reduction or other adverse change has
occurred in the nature or scope of the responsibilities,
authorities, duties, powers or functions of the Employee
attached to the Employee's position held immediately
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prior to the Change in Control; (ii) a change of more
than 60 miles has occurred in the location of the
Employee's principal office immediately prior to the
Change in Control; or (iii) the Employee shall be
required to travel away from his office in the course of
discharging his responsibilities or duties of his
employment more than 14 consecutive calendar days or an
aggregate of more than 90 calendar days in any
consecutive 365 calendar-day period without in either
case his approval;
(b) A failure to elect, reelect or otherwise maintain the
Employee in the office or position in the Company which
the Employee held immediately prior to a Change in
Control, or removal of the Employee as a Director of the
Company (or a successor thereto), if the Employee shall
have been a Director of the Company immediately prior to
the Change in Control;
(c) A reduction by the Company in the Employee's annual base
salary as in effect on the date this Agreement becomes
operative or as the same may be increased from time to
time ("Base Salary");
(d) If in any calendar year, or portion of a calendar year,
during the Limited Period in or for which the Company
pays to any employee any cash incentive compensation
(whether pursuant to the Company's Management
Performance Plan or any successor similar plan or
through any other means [together, "Incentive
Payments"]), the amount of Incentive Payments received
by or awarded to the Employee is less than an amount
equal to the Employee's Average Incentive Pay.
For purposes of this Agreement, "Average Incentive Pay"
shall mean the sum of the Incentive Payments received by
the Employee for the three most recent years for which
the Company has made Incentive Payments or for which the
Company has considered and declined to pay Incentive
Payments divided by three (or divided by such lesser
number if Employee was not eligible to receive an
Incentive Payment as a participant during all or a
portion of said three year period);
(e) The failure by the Company to continue in effect without
substantial change any compensation or benefit plan in
which the Employee participates, or the failure by the
Company to continue the Employee's participation
therein; or the taking of any action by the Company or
its subsidiaries which would directly or indirectly
materially reduce any of the benefits of such plans
enjoyed by the Employee at the time of the Change in
Control, or the failure by the Company or its
subsidiaries to provide the Employee with the number of
paid vacation days to which the Employee is entitled on
the basis of years of service with the Company or its
subsidiaries in accordance with the normal vacation
policy of the Company or of the subsidiary by which the
Employee is employed as in effect at the time of the
Change in Control, or the taking of any other action by
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the Company or its subsidiaries which materially
adversely changes the conditions or perquisites of the
Employee's employment;
(f) The purported termination of the Employee's employment
which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 1.2
of this Agreement, which purported termination shall not
be effective for purposes of this Agreement; or
(g) A failure of any successor company to execute the
agreement required by Section 7 of this Agreement.
1.6 SEVERANCE AMOUNT: The term "Severance Amount"
shall mean a lump sum amount equal to the sum of:
(a) Three times the Employee's Base Salary for the year in
which the Employee's employment is terminated;
(b) Three times the Employee's Average Incentive Pay;
(c) The Supplemental Pension Benefit; and
(d) The Supplemental SIP Benefit.
1.7 CODE: The term "Code" shall mean the Internal
Revenue Code of 1986, as amended.
1.8 SUPPLEMENTAL PENSION BENEFIT: The term
"Supplemental Pension Benefit" shall mean (a) less (b), where:
(a) is the sum of the future pension benefits (converted to
a lump sum of actuarial equivalence) which the Employee
would have been entitled to receive at or after the end
of the Limited Period under (i) the Retirement Plan,
(ii) any annuity distributed to the Employee as a result
of the termination on October 31, 1984 of the Retirement
Plan for Salaried Employees of The Timken Company, (iii)
any Employee Excess Benefits Agreement ("Excess
Agreement"), and (iv) the Supplemental Pension Plan of
The Timken Company ("Supplemental Plan") (any provision
in the Excess Agreement and the Supplemental Plan to the
contrary notwithstanding, (a) Employee shall be assumed
to be eligible for early retirement under the Retirement
Plan, the Excess Agreement and the Supplemental Plan
upon attaining the minimum age required under the
Retirement Plan, the Excess Agreement and the
Supplemental Plan, respectively, (b) Employee's benefits
under the Retirement Plan, the Excess Agreement and the
Supplemental Plan shall be vested and non-forfeitable,
and (c) Employee shall be deemed to have satisfied any
other provision in the Excess Agreement and the
Supplemental Plan which is or may be a condition to his
receipt of benefits thereunder), if the Employee had
remained in the full-time employment of the Company
until the end of the Limited Period at his Base Salary
for the calendar year in which the Employee's employment is
terminated, and at the Employee's Average Incentive Pay: and
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(b) is the sum of (i) the future pension benefits (converted
to a lump sum of actuarial equivalence) which the
Employee is entitled to receive at or after the date the
Employee's employment is terminated under (ii) the
Retirement Plan, and (iii) any annuity distributed to
the Employee as a result of the termination on October
31, 1984 of the Retirement Plan for Salaried Employees
of The Timken Company.
The calculations of the Supplemental Pension Benefit (and its
actuarial equivalence) shall be made, as of the date the Employee's
employment is terminated, by The Wyatt Company or such other
independent actuary appointed by the administrator of the Retirement
Plan and acceptable to the Employee. The lump sum of actuarial
equivalence shall be calculated using the UP-1984 Mortality Table and
120 percent of the interest rate(s) which would be used (as of the
beginning of the calendar year in which the date of distribution
occurs) by the Pension Benefit Guaranty Corporation for purposes of
determining the present value of a lump sum distribution on plan
termination.
1.9 SUPPLEMENTAL SIP PLAN BENEFIT: The "Supplemental
SIP Plan Benefit" shall mean:
(a) The amount of the matching contributions that would have
been made to The Timken Company Savings and Investment
Pension Plan ("SIP Plan") by the Company and allocated
to the Employee's account thereunder as of the end of
the Limited Period if the Employee had remained in the
full-time employment of the Company until the end of the
Limited Period at his Base Salary for the calendar year
in which the Employee's employment is terminated, at the
Employee's Average Incentive Pay, and assuming the
Employee's salary deferral was at the maximum
permissible level; less
(b) The amount of the matching contributions made to the SIP
Plan by the Company and allocated to the Employee's
account thereunder at the date the Employee's employment
is terminated.
2. OPERATION OF AGREEMENT: This Agreement shall be
effective immediately upon its execution, but anything in this
Agreement to the contrary notwithstanding, neither this Agreement nor
any of its provisions shall be operative unless and until a Change in
Control has occurred. Upon the occurrence of a Change in Control,
this Agreement and all of its provisions shall become operative
immediately.
3. SEVERANCE COMPENSATION:
3.1 SEVERANCE COMPENSATION: If the Company shall
terminate the Employee's employment during the Limited Period other
than pursuant to a Company Termination Event, or if the Employee shall
voluntarily terminate his employment during the Limited Period
pursuant to an Employee Termination Event, then the Company shall pay
as severance compensation to the Employee a lump sum cash payment in
the amount of the Severance Amount. The payment of the Severance
Amount required by this Section 3.1 and any Gross-Up Payment initially
determined to be required by Section 3.5 shall, subject to execution
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and delivery by the Employee of the Release described in Section 6
hereof, and the expiration of all applicable rights of the Employee to
revoke the Release or any provision thereof, be made to the Employee
within thirty calendar days of the date of termination of his
employment. Upon receipt of the Severance Amount, and since the
Severance Amount includes a Supplemental Pension Benefit, the Employee
hereby retroactively waives participation in any non-qualified pension
plan of, or benefits under any Employee Excess Benefits Agreement,
with the Company providing for benefits in excess of those permitted
by the Code to be paid under the Retirement Plan, and which measures
service and compensation under such Plan as a basis for benefits.
3.2 COMPENSATION THROUGH TERMINATION: The Company
shall pay the Employee (i) his full Base Salary through the date of
the termination of the Employee's employment; and (ii) an amount
equivalent to the Average Incentive Pay multiplied by a fraction, the
numerator of which is the number of days in the current calendar year
that have expired prior to the Employee's termination of employment
and the denominator of which is three hundred sixty-five.
3.3 SET-OFF: There shall be no right of set-off or
counterclaim against, or delay in, any payment of the Severance Amount
or the Gross-Up Payment by the Company to the Employee provided for in
this Agreement in respect of any claim against or debt or obligation
of the Employee, whether arising hereunder or otherwise.
3.4 INTEREST ON OVERDUE PAYMENTS: Without limiting the
rights of the Employee at law or in equity, if the Company fails to
make any payment required to be made under this Agreement on a timely
basis, the Company shall pay interest on the amount thereof at an
annualized rate of interest equal to eighteen percent (18%).
3.5 INDEMNIFICATION: (a) Anything in this Agreement to
the contrary notwithstanding, in the event that this Agreement shall
become operative and it shall be determined (as hereafter provided)
that any payment or distribution by the Company to or for the benefit
of the Employee, whether paid hereunder or paid or payable or
distributed or distributable pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without
limitation any stock option, stock appreciation right or similar
right, or the lapse of termination of any of the foregoing
(individually and collectively a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Code (or any successor
provision thereto) by reason of being considered "contingent on a
change in ownership or control" of the Company, within the meaning of
Section 280G of the Code (or any successor provision thereto), or any
interest or penalties with respect to such excise tax (such excise
tax, together with any such interest and penalties, being hereafter
collectively referred to as the "Excise Tax"), then the Employee shall
be entitled to receive an additional payment or payments (individually
and collectively, a "Gross-Up Payment"). The Gross-Up Payment shall
be in an amount such that, after payment by the Employee of all taxes
(including any interest or penalties imposed with respect to such
taxes), including any Excise Tax imposed upon the Gross-Up Payment,
the Employee retains a portion of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payment.
(b) Subject to the provisions of paragraph (e) of this
Section 3.5, all determinations required to be made under this Section
3.5, including whether an Excise Tax is payable by the Employee and
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the amount of such Excise Tax and whether a Gross-Up Payment is
required to be paid by the Company to the Employee and the amount of
such Gross-Up Payment, if any, shall be made by a nationally
recognized accounting firm (the "Accounting Firm") selected by the
Employee in his sole discretion. The Employee shall direct the
Accounting Firm to submit its determination and detailed supporting
calculations to both the Company and the Employee within 30 calendar
days after the Termination Date, if applicable, and any such other
time or times as may be requested by the Company or the Employee. If
the Accounting Firm determines that any Excise Tax is payable by the
Employee, the Company shall pay the required Gross-Up Payment to the
Employee within five business days after receipt of such determination
and calculations with respect to any Payment to the Employee. The
federal tax returns filed by the Employee shall be prepared and filed
on a consistent basis with the determination of the Accounting Firm
with respect to the Excise Tax payable by the Employee. If the
Accounting Firm determines that no Excise Tax is payable by the
Employee, it shall, at the same time as it makes such determination,
furnish the Company and the Employee an opinion that the Employee has
substantial authority not to report any Excise Tax on his federal
income tax return, and that, as a result of such reporting position,
the Employee will not be subject to the imposition of accuracy-related
penalties under Section 6662(b)(1) of the Code. As a result of the
uncertainty in the application of Section 4999 of the Code (or any
successor provision thereto) at the time of any determination by the
Accounting Firm hereunder, it is possible that Gross-Up payments which
will not have been made by the Company should have been made (an
"Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts or fails to pursue
its remedies pursuant to paragraph (e) hereof and the Employee
thereafter is required to make a payment of any Excise Tax, the
Employee shall direct the Accounting Firm to determine the amount of
the Underpayment that has occurred and to submit its determination and
detailed supporting calculations to both the Company and the Employee
as promptly as possible. Any such Underpayment shall be promptly paid
by the Company to, or for the benefit of, the Employee within five
business days after receipt of such determination and calculations.
(c) The Company and the Employee shall each provide the
Accounting Firm access to and copies of any books, records and
documents in the possession of the Company or the Employee, as the
case may be, reasonably requested by the Accounting Firm, and
otherwise cooperate with the Accounting Firm in connection with the
preparation and issuance of the determinations and calculations
contemplated by paragraph (b) hereof.
(d) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations
contemplated by paragraph (b) hereof shall be borne by the Company.
If such fees and expenses are initially paid by the Employee, the
Company shall reimburse the Employee the full amount of such fees and
expenses within five business days after receipt from the Employee of
a statement therefor and reasonable evidence of his payment thereof.
(e) The Employee shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as promptly as practicable but no later
than 10 business days after the Employee actually receives notice of
such claim and the Employee shall further apprise the Company of the
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nature of such claim and the date on which such claim is requested to
be paid (in each case, to the extent known by the Employee). The
Employee shall not pay such claim prior to the earlier of (i) the
expiration of the 30-calendar-day period following the date on which
he gives such notice to the Company and (ii) the date that any payment
of amount with respect to such claim is due. If the Company notifies
the Employee in writing prior to the expiration of such period that it
desires to contest such claim, the Employee shall:
(i) provide the Company with any written records or
documents in his possession relating to such claim
reasonably requested by the Company;
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including without limitation
accepting legal representation with respect to such claim by
an attorney competent in respect of the subject matter and
reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order
to effectively contest such claim; and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including interest and penalties) incurred in
connection with such contest and shall indemnify and hold harmless the
Employee, on an after-tax basis, for and against any Excise Tax or
income tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of costs and
expenses. Without limiting the foregoing provisions of paragraph (e),
the Company shall control all proceedings taken in connection with the
contest of any claim contemplated by paragraph (e) and, at its sole
option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in
respect of such claim (provided, however, that the Employee may
participate therein at his own cost and expense) and may, at its
option, either direct the Employee to pay the tax claimed and sue for
a refund or contest the claim in any permissible manner, and the
Employee agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine;
provided, however, that if the Company directs the Employee to pay the
tax claimed and sue for a refund, the Company shall advance the amount
of such payment to the Employee on an interest-free basis and shall
indemnify and hold the Employee harmless, on an after-tax basis, from
any Excise Tax or income tax, including interest or penalties with
respect thereto, imposed with respect to such advance; and provided
further, however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Employee with
respect to which the contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control
of any such contested claim shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Employee
shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
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(f) If, after the receipt by the Employee of an amount
advanced by the Company pursuant to paragraph (e) hereof, the Employee
receives any refund with respect to such claim, the Employee shall
(subject to the Company's complying with the requirements of paragraph
(e) hereof) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after any taxes
applicable thereto). If, after the receipt by the Employee of an
amount advanced by the Company pursuant to paragraph (e) hereof, a
determination is made that the Employee shall not be entitled to any
refund with respect to such claim and the Company does not notify the
Employee in writing of its intent to contest such denial or refund
prior to the expiration of 30 calendar days after such determination,
then such advance shall be forgiven and shall not be required to be
repaid and the amount of any such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid by the
Company to the Employee pursuant to this Section 3.5.
4. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER
CONTRACTUAL RIGHTS:
4.1 The Employee shall not be required to mitigate
damages or the amount of any payment provided for under this Agreement
by seeking other employment or otherwise, nor shall the amount of any
payment provided for under this Agreement be reduced by any
compensation earned by the Employee as the result of employment by
another employer after the date of termination of his employment with
the Company, or otherwise.
4.2 The provisions of this Agreement, and any payment
provided for hereunder, shall not reduce any amounts otherwise
payable, or in any way diminish the Employee's existing rights, or
rights which would accrue solely as a result of the passage of time,
under any other employment agreement or other contract, plan or
arrangement with the Company.
5. CONFIDENTIAL INFORMATION; COVENANT NOT TO COMPETE:
5.1 The Employee acknowledges that all trade secrets,
customer lists and other confidential business information are the
exclusive property of the Company. The Employee shall not (following
the execution of this Agreement, during the Limited Period, or at any
time thereafter) disclose such trade secrets, customer lists, or
confidential business information without the prior written consent of
the Company. The Employee also shall not (following the execution of
this Agreement, during the Limited Period, or at any time thereafter)
directly or indirectly, or by act in concert with others, employ or
attempt to employ or solicit for any employment competitive with the
Company any person(s) employed by the Company. The Employee
recognizes that any violation of this Section 5 is likely to result in
immediate and irreparable harm to the Company for which money damages
are likely to be inadequate. Accordingly, the Employee consents to
the entry of injunctive and other appropriate equitable relief by a
court of competent jurisdiction, after notice and hearing and the
court's finding of irreparable harm and the likelihood of prevailing
on a claim alleging violation of this Section 5, in order to protect
the Company's rights under this Section. Such relief shall be in
addition to any other relief to which the Company may be entitled at
law or in equity. The Employee agrees that the state and federal
courts located in the State of Ohio shall have jurisdiction in any
action, suit or proceeding against Employee based on or arising out of
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this Agreement and Employee hereby: (i) submits to the personal
jurisdiction of such courts; (ii) consents to service of process in
connection with any action, suit or proceeding against Employee; and
(iii) waives any other requirement (whether imposed by statute, rule
of court or otherwise) with respect to personal jurisdiction, venue or
service of process.
5.2 For a period of time beginning upon the date of the
Employee's termination of employment (the "Termination Date") and
ending upon the later of (i) the first anniversary of the Termination
Date or (ii) the expiration of the Limited Period, the Employee shall
not engage or participate, directly or indirectly, in any Competitive
Activity, as defined in Section 1.4. For a period of three years from
and after the Termination Date, the Employee shall not solicit or
cause to be solicited on behalf of a competitor any person or entity
which was a customer of the Company during the term of this Agreement,
if the Employee had business contacts with such customer while
employed by the Company.
6. RELEASE.
Payment of the severance payments set forth in Section 3
hereof is conditioned upon the Employee executing and delivering a
release satisfactory to the Company releasing the Company from any and
all claims, demands, damages, actions and/or causes of action
whatsoever, which he may have had on account of the termination of his
employment, and including, but not limited to claims of
discrimination, including on the basis of sex, race, age, national
origin, religion, or handicapped status (with all applicable periods
during which the Employee may revoke the Release or any provision
thereof having expired); and any and all claims, demands and causes of
action for retirement (other than under the Retirement Plan or any
Company medical plan with respect to claims thereunder) or severance
or other termination pay. Such Release shall not, however, apply to
the obligations of the Company arising under this Agreement, under any
Indemnification Agreement between the Employee and the Company, or
rights of indemnification the Employee may have under the Company's
Regulations or by statute.
7. SUCCESSORS AND BINDING AGREEMENT:
7.1 SUCCESSORS: The Company shall require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business or assets of the Company by agreement in form and substance
satisfactory to the Employee, to assume and agree to perform this
Agreement.
7.2 BINDING AGREEMENT: This Agreement shall inure to
the benefit of and be enforceable by the Employee's personal or legal
representative, executor, administrators, successors, heirs,
distributees and legatees. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of or to the
Company, including, without limitation, any person acquiring directly
or indirectly all or substantially all of the assets of the Company
whether by merger, consolidation, sale or otherwise (and such
successor shall thereafter be deemed "the Company" for the purposes of
this Agreement), but shall not otherwise be assignable by the Company.
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8. NOTICES: For the purpose of this Agreement, all
communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United
States registered or certified mail, return receipt requested, postage
prepaid, addressed as indicated below, or to such other address as any
party may have furnished to the other in writing and in accordance
herewith, except that notices of change of address shall be effective
only upon receipt.
If to the Company: The Timken Company
1835 Dueber Avenue, S.W.
Canton, OH 44706
If to the Employee 3704 Parkhill Circle, N.W.
Canton, Ohio 44718
9. GOVERNING LAW: The validity, interpretation,
construction and performance of this Agreement shall be governed by
the laws of the State of Ohio, without giving effect to the principles
of conflict of laws of such State.
10. MISCELLANEOUS: No provisions of this Agreement may be
amended, modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by the
Employee and the Company. No waiver by either party hereto at any
time of any breach by the other party hereto or compliance with, any
condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, expressed or implied
with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
11. VALIDITY: The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement which shall
remain in full force and effect.
12. COUNTERPARTS: This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same Agreement.
13. EMPLOYMENT RIGHTS: Nothing expressed or implied in this
Agreement shall create any right or duty on the part of the Company or
the Employee to have the Employee remain in the employment of the
Company; provided; however, that any termination of the employment of
the Employee or removal of the Employee as an elected officer or
Director of the Company following the commencement of any discussion
with a third party that ultimately results in a Change in Control
shall be deemed to be a termination of the Employee after a Change in
Control of the Company for purposes of this Agreement.
14. WITHHOLDING OF TAXES: The Company may withhold from any
amount payable under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or government
regulation or ruling.
15. NONASSIGNABILITY: This Agreement is personal in nature
and neither of the parties hereto shall, without the consent of the
other, assign or transfer this Agreement or any rights or obligations,
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hereunder, except as provided in Sections 7.1 and 7.2 above. Without
limiting the foregoing, the Employee's right to receive payments
hereunder shall not be assignable or transferable, whether by pledge,
creation of a security interest or otherwise, other than by a transfer
by his will or by the laws of descent and distribution and in the
event of any attempted assignment or transfer contrary to this Section
the Company shall have no liability to pay any amounts so attempted to
be assigned or transferred.
16. TERMINATION OF AGREEMENT: The term of this Agreement
(the "Term") shall commence as of the date hereof and shall expire as
of the later of the close of business on December 31, 1991 and the
expiration of the Limited Period; provided, however, that (A) the term
of this Agreement shall automatically be extended for an additional
year unless, not later than September 30 of the immediately preceding
year, the Company or the Employee shall have given notice that it or
he, as the case may be, does not wish to have the Term extended, and
(B) subject to Section 11 hereof, if prior to a Change in Control, the
Employee ceases for any reason to be an employee of the Company,
thereupon the Term shall be deemed to have expired and this Agreement
shall immediately terminate and be of no further effect; and provided
further, however, that notwithstanding any notice by the Company to
terminate, if a Change in Control shall have occurred during the Term,
this Agreement shall continue in effect for a period of three years
from the date of the occurrence of the Change in Control.
17. ARBITRATION: In the event of a disagreement between the
parties with regard to any determination to be made under this
Agreement, such disagreement shall be settled in Canton, Ohio, by
arbitration in accordance with the then applicable rules of the
American Arbitration Association.
18. INDEMNIFICATION OF LEGAL FEES AND EXPENSES; SECURITY FOR
PAYMENT:
(a) INDEMNIFICATION OF LEGAL FEES. It is the intent of the
Company that the Employee not be required to incur the expenses
associated with the enforcement of his rights under this Agreement by
litigation or other legal action because the cost and expense thereof
would substantially detract from the benefits intended to be extended
to the Employee hereunder. Accordingly, if it should appear to the
Employee that the Company has failed to comply with any of its
obligations under this Agreement or in the event that the Company or
any other person takes any action to declare this Agreement void or
unenforceable, or institutes any litigation designed to deny, or to
recover from, the Employee the benefits intended to be provided to the
Employee hereunder, the Company irrevocably authorizes the Employee
from time to time to retain counsel of his choice, at the expense of
the Company as hereafter provided, to represent the Employee in
connection with the initiation or defense of any litigation or other
legal action, whether by or against the Company or any Director,
officer, stockholder or other person affiliated with the Company, in
any jurisdiction. Notwithstanding any existing or prior
attorney-client relationship between the Company and such counsel, the
Company irrevocably consents to the Employee's entering into an
attorney-client relationship with such counsel, and in that connection
the Company and the Employee agree that a confidential relationship
shall exist between the Employee and such counsel. The Company shall
pay or cause to be paid and shall be solely responsible for any and
all attorneys' and related fees and expenses incurred by the Employee
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as a result of the Company's failure to perform this Agreement or any
provision hereof or as a result of the Company or any person
contesting the validity or enforceability of this Agreement or any
provision hereof as aforesaid.
(b) TRUST AGREEMENTS. To ensure that the provisions of this
Agreement can be enforced by the Employee, two agreements ("Trust
Agreement" and "Trust Agreement No. 2") dated as of March 25, 1987 and
December 15, 1987, respectively, as they may have been or may be
amended, have been established between a Trustee selected by the
members of the Compensation Committee or any officer ("Trustee") and
the Company. The Trust Agreement sets forth the terms and conditions
relating to payment pursuant to the Trust Agreement of the Severance
Amount, the Gross-Up Payment and other payments provided for in
Section 3.5 hereof pursuant to this Agreement owed by the Company, and
Trust Agreement No. 2 sets forth the terms and conditions relating to
payment pursuant to Trust Agreement No. 2 of attorneys' and related
fees and expenses pursuant to paragraph (a) hereof owed by the
Company. Employee shall make demand on the Company for any payments
due Employee pursuant to paragraph (a) hereof prior to making demand
therefore on the Trustee under Trust Agreement No. 2. Payments by
such Trustee shall discharge the Company's liability under paragraph
(a) hereof only to the extent that trust assets are used to satisfy
such liability.
(c) OBLIGATION OF THE COMPANY TO FUND TRUSTS. Upon the
earlier to occur of (X) a Change in Control that involves a
transaction that was not approved by the Board, and was not
recommended to the Company's shareholders by the Board, (Y) a
declaration by the Board that the trusts under the Trust Agreement and
Trust Agreement No. 2 should be funded in connection with a Change in
Control that involves a transaction that was approved by the Board, or
was recommended to shareholders by the Board, or (Z) a declaration by
the Board that a Change in Control is imminent, the Company shall
promptly to the extent it has not previously done so, and in any event
within five (5) business days:
(i)transfer to the Trustee to be added to the principal of
the trust under the Trust Agreement a sum equal to the aggregate
value on the date of the Change in Control of the Severance
Amount and Gross-Up Payment which could become payable to
Executive under the provisions of Section 3.1 and Section 3.5
hereof; provided, however, that the Company shall not be required
to transfer, in the aggregate, to the trust under the Trust
Agreement a sum in excess of the maximum amount authorized by its
Compensation Committee from time to time. The payment of any
Severance Amount, Gross-Up Payment or other payment by the
Trustee pursuant to the Trust Agreement shall, to the extent
thereof, discharge the Company's obligation to pay the Severance
Amount, Gross-Up Payment or other payment hereunder, it being the
intent of the Company that assets in such Trust Agreement be held
as security for the Company's obligation to pay the Severance
Amount, Gross-Up Payment and other payments under this Agreement;
and
(ii) transfer to the Trustee to be added to the
principal of the trust under Trust Agreement No. 2 the sum
authorized by the members of the Compensation Committee from time
to time. Any payments of attorneys' and related fees and
expenses, which are the obligation of the Company under paragraph
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(a) hereof, by the Trustee pursuant to Trust Agreement No. 2
shall, to the extent thereof, discharge the Company's obligation
hereunder, it being the intent of the Company that such assets in
such Trust Agreement No. 2 be held as security for the Company's
obligation under paragraph (a) hereof.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed and delivered as of the date first set forth
above.
______________________________________
Donald L. Hart
THE TIMKEN COMPANY
By:___________________________________
Name: W. R. Timken, Jr.
Title: Chairman -- Board of
Directors
012leg
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EXHIBIT 10.3f
SEVERANCE AGREEMENT
___________________
This Severance Agreement (the "Agreement") is dated as of
the _______ day of ________________________, 19_______, between The
Timken Company, an Ohio corporation, and <Employee> (the "Employee").
RECITALS
________
The Employee is a key employee of The Timken Company (the
"Company") and has made and is expected to continue to make major
contributions to the profitability, growth and financial strength of
the Company.
The Company wishes to induce its key employees to remain in
the employment of the Company and to assure itself of continuity of
management in the event of any threatened or actual change in control
of the Company. The Company recognizes that a termination of
employment may occur following a change in control in circumstances
where the Employee should receive additional compensation for
services theretofore rendered and for other good reasons, the
appropriate amount of which would be difficult to ascertain. Hence,
the Company has agreed to provide as severance benefits the amounts
set forth herein.
NOW, THEREFORE, in consideration of the premises, including
the Release provided for in Section 6 hereof, the Company and the
Employee hereby agree as follows:
1. DEFINITIONS:
1.1 LIMITED PERIOD: The term "Limited Period" shall
mean that period of time commencing on the date of a Change in
Control and continuing for a period of three years.
1.2 NOTICE OF TERMINATION: The term "Notice of
Termination" shall mean a written notice delivered to the Employee in
the manner specified in Section 8 of this Agreement, which notice
indicates the specific termination provision in this Agreement relied
upon and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employee's
employment.
1.3 CHANGE IN CONTROL: The term "Change in Control"
shall mean the occurrence of any of the following events:
(a) All or substantially all of the assets of the Company
are sold or transferred to another corporation or
entity, or the Company is merged, consolidated or
reorganized into or with another corporation or entity,
with the result that upon conclusion of the transaction
less than 51% of the outstanding securities entitled to
vote generally in the election of Directors or other
capital interests of the acquiring corporation or entity
are owned, directly or indirectly, by the shareholders
of the Company generally prior to the transaction; or
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(b) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report), each
as promulgated pursuant to the Securities Exchange Act
of 1934 (the "Exchange Act"), disclosing that any person
(as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of
securities representing 30% or more of the combined
voting power of the then-outstanding voting securities
of the Company; or
(c) The Company shall file a report or proxy statement with
the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to Item 1 of Form
8-K thereunder or Item 5(f) of Schedule 14A thereunder
(or any successor schedule, form or report or item
therein) that a change in control of the Company has or
may have occurred or will or may occur in the future
pursuant to any then-existing contract or transaction;
or
(d) The individuals who, at the beginning of any period of
two consecutive calendar years, constituted the
Directors of the Company cease for any reason to
constitute at least a majority thereof unless the
nomination for election by the Company's stockholders of
each new Director of the Company was approved by a vote
of at least two-thirds of the Directors of the Company
still in office who were Directors of the Company at the
beginning of any such period.
1.4 COMPANY TERMINATION EVENT: The term "Company
Termination Event" shall mean the termination, prior to any Employee
Termination Event, of the employment of the Employee by the Company in
any of the following events:
(a) The Employee's death during the Limited Period;
(b)If the Employee shall become eligible during the Limited
Period to receive and begins actually to receive
long-term disability benefits under The Long Term
Disability Program of The Timken Company (the "LTD
Plan") or any successor plan as in effect immediately
prior to the date the Change in Control occurred in an
amount not less than the benefits provided by such plans
as in effect as of such date; or
(c)For Cause. Termination shall be deemed to have been for
"Cause" only if based on the fact that the Employee has
done any of the following acts during the Limited Period
and such is materially harmful to the Company:
(i) An intentional act of fraud, embezzlement or theft
in connection with his duties with the Company and
resulting or intended to result directly or
indirectly in substantial personal gain to the
Employee at the expense of the Company;
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(ii)Intentional wrongful disclosure of secret
processes or confidential information of the
Company or a subsidiary; or
(iii)Intentional wrongful engagement in any Competitive
Activity which would constitute a material breach
of the duty of loyalty.
For purposes of this Agreement, the term "Competitive Activity" shall
mean the Employee's participation, without the written consent of an
officer of the Company, in the management of any business enterprise
if such enterprise engages in substantial and direct competition with
the Company and such enterprise's sales of any product or service
competitive with any product or service of the Company amounted to 25%
of such enterprise's net sales for its most recently completed fiscal
year and if the Company's net sales of said product or service
amounted to 25% of the Company's net sales for its most recently
completed fiscal year. "Competitive Activity" shall not include (i)
the mere ownership of securities in any enterprise and exercise of
rights appurtenant thereto or (ii) participation in management of any
enterprise or business operation thereof other than in connection with
the competitive operation of such enterprise.
For purposes of this Agreement, no act, or failure to act, on the part
of the Employee shall be deemed "intentional" unless done or omitted
to be done, by the Employee not in good faith and without reasonable
belief that his action or omission was in or not opposed to the best
interest of the Company. Notwithstanding the foregoing, the Employee
shall not be deemed to have been terminated for "Cause" hereunder
unless and until there shall have been delivered to the Employee a
copy of a resolution duly adopted by the affirmative vote of not less
than three-quarters of the Directors then in office at a meeting of
the Directors called and held for such purpose (after reasonable
notice to the Employee and an opportunity for the Employee, together
with his counsel, to be heard before the Directors), finding that, in
the good faith opinion of the Directors, the Employee had committed an
act set forth in paragraph (c) of this Section and specifying the
particulars thereof in detail. Nothing herein shall limit the right
of the Employee or his beneficiaries to contest the validity or
propriety of any such determination.
1.5 EMPLOYEE TERMINATION EVENT: The term "Employee
Termination Event" shall mean the termination of the employment of the
Employee (including a decision to retire if eligible under The 1984
Retirement Plan for Salaried Employees of The Timken Company [the
"Retirement Plan"]) by the Employee in any of the following events:
(a) A determination by the Employee made in good faith that
upon or after the occurrence of a Change in Control:
(i) a significant reduction or other adverse change has
occurred in the nature or scope of the responsibilities,
authorities, duties, powers or functions of the Employee
attached to the Employee's position held immediately
prior to the Change in Control; (ii) a change of more
than 60 miles has occurred in the location of the
Employee's principal office immediately prior to the
Change in Control; or (iii) the Employee shall be
required to travel away from his office in the course of
discharging his responsibilities or duties of his
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employment more than 14 consecutive calendar days or an
aggregate of more than 90 calendar days in any
consecutive 365 calendar-day period without in either
case his approval;
(b) A failure to elect, reelect or otherwise maintain the
Employee in the office or position in the Company which
the Employee held immediately prior to a Change in
Control, or removal of the Employee as a Director of the
Company (or a successor thereto), if the Employee shall
have been a Director of the Company immediately prior to
the Change in Control;
(c) A reduction by the Company in the Employee's annual base
salary as in effect on the date this Agreement becomes
operative or as the same may be increased from time to
time ("Base Salary");
(d) If in any calendar year, or portion of a calendar year,
during the Limited Period in or for which the Company
pays to any employee any cash incentive compensation
(whether pursuant to the Company's Management
Performance Plan or any successor similar plan or
through any other means [together, "Incentive
Payments"]), the amount of Incentive Payments received
by or awarded to the Employee is less than an amount
equal to the Employee's Average Incentive Pay.
For purposes of this Agreement, "Average Incentive Pay"
shall mean the sum of the Incentive Payments received by
the Employee for the three most recent years for which
the Company has made Incentive Payments or for which the
Company has considered and declined to pay Incentive
Payments divided by three (or divided by such lesser
number if Employee was not eligible to receive an
Incentive Payment as a participant during all or a
portion of said three year period);
(e) The failure by the Company to continue in effect without
substantial change any compensation or benefit plan in
which the Employee participates, or the failure by the
Company to continue the Employee's participation
therein; or the taking of any action by the Company or
its subsidiaries which would directly or indirectly
materially reduce any of the benefits of such plans
enjoyed by the Employee at the time of the Change in
Control, or the failure by the Company or its
subsidiaries to provide the Employee with the number of
paid vacation days to which the Employee is entitled on
the basis of years of service with the Company or its
subsidiaries in accordance with the normal vacation
policy of the Company or of the subsidiary by which the
Employee is employed as in effect at the time of the
Change in Control, or the taking of any other action by
the Company or its subsidiaries which materially
adversely changes the conditions or perquisites of the
Employee's employment;
(f) The purported termination of the Employee's employment
which is not effected pursuant to a Notice of
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Termination satisfying the requirements of Section 1.2
of this Agreement, which purported termination shall not
be effective for purposes of this Agreement; or
(g) A failure of any successor company to execute the
agreement required by Section 7 of this Agreement.
1.6 SEVERANCE AMOUNT: The term "Severance Amount"
shall mean a lump sum amount equal to the sum of:
(a) Three times the Employee's Base Salary for the year in
which the Employee's employment is terminated;
(b) Three times the Employee's Average Incentive Pay;
(c) The Supplemental Pension Benefit; and
(d) The Supplemental SIP Benefit.
1.7 CODE: The term "Code" shall mean the Internal
Revenue Code of 1986, as amended.
1.8 SUPPLEMENTAL PENSION BENEFIT: The term
"Supplemental Pension Benefit" shall mean (a) less (b), where:
(a) is the sum of the future pension benefits (converted to
a lump sum of actuarial equivalence) which the Employee
would have been entitled to receive at or after the end
of the Limited Period under (i) the Retirement Plan,
(ii) any annuity distributed to the Employee as a result
of the termination on October 31, 1984 of the Retirement
Plan for Salaried Employees of The Timken Company, (iii)
any Employee Excess Benefits Agreement ("Excess
Agreement"), and (iv) the Supplemental Pension Plan of
The Timken Company ("Supplemental Plan") (any provision
in the Excess Agreement and the Supplemental Plan to the
contrary notwithstanding, (a) Employee shall be assumed
to be eligible for early retirement under the Retirement
Plan, the Excess Agreement and the Supplemental Plan
upon attaining the minimum age required under the
Retirement Plan, the Excess Agreement and the
Supplemental Plan, respectively, (b) Employee's benefits
under the Retirement Plan, the Excess Agreement and the
Supplemental Plan shall be vested and non-forfeitable,
and (c) Employee shall be deemed to have satisfied any
other provision in the Excess Agreement and the
Supplemental Plan which is or may be a condition to his
receipt of benefits thereunder), if the Employee had
remained in the full-time employment of the Company
until the end of the Limited Period at his Base Salary
for the calendar year in which the Employee's employment
is terminated, and at the Employee's Average Incentive
Pay; and
(b) is the sum of (i) the future pension benefits (converted
to a lump sum of actuarial equivalence) which the
Employee is entitled to receive at or after the date the
Employee's employment is terminated under (ii) the
Retirement Plan, and (iii) any annuity distributed to
the Employee as a result of the termination on October
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31, 1984 of the Retirement Plan for Salaried Employees
of The Timken Company.
The calculations of the Supplemental Pension Benefit (and its
actuarial equivalence) shall be made, as of the date the Employee's
employment is terminated, by The Wyatt Company or such other
independent actuary appointed by the administrator of the Retirement
Plan and acceptable to the Employee. The lump sum of actuarial
equivalence shall be calculated using the UP-1984 Mortality Table and
120 percent of the interest rate(s) which would be used (as of the
beginning of the calendar year in which the date of distribution
occurs) by the Pension Benefit Guaranty Corporation for purposes of
determining the present value of a lump sum distribution on plan
termination.
1.9 SUPPLEMENTAL SIP PLAN BENEFIT: The "Supplemental
SIP Plan Benefit" shall mean:
(a) The amount of the matching contributions that would have
been made to The Timken Company Savings and Investment
Pension Plan ("SIP Plan") by the Company and allocated
to the Employee's account thereunder as of the end of
the Limited Period if the Employee had remained in the
full-time employment of the Company until the end of the
Limited Period at his Base Salary for the calendar year
in which the Employee's employment is terminated, at the
Employee's Average Incentive Pay, and assuming the
Employee's salary deferral was at the maximum
permissible level; less
(b) The amount of the matching contributions made to the SIP
Plan by the Company and allocated to the Employee's
account thereunder at the date the Employee's employment
is terminated.
2. OPERATION OF AGREEMENT: This Agreement shall be
effective immediately upon its execution, but anything in this
Agreement to the contrary notwithstanding, neither this Agreement nor
any of its provisions shall be operative unless and until a Change in
Control has occurred. Upon the occurrence of a Change in Control,
this Agreement and all of its provisions shall become operative
immediately.
3. SEVERANCE COMPENSATION:
3.1 SEVERANCE COMPENSATION: If the Company shall
terminate the Employee's employment during the Limited Period other
than pursuant to a Company Termination Event, or if the Employee shall
voluntarily terminate his employment during the Limited Period
pursuant to an Employee Termination Event, then the Company shall pay
as severance compensation to the Employee a lump sum cash payment in
the amount of the Severance Amount. The payment of the Severance
Amount required by this Section 3.1 and any Gross-Up Payment initially
determined to be required by Section 3.5 shall, subject to execution
and delivery by the Employee of the Release described in Section 6
hereof, and the expiration of all applicable rights of the Employee to
revoke the Release or any provision thereof, be made to the Employee
within thirty calendar days of the date of termination of his
employment. Upon receipt of the Severance Amount, and since the
Severance Amount includes a Supplemental Pension Benefit, the Employee
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hereby retroactively waives participation in any non-qualified pension
plan of, or benefits under any Employee Excess Benefits Agreement,
with the Company providing for benefits in excess of those permitted
by the Code to be paid under the Retirement Plan, and which measures
service and compensation under such Plan as a basis for benefits.
3.2 COMPENSATION THROUGH TERMINATION: The Company
shall pay the Employee (i) his full Base Salary through the date of
the termination of the Employee's employment; and (ii) an amount
equivalent to the Average Incentive Pay multiplied by a fraction, the
numerator of which is the number of days in the current calendar year
that have expired prior to the Employee's termination of employment
and the denominator of which is three hundred sixty-five.
3.3 SET-OFF: There shall be no right of set-off or
counterclaim against, or delay in, any payment of the Severance Amount
or the Gross-Up Payment by the Company to the Employee provided for in
this Agreement in respect of any claim against or debt or obligation
of the Employee, whether arising hereunder or otherwise.
3.4 INTEREST ON OVERDUE PAYMENTS: Without limiting the
rights of the Employee at law or in equity, if the Company fails to
make any payment required to be made under this Agreement on a timely
basis, the Company shall pay interest on the amount thereof at an
annualized rate of interest equal to eighteen percent (18%).
3.5 INDEMNIFICATION: (a) Anything in this Agreement to
the contrary notwithstanding, in the event that this Agreement shall
become operative and it shall be determined (as hereafter provided)
that any payment or distribution by the Company to or for the benefit
of the Employee, whether paid hereunder or paid or payable or
distributed or distributable pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without
limitation any stock option, stock appreciation right or similar
right, or the lapse of termination of any of the foregoing
(individually and collectively a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Code (or any successor
provision thereto) by reason of being considered "contingent on a
change in ownership or control" of the Company, within the meaning of
Section 280G of the Code (or any successor provision thereto), or any
interest or penalties with respect to such excise tax (such excise
tax, together with any such interest and penalties, being hereafter
collectively referred to as the "Excise Tax"), then the Employee shall
be entitled to receive an additional payment or payments (individually
and collectively, a "Gross-Up Payment"). The Gross-Up Payment shall
be in an amount such that, after payment by the Employee of all taxes
(including any interest or penalties imposed with respect to such
taxes), including any Excise Tax imposed upon the Gross-Up Payment,
the Employee retains a portion of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payment.
(b) Subject to the provisions of paragraph (e) of this
Section 3.5, all determinations required to be made under this Section
3.5, including whether an Excise Tax is payable by the Employee and
the amount of such Excise Tax and whether a Gross-Up Payment is
required to be paid by the Company to the Employee and the amount of
such Gross-Up Payment, if any, shall be made by a nationally
recognized accounting firm (the "Accounting Firm") selected by the
Employee in his sole discretion. The Employee shall direct the
Accounting Firm to submit its determination and detailed supporting
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calculations to both the Company and the Employee within 30 calendar
days after the Termination Date, if applicable, and any such other
time or times as may be requested by the Company or the Employee. If
the Accounting Firm determines that any Excise Tax is payable by the
Employee, the Company shall pay the required Gross-Up Payment to the
Employee within five business days after receipt of such determination
and calculations with respect to any Payment to the Employee. The
federal tax returns filed by the Employee shall be prepared and filed
on a consistent basis with the determination of the Accounting Firm
with respect to the Excise Tax payable by the Employee. If the
Accounting Firm determines that no Excise Tax is payable by the
Employee, it shall, at the same time as it makes such determination,
furnish the Company and the Employee an opinion that the Employee has
substantial authority not to report any Excise Tax on his federal
income tax return, and that, as a result of such reporting position,
the Employee will not be subject to the imposition of accuracy-related
penalties under Section 6662(b)(1) of the Code. As a result of the
uncertainty in the application of Section 4999 of the Code (or any
successor provision thereto) at the time of any determination by the
Accounting Firm hereunder, it is possible that Gross-Up payments which
will not have been made by the Company should have been made (an
"Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts or fails to pursue
its remedies pursuant to paragraph (e) hereof and the Employee
thereafter is required to make a payment of any Excise Tax, the
Employee shall direct the Accounting Firm to determine the amount of
the Underpayment that has occurred and to submit its determination and
detailed supporting calculations to both the Company and the Employee
as promptly as possible. Any such Underpayment shall be promptly paid
by the Company to, or for the benefit of, the Employee within five
business days after receipt of such determination and calculations.
(c) The Company and the Employee shall each provide the
Accounting Firm access to and copies of any books, records and
documents in the possession of the Company or the Employee, as the
case may be, reasonably requested by the Accounting Firm, and
otherwise cooperate with the Accounting Firm in connection with the
preparation and issuance of the determinations and calculations
contemplated by paragraph (b) hereof.
(d) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations
contemplated by paragraph (b) hereof shall be borne by the Company.
If such fees and expenses are initially paid by the Employee, the
Company shall reimburse the Employee the full amount of such fees and
expenses within five business days after receipt from the Employee of
a statement therefor and reasonable evidence of his payment thereof.
(e) The Employee shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as promptly as practicable but no later
than 10 business days after the Employee actually receives notice of
such claim and the Employee shall further apprise the Company of the
nature of such claim and the date on which such claim is requested to
be paid (in each case, to the extent known by the Employee). The
Employee shall not pay such claim prior to the earlier of (i) the
expiration of the 30-calendar-day period following the date on which
he gives such notice to the Company and (ii) the date that any payment
of amount with respect to such claim is due. If the Company notifies
- 8 -
<PAGE>
<PAGE>
the Employee in writing prior to the expiration of such period that it
desires to contest such claim, the Employee shall:
(i) provide the Company with any written records or
documents in his possession relating to such claim
reasonably requested by the Company;
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including without limitation
accepting legal representation with respect to such claim by
an attorney competent in respect of the subject matter and
reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order
to effectively contest such claim; and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including interest and penalties) incurred in
connection with such contest and shall indemnify and hold harmless the
Employee, on an after-tax basis, for and against any Excise Tax or
income tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of costs and
expenses. Without limiting the foregoing provisions of paragraph (e),
the Company shall control all proceedings taken in connection with the
contest of any claim contemplated by paragraph (e) and, at its sole
option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in
respect of such claim (provided, however, that the Employee may
participate therein at his own cost and expense) and may, at its
option, either direct the Employee to pay the tax claimed and sue for
a refund or contest the claim in any permissible manner, and the
Employee agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine;
provided, however, that if the Company directs the Employee to pay the
tax claimed and sue for a refund, the Company shall advance the amount
of such payment to the Employee on an interest-free basis and shall
indemnify and hold the Employee harmless, on an after-tax basis, from
any Excise Tax or income tax, including interest or penalties with
respect thereto, imposed with respect to such advance; and provided
further, however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Employee with
respect to which the contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control
of any such contested claim shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Employee
shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
(f) If, after the receipt by the Employee of an amount
advanced by the Company pursuant to paragraph (e) hereof, the Employee
receives any refund with respect to such claim, the Employee shall
(subject to the Company's complying with the requirements of paragraph
(e) hereof) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after any taxes
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<PAGE>
<PAGE>
applicable thereto). If, after the receipt by the Employee of an
amount advanced by the Company pursuant to paragraph (e) hereof, a
determination is made that the Employee shall not be entitled to any
refund with respect to such claim and the Company does not notify the
Employee in writing of its intent to contest such denial or refund
prior to the expiration of 30 calendar days after such determination,
then such advance shall be forgiven and shall not be required to be
repaid and the amount of any such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid by the
Company to the Employee pursuant to this Section 3.5.
4. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER
CONTRACTUAL RIGHTS:
4.1 The Employee shall not be required to mitigate
damages or the amount of any payment provided for under this Agreement
by seeking other employment or otherwise, nor shall the amount of any
payment provided for under this Agreement be reduced by any
compensation earned by the Employee as the result of employment by
another employer after the date of termination of his employment with
the Company, or otherwise.
4.2 The provisions of this Agreement, and any payment
provided for hereunder, shall not reduce any amounts otherwise
payable, or in any way diminish the Employee's existing rights, or
rights which would accrue solely as a result of the passage of time,
under any other employment agreement or other contract, plan or
arrangement with the Company.
5. CONFIDENTIAL INFORMATION; COVENANT NOT TO COMPETE:
5.1 The Employee acknowledges that all trade secrets,
customer lists and other confidential business information are the
exclusive property of the Company. The Employee shall not (following
the execution of this Agreement, during the Limited Period, or at any
time thereafter) disclose such trade secrets, customer lists, or
confidential business information without the prior written consent of
the Company. The Employee also shall not (following the execution of
this Agreement, during the Limited Period, or at any time thereafter)
directly or indirectly, or by act in concert with others, employ or
attempt to employ or solicit for any employment competitive with the
Company any person(s) employed by the Company. The Employee
recognizes that any violation of this Section 5 is likely to result in
immediate and irreparable harm to the Company for which money damages
are likely to be inadequate. Accordingly, the Employee consents to
the entry of injunctive and other appropriate equitable relief by a
court of competent jurisdiction, after notice and hearing and the
court's finding of irreparable harm and the likelihood of prevailing
on a claim alleging violation of this Section 5, in order to protect
the Company's rights under this Section. Such relief shall be in
addition to any other relief to which the Company may be entitled at
law or in equity. The Employee agrees that the state and federal
courts located in the State of Ohio shall have jurisdiction in any
action, suit or proceeding against Employee based on or arising out of
this Agreement and Employee hereby: (i) submits to the personal
jurisdiction of such courts; (ii) consents to service of process in
connection with any action, suit or proceeding against Employee; and
(iii) waives any other requirement (whether imposed by statute, rule
of court or otherwise) with respect to personal jurisdiction, venue or
service of process.
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<PAGE>
<PAGE>
5.2 For a period of time beginning upon the date of the
Employee's termination of employment (the "Termination Date") and
ending upon the later of (i) the first anniversary of the Termination
Date or (ii) the expiration of the Limited Period, the Employee shall
not engage or participate, directly or indirectly, in any Competitive
Activity, as defined in Section 1.4. For a period of three years from
and after the Termination Date, the Employee shall not solicit or
cause to be solicited on behalf of a competitor any person or entity
which was a customer of the Company during the term of this Agreement,
if the Employee had business contacts with such customer while
employed by the Company.
6. RELEASE.
Payment of the severance payments set forth in Section 3
hereof is conditioned upon the Employee executing and delivering a
release satisfactory to the Company releasing the Company from any and
all claims, demands, damages, actions and/or causes of action
whatsoever, which he may have had on account of the termination of his
employment, and including, but not limited to claims of
discrimination, including on the basis of sex, race, age, national
origin, religion, or handicapped status (with all applicable periods
during which the Employee may revoke the Release or any provision
thereof having expired); and any and all claims, demands and causes of
action for retirement (other than under the Retirement Plan or any
Company medical plan with respect to claims thereunder) or severance
or other termination pay. Such Release shall not, however, apply to
the obligations of the Company arising under this Agreement, under any
Indemnification Agreement between the Employee and the Company, or
rights of indemnification the Employee may have under the Company's
Regulations or by statute.
7. SUCCESSORS AND BINDING AGREEMENT:
7.1 SUCCESSORS: The Company shall require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business or assets of the Company by agreement in form and substance
satisfactory to the Employee, to assume and agree to perform this
Agreement.
7.2 BINDING AGREEMENT: This Agreement shall inure to
the benefit of and be enforceable by the Employee's personal or legal
representative, executor, administrators, successors, heirs,
distributees and legatees. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of or to the
Company, including, without limitation, any person acquiring directly
or indirectly all or substantially all of the assets of the Company
whether by merger, consolidation, sale or otherwise (and such
successor shall thereafter be deemed "the Company" for the purposes of
this Agreement), but shall not otherwise be assignable by the Company.
8. NOTICES: For the purpose of this Agreement, all
communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United
States registered or certified mail, return receipt requested, postage
prepaid, addressed as indicated below, or to such other address as any
party may have furnished to the other in writing and in accordance
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<PAGE>
<PAGE>
herewith, except that notices of change of address shall be effective
only upon receipt.
If to the Company: The Timken Company
1835 Dueber Avenue, S.W.
Canton, OH 44706
If to the Employee <Street>
[CITY]
9. GOVERNING LAW: The validity, interpretation,
construction and performance of this Agreement shall be governed by
the laws of the State of Ohio, without giving effect to the principles
of conflict of laws of such State.
10. MISCELLANEOUS: No provisions of this Agreement may be
amended, modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by the
Employee and the Company. No waiver by either party hereto at any
time of any breach by the other party hereto or compliance with, any
condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, expressed or implied
with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
11. VALIDITY: The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement which shall
remain in full force and effect.
12. COUNTERPARTS: This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same Agreement.
13. EMPLOYMENT RIGHTS: Nothing expressed or implied in this
Agreement shall create any right or duty on the part of the Company or
the Employee to have the Employee remain in the employment of the
Company; provided; however, that any termination of the employment of
the Employee or removal of the Employee as an elected officer or
Director of the Company following the commencement of any discussion
with a third party that ultimately results in a Change in Control
shall be deemed to be a termination of the Employee after a Change in
Control of the Company for purposes of this Agreement.
14. WITHHOLDING OF TAXES: The Company may withhold from any
amount payable under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or government
regulation or ruling.
15. NONASSIGNABILITY: This Agreement is personal in nature
and neither of the parties hereto shall, without the consent of the
other, assign or transfer this Agreement or any rights or obligations,
hereunder, except as provided in Sections 7.1 and 7.2 above. Without
limiting the foregoing, the Employee's right to receive payments
hereunder shall not be assignable or transferable, whether by pledge,
creation of a security interest or otherwise, other than by a transfer
by his will or by the laws of descent and distribution and in the
event of any attempted assignment or transfer contrary to this Section
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<PAGE>
<PAGE>
the Company shall have no liability to pay any amounts so attempted to
be assigned or transferred.
16. TERMINATION OF AGREEMENT: The term of this Agreement
(the "Term") shall commence as of the date hereof and shall expire as
of the later of the close of business on December 31, 1993, and the
expiration of the Limited Period; provided, however, that (A) the term
of this Agreement shall automatically be extended for an additional
year unless, not later than September 30 of the immediately preceding
year, the Company or the Employee shall have given notice that it or
he, as the case may be, does not wish to have the Term extended, and
(B) subject to Section 11 hereof, if prior to a Change in Control, the
Employee ceases for any reason to be an employee of the Company,
thereupon the Term shall be deemed to have expired and this Agreement
shall immediately terminate and be of no further effect; and provided
further, however, that notwithstanding any notice by the Company to
terminate, if a Change in Control shall have occurred during the Term,
this Agreement shall continue in effect for a period of three years
from the date of the occurrence of the Change in Control.
17. ARBITRATION: In the event of a disagreement between the
parties with regard to any determination to be made under this
Agreement, such disagreement shall be settled in Canton, Ohio, by
arbitration in accordance with the then applicable rules of the
American Arbitration Association.
18. INDEMNIFICATION OF LEGAL FEES AND EXPENSES; SECURITY FOR
PAYMENT:
(a) INDEMNIFICATION OF LEGAL FEES. It is the intent of the
Company that the Employee not be required to incur the expenses
associated with the enforcement of his rights under this Agreement by
litigation or other legal action because the cost and expense thereof
would substantially detract from the benefits intended to be extended
to the Employee hereunder. Accordingly, if it should appear to the
Employee that the Company has failed to comply with any of its
obligations under this Agreement or in the event that the Company or
any other person takes any action to declare this Agreement void or
unenforceable, or institutes any litigation designed to deny, or to
recover from, the Employee the benefits intended to be provided to the
Employee hereunder, the Company irrevocably authorizes the Employee
from time to time to retain counsel of his choice, at the expense of
the Company as hereafter provided, to represent the Employee in
connection with the initiation or defense of any litigation or other
legal action, whether by or against the Company or any Director,
officer, stockholder or other person affiliated with the Company, in
any jurisdiction. Notwithstanding any existing or prior
attorney-client relationship between the Company and such counsel, the
Company irrevocably consents to the Employee's entering into an
attorney-client relationship with such counsel, and in that connection
the Company and the Employee agree that a confidential relationship
shall exist between the Employee and such counsel. The Company shall
pay or cause to be paid and shall be solely responsible for any and
all attorneys' and related fees and expenses incurred by the Employee
as a result of the Company's failure to perform this Agreement or any
provision hereof or as a result of the Company or any person
contesting the validity or enforceability of this Agreement or any
provision hereof as aforesaid.
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<PAGE>
<PAGE>
(b) TRUST AGREEMENTS. To ensure that the provisions of this
Agreement can be enforced by the Employee, two agreements ("Amended
and Restated Trust Agreement" and "Amended and Restated Trust
Agreement No. 2") each dated as of March 26, 1991, as they may have
been or may be amended, have been established between a Trustee
selected by the members of the Compensation Committee or any officer
("Trustee") and the Company. The Amended and Restated Trust Agreement
sets forth the terms and conditions relating to payment pursuant to
the Amended and Restated Trust Agreement of the Severance Amount, the
Gross-Up Payment and other payments provided for in Section 3.5 hereof
pursuant to this Agreement owed by the Company, and Amended and
Restated Trust Agreement No. 2 sets forth the terms and conditions
relating to payment pursuant to Amended and Restated Trust Agreement
No. 2 of attorneys' and related fees and expenses pursuant to
paragraph (a) hereof owed by the Company. Employee shall make demand
on the Company for any payments due Employee pursuant to paragraph (a)
hereof prior to making demand therefor on the Trustee under Amended
and Restated Trust Agreement No. 2. Payments by such Trustee shall
discharge the Company's liability under paragraph (a) hereof only to
the extent that trust assets are used to satisfy such liability.
(c) OBLIGATION OF THE COMPANY TO FUND TRUSTS. Upon the
earlier to occur of (X) a Change in Control that involves a
transaction that was not approved by the Board, and was not
recommended to the Company's shareholders by the Board, (Y) a
declaration by the Board that the trusts under the Amended and
Restated Trust Agreement and Amended and Restated Trust Agreement No.
2 should be funded in connection with a Change in Control that
involves a transaction that was approved by the Board, or was
recommended to shareholders by the Board, or (Z) a declaration by the
Board that a Change in Control is imminent, the Company shall promptly
to the extent it has not previously done so, and in any event within
five (5) business days:
(i)transfer to the Trustee to be added to the principal of
the trust under the Amended and Restated Trust Agreement a sum
equal to the aggregate value on the date of the Change in Control
of the Severance Amount and Gross-Up Payment which could become
payable to Executive under the provisions of Section 3.1 and
Section 3.5 hereof; provided, however, that the Company shall not
be required to transfer, in the aggregate, to the trust under the
Amended and Restated Trust Agreement a sum in excess of the
maximum amount authorized by its Compensation Committee from time
to time. The payment of any Severance Amount, Gross-Up Payment
or other payment by the Trustee pursuant to the Amended and
Restated Trust Agreement shall, to the extent thereof, discharge
the Company's obligation to pay the Severance Amount, Gross-Up
Payment or other payment hereunder, it being the intent of the
Company that assets in such Amended and Restated Trust Agreement
be held as security for the Company's obligation to pay the
Severance Amount, Gross-Up Payment and other payments under this
Agreement; and
(ii) transfer to the Trustee to be added to the
principal of the trust under Amended and Restated Trust Agreement
No. 2 the sum authorized by the members of the Compensation
Committee from time to time. Any payments of attorneys' and
related fees and expenses, which are the obligation of the
Company under paragraph (a) hereof, by the Trustee pursuant to
Amended and Restated Trust Agreement No. 2 shall, to the extent
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<PAGE>
thereof, discharge the Company's obligation hereunder, it being
the intent of the Company that such assets in such Amended and
Restated Trust Agreement No. 2 be held as security for the
Company's obligation under paragraph (a) hereof.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed and delivered as of the date first set forth
above.
__________________________________
<Employee>
THE TIMKEN COMPANY
By:___________________________________
Name: Stephen A. Perry
Title: Vice President -
Human Resources & Logistics
012leg
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<PAGE>
Exhibit 10.4
EMPLOYEE DEATH BENEFIT AGREEMENT
THIS AGREEMENT, made this _____ day of ______________, 199?,
by and between <Employee> ("Employee"), and THE TIMKEN COMPANY
("Timken"), an Ohio corporation having its principal offices at
Canton, Ohio.
WHEREAS, Employee has been employed by Timken since <Year>
and is currently serving as [TITLE] in a capable and efficient
manner; and
WHEREAS, Timken desires to retain the services of Employee
and to provide additional compensation to Employee for his
services; and
WHEREAS, Employee is willing to continue in the employ of
Timken until his retirement, provided that Timken will pay a
death benefit to Employee's Beneficiary upon Employee's death.
NOW, THEREFORE, the parties covenant and agree as follows:
1. Upon Employee's death, Timken shall provide the
following death benefits:
a. If Employee dies after retirement (whether at
normal retirement age or early retirement age) Timken
shall pay to Employee's beneficiary an amount equal
to twice Employee's annual salary in effect at the
time of his retirement, said amount increased to
offset the United States Federal Income Taxes then in
effect.
b. If Employee dies prior to retirement Timken shall
pay to Employee's beneficiary an amount equal to
twice Employee's annual salary in effect at the time
of his death, said amount increased to offset the
United States Federal Income Taxes then in effect.
c. If Employee dies after an involuntary termination
of his employment subsequent to a change in control
(as defined in Paragraph 7 hereof), an amount equal
to twice Employee's annual salary in effect at the
time of the change in control shall be paid to
Employee's beneficiary, said amount increased to
offset the United States Federal Income Taxes then in
effect.
2. Any payment under Paragraph 1 shall be in a lump sum and
shall be paid to Employee's Beneficiary as soon as
administratively feasible following receipt of the
information required by Paragraph 9 hereof.
<PAGE>
<PAGE>
3. If Employee voluntarily terminates his employment with
Timken prior to his retirement, or if Timken discharges
Employee or requests that he resign his employment, no
death benefits shall become due and payable to
Employee's Beneficiary and this Agreement shall be
considered terminated. If Employee and Timken mutually
agree to Employee's termination prior to his retirement
under circumstances other than those set forth in the
preceding sentence, this Agreement may remain in full
force and effect at the discretion of Timken.
4. Employee hereby names ______________ as the beneficiary
hereunder.
It is agreed that neither Employee nor any beneficiary
5.
hereunder shall have any right to commute, sell, assign,
transfer or otherwise convey the right to receive any
payment hereunder, which payments and the right thereto
are expressly declared to be non-assignable and
non-transferable. Any such attempted assignment or
transfer shall terminate this Agreement and Timken shall
have no further liability hereunder.
Timken is hereby designated as the Named Fiduciary of
6.
this Agreement, in accordance with the Employee
Retirement Income Security Act of 1974 (ERISA). The
Named Fiduciary shall have the authority to control and
manage the operation and administration of this
Agreement and is hereby designated as the Agreement
Administrator.
7. The Funding Policy of this Agreement shall be that death
benefits under this Agreement shall be provided out of
the general assets of Timken at the time such benefits
are to be paid. No specific amounts, therefore, shall
be set aside in advance. In the event that there is a
change in control of Timken, prior to such change in
control, Timken shall arrange for the funding of a trust
established for the purpose of providing death benefits
to Employee's Beneficiary to insure that the rights and
obligations of Timken under this Agreement are
performed. The amount to be contributed to such trust
prior to a change in control to insure Timken's
obligations under this Agreement shall be calculated,
using the actuarial assumptions set forth in Exhibit A
to this Agreement, by The Wyatt Company or such other
independent actuary appointed by Timken. Upon a change
in control, the rights of Employee under this Agreement
shall be fully vested and shall be forfeited only if
Employee voluntarily terminates his employment prior to
retirement. The term "change in control" shall mean the
occurrence of any of the following events:
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<PAGE>
a. All or substantially all of the assets of Timken are
sold or transferred to another corporation or entity,
or Timken is merged, consolidated or reorganized into
or with another corporation or entity, with the
result that upon conclusion of the transaction less
than 51% of the outstanding securities entitled to
vote generally in the election of directors or other
capital interests of the acquiring corporation or
entity are owned, directly or indirectly, by the
shareholders of Timken generally prior to the
transaction; or
b. There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or
report), each as promulgated pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act"),
disclosing that any person (as the term "person" is
used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3
or any successor rule or regulation promulgated under
the Exchange Act) of securities representing 30% or
more of the combined voting power of the
then-outstanding voting securities of Timken; or
c. Timken shall file a report or proxy statement with
the Securities and Exchange Commission pursuant to
the Exchange Act disclosing in response to Item 1 of
Form 8-K thereunder or Item 5(f) of Schedule 14A
thereunder (or any successor schedule, form or report
or item therein) that a change in control of Timken
has or may have occurred or will or may occur in the
future pursuant to any then-existing contract or
transaction; or
d. The individuals who, at the beginning of any period
of two consecutive calendar years, constituted the
Directors of Timken cease for any reason to
constitute at least a majority thereof unless the
nomination for election by Timken's stockholders of
each new Director of Timken was approved by a vote of
at least two-thirds of the Directors of Timken still
in office who were Directors of Timken at the
beginning of any such period.
8. In the event that, in its discretion, Timken purchases
an insurance policy or policies insuring the life of
Employee to allow Timken to recover in whole or in part,
the cost of providing the benefits under this Agreement,
neither Employee nor any beneficiary shall have any
rights whatsoever therein; Timken shall be the sole
owner and beneficiary of such insurance policy or
policies and shall possess and may exercise all
incidents of ownership therein.
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<PAGE>
<PAGE>
9. It shall be the duty of Employee's Beneficiary to
submit a claim for benefits under this Agreement to
Timken. The claim must be in writing and must include a
copy of the death certificate.
10. Timken shall make all determinations as to rights to
benefits under this Agreement. Any decision by Timken
denying a claim for benefits under this Agreement shall
be stated in writing and delivered or mailed to the
beneficiary. Such decision shall set forth the specific
reasons for the denial written to the best of Timken's
ability in a manner that may be understood without legal
counsel. In addition Timken shall afford a reasonable
opportunity to the beneficiary for a full and fair
review of the decision denying such claim.
11. Nothing contained in this Agreement shall be construed
to be a contract of employment nor as conferring upon
Employee the right to continue in the employ of Timken
in any capacity. It is expressly understood by the
parties hereto that this Agreement relates exclusively
to death benefits and is not intended to be an
employment contract.
12. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties
hereto.
13. The failure at any time to require performance of any
provision expressed herein shall in no way affect the
right thereafter to enforce such provision; nor shall
the waiver of any breach of any provision expressed
herein be taken or held to be a waiver of any succeeding
breach of any such provision or as a waiver of a
provision itself.
14. All notices, including offers and acceptances, shall be
deemed to have been given if delivered or mailed, by
certified or registered mail, to the parties entitled
thereto at their addresses contained in Timken's
records.
15. This Agreement shall be subject to and construed under
the laws of the State of Ohio.
Exhibit A attached hereto and made a part hereof is hereby
added as an attachment to the Death Benefit Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Death Benefit Agreement in duplicate this ____________ day of
______________, 199?.
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<PAGE>
<PAGE>
_________________________
<Employee>
THE TIMKEN COMPANY
By: ______________________
Stephen A. Perry
Its: Vice President -
Human Resources and Logistics
004leg
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<PAGE>
<PAGE>
Exhibit A
The amount to be contributed to a trust fund pursuant to Section
7 of this Agreement to insure the performance of Timken's
obligations under this Agreement in the event of a change in
control shall be calculated using:
(1) The UP-1984 Mortality Table, and
(2) 120 percent of the interest rate(s) which would be used
(as of the beginning of the calendar year in which the
date of the contribution to the trust fund occurs) by
the Pension Benefit Guaranty Corporation for purposes of
determining the present value of a lump sum distribution
on plan termination.
005leg
<PAGE>
COMPUTATION OF PER SHARE EARNINGS
Year Ended December 31
1993 1992 1991
________________________________________
(Thousands of dollars
except per share data)
PRIMARY
Average shares outstanding 30,680,372 30,196,346 29,599,552
Net effect of dilutive stock
options -- based on the treasury
stock method using average
market price (1) (1) (1)
__________ __________ __________
TOTAL 30,680,372 30,196,346 29,599,552
========== ========== ==========
Net income (loss) ($271,932) $4,452 ($35,687)
========== ====== =========
Per-share amount ($8.86) $0.15 ($1.21)
======= ===== =======
FULLY DILUTED
Average shares outstanding 30,680,372 30,196,346 29,599,552
Net effect of dilutive stock
options -- based on the treasury
stock method using the year-end
market price, if higher than
exercise price 80,001 13,251 5,407
__________ __________ __________
TOTAL 30,760,373 30,209,597 29,604,959
========== ========== ==========
Net income (loss) ($271,932) $4,452 ($35,687)
========== ====== =========
Per share amount $(8.84) $0.15 $(1.21)
======= ===== =======
(1) Incremental number of shares excluded from calculation since they do not
have a dilutive effect.
EXHIBIT 11
<PAGE>
EXHIBIT 13
Financial Summary
1993 1992
_____________________________________________________________________________
(Thousands of dollars,
except per share data)
Net sales $1,708,761 $1,642,310
Income (loss) before income taxes and
cumulative effect of accounting changes (20,919) 13,431
Provision (credit) for income taxes (3,250) 8,979
Income (loss) before cumulative effect of
accounting changes (17,669) 4,452
Cumulative effect of accounting changes on
prior years (net of income tax benefit of
$132,971) (254,263) -0-
Net income (loss) $ (271,932) $ 4,452
Net income (loss) per share $(8.86) $0.15
Dividends paid per share $ 1.00 $1.00
The 1993 loss includes an impairment and
restructuring charge of $48,000,000;
$33,126,000 net of tax, as described in
Note 3 to the financial statements.
In 1993, The Timken Company improved financial performance for the second
consecutive year. Excluding restructuring charges and accounting changes,
net income was $15.5 million, up $11 million from 1992. Net sales grew 4%.
The year ended strong with record fourth quarter sales.
To further improve performance, the company is moving aggressively to reduce
costs and improve efficiencies in both its administrative and manufacturing
operations. Additionally, marketing and manufacturing groups have been
restructured and realigned to increase customer focus and, ultimately,
improve competitiveness in profitable, high-volume markets.
In the following pages, you can see how The Timken Company -- and its
associates -- have been crafting a new framework for success.
<PAGE>
<TABLE>
Quarterly Financial Data
<CAPTION>
Net
Income
Net (Loss) Dividends Stock Prices
Net Gross Income per per _________________
1993 Sales Profit (Loss)(1,2) Share(1,2,3) Share High Low
<F1> <F2> <F1><F2><F3>
___________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
First Quarter $ 422,477 $ 87,312 $(251,081) $(8.22) $ .25 $30-5/8 $26-1/2
Second Quarter 441,241 99,350 9,556 .31 .25 34-3/8 29-1/2
Third Quarter 405,538 75,557 (446) (.01) .25 34-7/8 29-3/4
Fourth Quarter 439,505 80,378 (29,961) (.97) .25 34-5/8 29-7/8
_____________________________________________________________________________
$1,708,761 $342,597 $(271,932) $(8.86) $1.00
_____________________________________________________________________________
1992
___________________________________________________________________________________________________
First Quarter $ 420,936 $ 90,770 $ 4,907 $ .16 $ .25 $27-7/8 $23-1/4
Second Quarter 419,181 90,505 3,373 .11 .25 30-1/2 25-3/4
Third Quarter 404,018 82,624 (3,940) (.13) .25 28-5/8 25
Fourth Quarter 398,175 81,900 112 -0- .25 27-7/8 23-1/8
____________________________________________________________________________
$1,642,310 $345,799 $ 4,452 $ .15 $1.00
____________________________________________________________________________
<FN>
<F1>
(1) As described in Note 2 to financial statements, effective January 1, 1993, the company recorded
a one-time charge of $254,263,000 or $8.29 per share related primarily to a change in accounting
for retiree medical benefits. 1993 income (loss) before the cumulative effect of accounting
changes was $(17,669,000), or $(.57) per share.
<F2>
(2) Fourth quarter 1993 includes an impairment and restructuring charge of $48,000,000, $33,126,000
net of tax.
<F3>
(3) Annual net income (loss) per share does not equal the sum of the individual quarters due to
differences in the average number of shares outstanding during the respective periods.
</TABLE>
1
<PAGE>
<PAGE>
Management's Discussion and Analysis - Summary
The Timken Company achieved record annual and fourth quarter sales in
1993.
To help future performance growth, the company has moved aggressively
to reduce costs, advance manufacturing process quality, increase efficiency
and enhance customer service. Much progress was made in 1993. Even more
is expected during the next four years.
In North America, steel and automotive bearing sales increased
substantially, while only moderate gains were made in higher-value
industrial bearing sales. Bearing sales to aftermarket, railroad,
aerospace and U.S. export customers fell due to weak markets. Continued
recessionary economies in Europe and Japan limited our opportunities there.
In addition, significantly higher costs for scrap steel contributed to a
slightly lower gross profit for the year.
Improvements in manufacturing efficiencies, success in implementing
programs to improve on-time deliveries and reduce inventories, and
aggressive administrative streamlining activities strengthened the
company's performance. At December 31, 1993, the streamlining effort,
begun in 1992, was ahead of schedule to extract $60 million in annual
administrative costs from 1991 levels. All these savings may not be
reflected in future operating income as inflation and new initiatives
designed to expand the company's business may offset some of these
reductions. Selling, administrative and general expenses in 1993 were 7.6%
lower than in 1992.
In 1993, the company began a program aimed at reducing significantly
annual costs in its manufacturing plants. The majority of a $48 million
pre-tax charge, recorded in the fourth quarter of 1993, was related to
this. The global program is expected to begin showing results in 1995 and
be largely completed by 1997. While this initiative is expected to lead to
improved margins in all product lines, additional effort is being directed
at either enhancing the profitability of low-margin products or eliminating
them. Furthermore, organizational realignments will increase customer
focus and, ultimately, should improve the company's competitiveness in
higher-margin markets.
The company adopted Statements of Financial Accounting Standards (FAS)
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions;" No. 109, "Accounting for Income Taxes;" and No. 112, "Employers'
Accounting for Postemployment Benefits" in the first quarter of 1993. This
resulted in a one-time, cumulative effect, non-cash charge to net income of
$254.3 million and increased the company's 1993 pre-tax expense for
postretirement benefits by about $19 million.
During the first quarter of 1993, the company announced that British
Timken's Daventry bearing manufacturing operations would be consolidated
into other plants by mid-1994.
During the second quarter of 1993, the company's subsidiary, MPB
Corporation, completed its acquisition of equipment and inventory from the
U.S. jet engine bearing operations of The Torrington Company, a subsidiary
of Ingersoll-Rand Company. Also during the quarter, the company's
subsidiary, Latrobe Steel Company, announced it will establish a service
center for bar products near Franklin, Pennsylvania. Start-up of the
facility is planned for April 1994.
<PAGE>
In May 1993, the U.S. Department of Commerce determined that Brazilian
steel was being dumped in the U.S. market at prices up to 27% below fair
value. This government action was in response to an anti-dumping petition
filed in 1992 by the company and Republic Engineered Steels, Inc. In July
1993, the International Trade Commission (ITC) ruled that domestic
producers of special quality finished hot-rolled steel bars are not being
injured by imports from Brazil. The company and Republic appealed this
ruling during the third quarter to the U.S. Court of International Trade in
New York. The company believes that the ITC ruled incorrectly and that its
determination is not supported by fact.
In September 1993, the company's Steel Business began operation of its
St. Clair Precision Tubing Components plant in Eaton, Ohio. The facility
produces sub-components for automotive and industrial customers.
17
<PAGE>
<PAGE>
<TABLE>
Consolidated Statement of Income
The Timken Company and Subsidiaries
<CAPTION>
Year Ended December 31
_____________________________________________________________________________________________________
1993 1992 1991
_____________________________________________________________________________________________________
(Thousands of dollars, except share data)
<S> <C> <C> <C>
Net sales $ 1,708,761 $ 1,642,310 $1,647,425
Cost of products sold 1,366,164 1,296,511 1,309,893
_____________________________________________________________________________________________________
Gross Profit 342,597 345,799 337,532
Selling, administrative and general expenses 274,141 296,826 297,660
Impairment and restructuring charges 48,000 -0- 41,000
_____________________________________________________________________________________________________
Operating Income (Loss) 20,456 48,973 (1,128)
Interest expense (29,619) (28,660) (26,673)
Other-net (11,756) (6,882) (14,149)
_____________________________________________________________________________________________________
Other Income (Expense) (41,375) (35,542) (40,822)
_____________________________________________________________________________________________________
Income (Loss) Before Income Taxes and
Cumulative Effect of Accounting Changes (20,919) 13,431 (41,950)
Provision (credit) for income taxes (3,250) 8,979 (6,263)
_____________________________________________________________________________________________________
Income (Loss) Before Cumulative Effect
of Accounting Changes (17,669) 4,452 (35,687)
Cumulative effect of accounting changes on prior
years (net of income tax benefit of $132,971) (254,263) -0- -0-
_____________________________________________________________________________________________________
Net Income (Loss) $ (271,932) $ 4,452 $ (35,687)
_____________________________________________________________________________________________________
Earnings Per Share:
Income (loss) before cumulative effect of
accounting changes $ (0.57) $ 0.15 $ (1.21)
Cumulative effect of accounting changes (8.29) -0- -0-
_____________________________________________________________________________________________________
Net Income (Loss) Per Share $ (8.86) $ 0.15 $ (1.21)
_____________________________________________________________________________________________________
Average number of common shares outstanding 30,680,372 30,196,346 29,599,552
_____________________________________________________________________________________________________
See accompanying Notes to Consolidated Financial Statements on pages 25 through 33.
</TABLE>
<PAGE>
Management's Discussion and Analysis of the Statements of Income
1993 compared to 1992
Net sales increased 4% from 1992. Gross profit was slightly lower due to a
less-favorable sales mix, continuing poor business conditions in Europe,
higher costs for steel scrap and additional annual expense resulting from the
adoption of FAS No. 106. These effects were offset partially by
more-efficient manufacturing, better on-time delivery and lower inventory
levels. Inventory reductions generated LIFO income credits of $18.5 million
compared to $0.9 million in 1992. Operating income for 1993 declined to 1.2%
of net sales compared to 3% in 1992. Excluding the $48 million impairment
and restructuring charge, 1993 operating income would have increased to 4% of
net sales. The major contributor was reduced selling, administrative and
general expenses resulting from aggressive administrative streamlining
activities.
In December 1993, the company initiated a program to accelerate
significantly continuous improvement in its manufacturing plants worldwide.
The program, which is designed to improve profitability, create more value
for customers and strengthen the company's lead over competitors, is expected
to reduce employment by approximately 2,200 over the next four years based on
the current level of business. Certain costs to implement this program,
approximately $28 million, were charged to operations in 1993 as part of a $48
million impairment and restructuring charge. The $28 million, which includes
separation and related expenses, will be paid primarily over the next four
18
<PAGE>
<PAGE>
years from cash expected to be generated from operations. The balance of the
$48 million includes a non-cash charge of $17 million for the writedown of
inventories, impaired property, plant and equipment and the company's equity
investment in its foreign joint venture, Tata Timken Limited. The future
reduction of depreciation expense resulting from the writedown of property,
plant and equipment is not expected to impact materially future earnings.
The charge also includes $3 million for additional administrative
streamlining. The program is expected to show positive results by 1995 and
reduce annual costs significantly by 1998. Unrelated decisions could affect
the degree to which these savings directly reduce cost of products sold.
Net sales in the Bearing Business were relatively unchanged in 1993. As
in 1992, product mix was skewed toward lower-margin product. Sales volume in
U.S. automotive and industrial product lines showed improvement.
Aftermarket, railroad and U.S. export sales were weak. Defense and aerospace
sales remained depressed. Selling price increases, which were difficult to
achieve in 1993, did not cover inflation. In addition, the recession in
Europe continued to hurt the Bearing Business. Improved productivity, LIFO
income credits and lower selling, administrative and general expenses helped
to offset the effects of lower volume and the unfavorable sales mix.
The Steel Business increased net sales in 1993 by about 17%. This
resulted primarily from substantial increases in alloy bar volume, with
growth occurring in almost all product lines. Selling prices remained
unchanged from 1992. The added volume, improved plant operating levels,
increased productivity and reduced manufacturing costs contributed to higher
profitability compared to 1992. Furthermore, the Steel Business has begun to
realize the expected benefits from the $47 million investment in the
continuous caster at the Harrison Steel Plant in Canton and the $40 million
investment in the Precision Forging Facility at the Latrobe Steel Company
subsidiary in Pennsylvania, both of which were completed in the third quarter
of 1992. Reduced selling, administrative and general expenses also
contributed to improved profitability. Steel Business profit was hurt,
however, by higher scrap steel costs in the second half of 1993. The company
expects scrap prices to remain high, but plans to recover the additional cost
through price increases.
Companywide, selling, administrative and general expenses were reduced
to $274.1 million in 1993 from $296.8 million in 1992. Progress made in the
administrative streamlining effort during 1993 exceeded expectations.
Actions taken to date to reduce costs will not only result in annualized net
savings of more than $50 million compared to 1991 cost levels, but also
increase the overall effectiveness and efficiency with which remaining
functions are performed. The company expects to meet its goal of removing
$60 million from the 1991 administrative cost structure by mid-1995.
Selling, administrative and general expenses may not reflect all of this
reduction due to inflation and the possible initiation of programs designed
to expand the company's business.
Other income and expense for 1993 reflect greater expense than incurred
during 1992 due in part to charges related to the company's joint venture in
India. Interest expense in 1993 was similar to 1992 as the majority of the
company's debt is at fixed interest rates.
In 1993, the company had taxable income but a pre-tax loss for financial
reporting purposes. The difference was primarily the result of the
impairment and restructuring charge and certain accrued expenses for
associate benefits, which will not be tax deductible until some future date.
In 1992, these income amounts were comparable to each other. The Revenue
Reconciliation Act of 1993 did not have an adverse material effect on 1993
income taxes and is not expected to significantly affect the company's future
earnings.
<PAGE>
1992 compared to 1991
Net sales declined slightly during 1992 as a result of lower sales volume.
This was attributed primarily to soft U.S. markets and the continued
weakening of the European economy. Gross profit, however, increased in 1992
to 21.1% of net sales from 20.5% in 1991 as a direct result of the company's
efforts to reduce costs and increase manufacturing efficiencies. Gross
profit for 1992 included LIFO income credits of $0.9 million compared to
$15.4 million in 1991. Excluding the effect of the inventory credits in both
periods, gross profit would have been 21% of net sales in 1992 and 19.6% in
1991. The company's efforts to reduce administrative costs contributed to a
$9.1 million increase in operating income in 1992, excluding the effect of a
$41 million restructuring charge in 1991. In 1991, taxable income exceeded
pre-tax book income primarily due to restructuring charges.
19
<PAGE>
<PAGE>
Consolidated Balance Sheets
The Timken Company and Subsidiaries
December 31
__________________________________________________________________________
1993 1992
__________________________________________________________________________
(Thousands of dollars)
Assets
Current Assets
Cash and cash equivalents $ 5,284 $ 7,863
Accounts receivable, less allowances,
1993-$6,292; 1992-$4,948 223,097 198,549
Deferred income taxes 58,220 38,658
Inventories:
Manufacturing supplies 39,392 44,150
Work in process and raw materials 175,920 165,995
Finished products 84,471 100,802
__________________________________________________________________________
299,783 310,947
__________________________________________________________________________
Total Current Assets 586,384 556,017
Property, Plant and Equipment
Land and buildings 347,757 344,623
Machinery and equipment 1,799,892 1,743,979
__________________________________________________________________________
2,147,649 2,088,602
Less allowances for depreciation 1,122,985 1,039,598
__________________________________________________________________________
1,024,664 1,049,004
Other Assets
Costs in excess of net assets of acquired
business, net of amortization,
1993-$9,242; 1992-$6,665 93,825 96,402
Deferred income taxes 52,902 -0-
Miscellaneous receivables and other assets 21,401 27,406
Deferred charges and prepaid expenses 10,543 9,621
__________________________________________________________________________
178,671 133,429
__________________________________________________________________________
$1,789,719 $1,738,450
__________________________________________________________________________
Management's Discussion and Analysis of the Balance Sheets
The consolidated balance sheets continue to indicate that the company's
financial position is solid and one of the best in its industries.
Total assets grew by $51.3 million from 1992, primarily as a result of
increased accounts receivable and deferred income taxes. The 1993 increase
in accounts receivable relates directly to higher sales in December 1993.
The days sales outstanding as of year-end 1993 reflects a slight decrease
from 1992.
Deferred taxes increased primarily as a result of the adoption of FAS
No. 106. Before its adoption, the company's net deferred tax liability was
$49.5 million. Afterward, the company's net deferred tax position is an
asset of $111.1 million. Management has evaluated this asset using the
"more likely than not" criterion established by FAS No. 109 and believes
that sufficient taxable income will be generated to realize the asset over
the long period that the postretirement benefit obligation will be paid.
<PAGE>
For the third consecutive year, the company reduced inventories.
During 1993, inventories were cut by $11.2 million due to structural
changes resulting from improved scheduling and manufacturing processes.
Inventory days declined by 11% during 1993.
The company uses the LIFO method of accounting for about 75% of its
inventories. Under this method, the cost of products sold approximates
current cost and, therefore, reduces the distortion in reporting income due
to inflation. Depreciation charged to operations is based on historical
cost and is significantly less than were it based on replacement value.
The increase in current and non-current liabilities is the result of
the 1993 impairment and restructuring charge and the adoption of FAS No.
106, respectively. The cumulative effect of accounting changes adopted in
1993 reduced shareholders' equity by $254.3 million.
20
<PAGE>
<PAGE>
December 31
___________________________________________________________________________
1993 1992
___________________________________________________________________________
(Thousands of dollars)
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and other liabilities $ 221,265 $ 167,388
Accrued pension contributions 11,377 12,523
Accrued postretirement benefits cost 24,330 -0-
Salaries, wages and payroll taxes 60,680 57,047
Commercial paper 62,907 71,730
Short-term debt 32,129 64,423
Income taxes 19,443 6,468
Current portion of long-term debt 282 10,885
___________________________________________________________________________
Total Current Liabilities 432,413 390,464
Non-Current Liabilities
Long-term debt 181,158 173,477
Accrued pension cost 117,396 101,300
Accrued postretirement benefits cost 373,440 -0-
Deferred income taxes -0- 88,146
___________________________________________________________________________
671,994 362,923
Shareholders' Equity
Class I and II Serial Preferred Stock without
par value:
Authorized-10,000,000 shares each class,
none issued -0- -0-
Common stock without par value:
Authorized-100,000,000 shares
Issued (including shares in treasury)
30,842,952 shares in 1993;
30,625,858 shares in 1992
Stated capital 53,064 53,064
Other paid-in capital 247,699 241,268
Earnings invested in the business 402,566 705,176
Foreign currency translation adjustment (18,016) (11,475)
___________________________________________________________________________
685,313 988,033
Less cost of common stock in treasury
(1993-40 shares; 1992-108,307 shares) 1 2,970
___________________________________________________________________________
Total Shareholders' Equity 685,312 985,063
$1,789,719 $1,738,450
___________________________________________________________________________
See accompanying Notes to Consolidated Financial Statements on
pages 25 through 33.
<PAGE>
Debt decreased $44 million to $276.5 million as a result of close
management of working capital and careful scrutiny of capital expenditures.
1993 capital spending of $92.9 million was $46.2 million lower than in 1992
and did not exceed depreciation. During 1992, capital expenditures
included spending for two large projects in the Steel Business. In
addition, certain other capital investments, which would have increased
1993 spending, were delayed in September 1992. During the second quarter
of 1993, the company resumed work on its 21st century bearing project,
which includes a plant in Asheboro, North Carolina. The status of a plant
in Europe, also delayed in 1992, remains unchanged.
The ratio of debt to total capital increased to 28.7% from 24.5% in
1992, primarily due to the reduction of equity for the cumulative effect of
accounting changes. Excluding this item, debt to total capital would have
declined to 22.7%.
To increase financial flexibility, the company amended its revolving
credit agreement effective February 26, 1993, to reduce the consolidated
tangible net worth plus subordinated liabilities requirement from $900
million to $850 million. The cumulative effect of the accounting changes
is disregarded for purposes of this requirement. In addition, the amount
of credit available was reduced from $350 million to $300 million. At
December 31, 1993, the company had $205 million available through this
unsecured credit agreement.
21
<PAGE>
<PAGE>
Consolidated Statements of Cash Flows
The Timken Company and Subsidiaries
Year Ended December 31
___________________________________________________________________________
1993 1992 1991
___________________________________________________________________________
(Thousands of dollars)
Cash Provided (Used)
Operating Activities
Net income (loss) $(271,932) $ 4,452 $ (35,687)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Cumulative effect of accounting
changes 254,263 -0- -0-
Depreciation and amortization 118,403 114,433 109,252
Impairment and restructuring
charges 48,000 -0- 41,000
Deferred income tax credit (28,733) (2,104) (16,198)
Common stock issued in lieu
of cash to benefit plans 3,924 8,184 9,617
Changes in operating assets
and liabilities:
Accounts receivable (27,233) (16,177) 23,685
Inventories and other assets 10,685 (1,732) 43,203
Accounts payable and accrued
expenses 45,944 9,235 (34,426)
Foreign currency translation
(gain) loss 399 (790) (27)
___________________________________________________________________________
Net Cash Provided by
Operating Activities 153,720 115,501 140,419
Investing Activities
Purchases of property, plant and
equipment-net (89,049) (136,122) (140,126)
Financing Activities
Purchases of treasury shares -0- -0- (2,258)
Cash dividends paid to shareholders (25,202) (22,435) (23,071)
Proceeds from issuance of long-term
debt -0- 50,000 23,000
Payments on long-term debt (2,847) (3,543) (2,950)
Commercial paper activity-net (8,824) 864 (68,210)
Short-term debt activity-net (30,134) 2,215 53,058
___________________________________________________________________________
Net Cash Provided (Used) by
Financing Activities (67,007) 27,101 (20,431)
Effect of exchange rate changes on
cash (243) (890) (387)
___________________________________________________________________________
Increase (Decrease) In Cash
and Cash Equivalents (2,579) 5,590 (20,525)
Cash and cash equivalents at beginning
of year 7,863 2,273 22,798
___________________________________________________________________________
Cash and Cash Equivalents at
End of Year $ 5,284 $ 7,863 $ 2,273
___________________________________________________________________________
See accompanying Notes to Consolidated Financial Statements on pages
25 through 33.
<PAGE>
Management's Discussion and Analysis of the Statements of Cash Flows
1993 compared to 1992
Net cash provided from operating activities increased 33% to $153.7 million
in 1993 due to changes in operating assets and liabilities. Cash generated
from net income was basically unchanged from 1992. Cash generated from
changes in operating assets and liabilities was primarily due to higher
accounts payable and income taxes payable. In addition, the company reduced
inventories by $11.2 million in 1993 following a $9.1 million decline in
1992. These reductions resulted from improved manufacturing and scheduling
practices.
Capital expenditures were $92.9 million in 1993 compared to $139.1 in
1992. During 1992, some capital investments were delayed, which lowered 1993
spending. It is expected that capital expenditures will approximate
depreciation expense in 1994.
The company reduced its debt by $44 million during the year through
aggressive management of its working capital and capital expenditures. In
1993, the company extended $8 million of Ohio Water Development Bonds from
22
<PAGE>
<PAGE>
1993 to 2007 and replaced the fixed interest rate of 8.95% with a floating
rate, which averaged 2.31% during 1993. By the end of 1994, the company
expects to further decrease its debt level. The company expects that cash
generated from operating activities during 1994 will be sufficient to fund
capital expenditures and pay interest and dividends.
1992 compared to 1991
Net cash provided from operations fell 17.7% as the increase in cash from net
income and operating activities did not offset the decrease resulting from
changes in operating assets and liabilities. During 1992, the company
reduced inventories by $9.1 million compared to a reduction of $59.5 million
in 1991. The company's 1992 capital expenditures were $139.1 million, which
included spending for a $47 million continuous caster at the Harrison Steel
Plant and a $40 million Precision Forging Facility at the Latrobe Steel
Company subsidiary. The company issued $50 million of medium-term notes to
replace commercial paper and short-term debt and extended the scheduled
maturity of $21.7 million of Ohio Air and Water Bonds from 1995 to 2001.
Total debt increased by $47.4 million. However, by delaying certain capital
projects and by implementing other cost control initiatives, the company was
able to reduce debt by $32.8 million from October through December of 1992.
Management's Discussion and Analysis of Other Information
In 1993, the company reduced its discount rate assumption for U.S.-based
pension and postretirement benefit plans from 9.5% to 7.5% and made other
actuarial assumption changes in its calculation of future pension and
postretirement medical expense. As a result of these revisions and other
plan changes, annual pension expense is expected to increase by approximately
$13 million in 1994. The impact of the discount rate change for
postretirement medical expenses was offset by a decrease in the assumed
medical inflation trend rate.
The company continues to focus on protecting the environment and
compliance with environmental protection laws. In doing so, the company has
invested in pollution control equipment and updated plant operational
practices. To the extent that the company's non-U.S. competitors are not
subject to similar laws and regulations in their home countries, the company
is placed at a competitive disadvantage.
It is very difficult to assess the possible effect of compliance with
future requirements that may differ from existing ones. The company believes
that the effect of amendments to the Clean Air Act of 1990 on its utility
suppliers will increase its costs for electricity by $4 million to $5 million
annually by 1995. Furthermore, regulations related to these amendments have
been proposed that, if adopted, would mandate significant changes in the way
the company monitors air emissions. This would require capital expenditures
in excess of $1 million and the addition of personnel. A large cross section
of industries have expressed opposition to the proposed regulations for a
variety of reasons. It is possible that the U.S. Environmental Protection
Agency (EPA) may amend the regulations before they are adopted, lessening
substantially their impact on the company.
The company and its U.S. subsidiaries are involved as potentially
responsible parties (PRP), as named by the EPA, for the clean-up of hazardous
waste at five non-company sites. It is believed the company's share of
liability for these sites would not be material to its financial condition or
results of operations because of the company's uncertain or limited
involvement at these sites and the number of other identified PRPs. In 1993,
the company and its Latrobe Steel subsidiary each participated in one minor
settlement agreement, which terminated their respective clean-up obligations
at two other sites.
<PAGE>
The company's MPB Corporation subsidiary is engaged in environmental
clean-up projects at its manufacturing locations in New Hampshire. The costs
for these projects, estimated at slightly over $3 million, were recorded
previously. A portion of these costs will be recovered from a former owner
of the property. MPB has filed suit against its insurance companies for
reimbursement of clean-up costs. The full extent of reimbursement cannot be
estimated. In late 1993, MPB was notified by the city of Keene, New
Hampshire, that city officials were looking to MPB to contribute to the costs
of cleaning up alleged soil and groundwater contamination of a city dump,
which allegedly had been used by MPB along with many others for industrial
waste disposal. This is not a superfund site. No specific monetary request
has been made at this time.
In December 1993, MPB announced the formation of MPB Singapore PTE.
LTD., which will open a manufacturing facility in Singapore. This facility
is to be operational by early summer 1994. This will improve service to
MPB's existing Pacific Rim area customers and provide direct participation in
new growth markets and products.
23
<PAGE>
<PAGE>
<TABLE>
Consolidated Statement of Shareholders' Equity
The Timken Company and Subsidiaries
<CAPTION>
Common Stock
__________________ Earnings Foreign
Other Invested Currency
Stated Paid-In in the Translation Treasury
Capital Capital Business Adjustment Stock Total
_______________________________________________________________________________________________________
(Thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1991
Balance at January 1, 1991 $ 53,064 $ 243,683 $ 796,230 $ 16,965 $(35,241) $1,074,701
Net loss (35,687) (35,687)
Dividends paid - $1.00 per share (29,612) (29,612)
Treasury share activity - net (1,276) 15,176 13,900
Foreign currency translation
adjustments (net of income
tax benefit of $734) (4,331) (4,331)
_______________________________________________________________________________________________________
Balance at December 31, 1991 53,064 242,407 730,931 12,634 (20,065) 1,018,971
Year Ended December 31, 1992
Net income 4,452 4,452
Dividends paid - $1.00 per share (30,207) (30,207)
Treasury share activity - net (1,139) 17,095 15,956
Foreign currency translation
adjustments (net of income
tax benefit of $4,170) (24,109) (24,109)
_______________________________________________________________________________________________________
Balance at December 31, 1992 53,064 241,268 705,176 (11,475) (2,970) 985,063
Year Ended December 31, 1993
Net loss (271,932) (271,932)
Dividends paid - $1.00 per share (30,678) (30,678)
Treasury share activity - net 125 2,969 3,094
Issuance of common stock 6,306 6,306
Foreign currency translation
adjustments (net of income
tax benefit of $2,112) (6,541) (6,541)
_______________________________________________________________________________________________________
Balance at December 31, 1993 $ 53,064 $ 247,699 $ 402,566 $(18,016) $ (1) $ 685,312
_______________________________________________________________________________________________________
See accompanying Notes to Consolidated Financial Statements on pages 25 through 33.
24
<PAGE>
<PAGE>
Notes to Consolidated Financial Statements
The Timken Company and Subsidiaries
1. Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include
the accounts and operations of the company and all of its subsidiaries. All
significant intercompany accounts and transactions are eliminated upon
consolidation.
Cash Equivalents: The company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents. The
carrying amount reported in the balance sheet for cash and cash equivalents
approximates fair value.
Inventories: Inventories are valued at the lower of cost or market,
principally by the last-in, first-out (LIFO) method. If all inventories had
been valued at current costs, inventories would have been $159,867,000 and
$180,465,000 greater at December 31, 1993 and 1992, respectively.
In each of the past three years, inventory quantities were reduced.
These reductions resulted in liquidations of LIFO inventory quantities
carried at lower costs prevailing in prior years. The effect of the
liquidations was to decrease the net loss by approximately $11,600,000 in
1993 and $10,200,000 in 1991 or $.38 and $.34 per share, respectively. The
effect of LIFO inventory reductions in 1992 was not material.
Property, Plant and Equipment: Property, plant and equipment is valued at
cost less accumulated depreciation. Provision for depreciation is computed
principally by the straight-line method based upon the estimated useful lives
of the assets.
Costs in Excess of Net Assets of Acquired Business: Costs in excess of net
assets of acquired business are amortized on the straight-line method over 40
years.
Income Taxes: The company uses the liability method of accounting for income
taxes in accordance with the provisions of FAS No. 109, "Accounting for
Income Taxes." Deferred income taxes are provided for the temporary
differences between the financial reporting basis and tax basis of the
company's assets and liabilities.
The company plans to continue to finance expansion of its operations
outside the United States by reinvesting undistributed earnings of its
non-U.S. subsidiaries. The amount of undistributed earnings that is
considered to be indefinitely reinvested for this purpose was approximately
$50,000,000 at December 31, 1993. Accordingly, U.S. income taxes have not
been provided on such earnings. While the amount of any U.S. income taxes on
these reinvested earnings, if distributed in the future, is not presently
determinable, it is anticipated that they would be reduced substantially by
the utilization of tax credits or deductions. Such distributions would be
subject to withholding taxes.
Foreign Exchange Contracts: The company enters into foreign exchange
contracts to manage exposure to currency rate fluctuations primarily related
to the purchase of inventory and equipment. As these exchange contracts
qualify for accounting as designated hedges, the realized and unrealized
gains and losses are deferred and included as a component of the related
transaction. At December 31, 1993, the company had outstanding foreign
exchange contracts totalling $29,038,000, which approximates their fair
value. The fair value of foreign exchange contracts is estimated based on
quoted market prices of comparable contracts.
<PAGE>
Earnings Per Share: Earnings per share are computed by dividing net income
by the average number of common shares outstanding during the year. Dilutive
common stock equivalents are not material and, therefore, are not included in
the computation of primary earnings per share.
2. Accounting Changes
Effective January 1, 1993, the company and its subsidiaries adopted FAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions,"
No. 109, "Accounting for Income Taxes," and No. 112, "Employers' Accounting
for Postemployment Benefits."
25
<PAGE>
<PAGE>
Notes to Consolidated Financial Statements
The adoption of these accounting standards resulted in a one-time, non-cash
charge to income of $254,263,000 ($8.29 per share) for the cumulative effect
of the accounting changes for periods prior to 1993. The charge relates
primarily to the adoption of FAS No. 106. In addition, these accounting
changes resulted in an increase in the loss before the cumulative effect of
accounting changes for 1993 of approximately $10,000,000 ($.33 per share).
3. Impairment and Restructuring Charges
During the fourth quarter of 1991, the company initiated a program to
streamline operations, strengthen its strategic long-term position and
significantly reduce costs. In connection with this program, the company
recorded a provision for restructuring of $41,000,000, which increased the
1991 net loss by $26,650,000 or $.90 per share. The program has been largely
implemented and included the write-off of certain non-strategic assets, the
consolidation of certain operations and the recognition of certain pension
costs, severance pay and outplacement services for terminated associates.
During 1993, further opportunities were identified to streamline the
company and strengthen its strategic long-term position. Accordingly, in the
fourth quarter of 1993, the company initiated a program to significantly
accelerate continuous improvement in its manufacturing plants worldwide. The
company recorded a pre-tax charge of $48,000,000 to cover certain costs
associated with the program, other costs related to manufacturing
restructuring and severance and the writedown of certain impaired assets.
The charge increased the 1993 net loss by $33,126,000 or $1.08 per share.
4. Financing Arrangements
Long-term debt at December 31, 1993 and 1992, was as follows:
1993 1992
===========================================================================
(Thousands of dollars)
Fixed Rate Medium-Term Notes, Series A,
due at various dates through September 2002,
with interest rates ranging from 7.20% to 9.25% $133,000 $133,000
7.50%, State of Ohio Pollution Control Revenue
Refunding Bonds, maturing on January 1, 2002 17,000 17,000
8.95%, State of Ohio Water Development Revenue Bonds -0- 8,000
Variable rate State of Ohio Water Development Revenue
Refunding Bonds, maturing May 1, 2007 (2.75% at
December 31, 1993) 8,000 -0-
Variable rate State of Ohio Air Quality and Water
Development Revenue Refunding Bonds, maturing on
June 1, 2001 (2.75% at December 31, 1993) 21,700 21,700
Other 1,740 4,662
__________________________________________________________________________
181,440 184,362
Less current maturities 282 10,885
__________________________________________________________________________
$181,158 $173,477
==========================================================================
The aggregate maturities of long-term debt for the five years subsequent
to December 31, 1993, are as follows: 1994--$282,000; 1995--$30,270,000;
1996--$217,000; 1997--$30,239,000; 1998--$23,209,000.
Interest paid in 1993, 1992 and 1991 approximated $31,290,000,
$31,137,000 and $27,371,000, respectively. This differs from interest
expense due to timing of payments and interest capitalized of $1,700,000 in
1993, $2,229,000 in 1992 and $1,987,000 in 1991 as a part of major capital
additions.
<PAGE>
At December 31, 1993, the company had available $205,000,000 through an
unsecured $300,000,000 revolving credit agreement with a group of banks. The
agreement, which expires in August 1996, bears interest based upon any one of
three rates at the company's option--prime, London Interbank Offered Rate
(LIBOR) or the adjusted certificate of deposit rate. The agreement contains
certain restrictions relating to investments held and other borrowings by the
company and its subsidiaries and restricts borrowing on assets other than
accounts receivable. Additionally, the company is required to meet tangible
net worth and borrowing covenants. At December 31, 1993, the company was
$36,000,000 above the required net worth minimum.
26
<PAGE>
<PAGE>
The company entered into an interest rate swap agreement to reduce the
impact of changes in interest rates on its short-term borrowings. This
agreement covers $50,000,000 of short-term borrowings and expires November
15, 1994. The differential between the variable rates on the related
short-term borrowings and the fixed rate provided by the agreement is accrued
to enable the company to recognize the interest expense at the fixed rate.
The counterparties to this agreement are major commercial banks. Management
believes the risk of incurring losses relating to credit risk is remote and
any losses would be immaterial.
At December 31, 1993, the estimated fair value of the company's debt
instruments, based on discounted cash flow analysis, exceeds the carrying
amount by approximately $18,000,000.
5. Stock Compensation Plans
As approved by the shareholders, the company had two stock compensation plans
at December 31, 1993, the Long-term Incentive Plan and the 1985 Incentive
Plan. The Long-term Incentive Plan, which replaced the 1985 Incentive Plan,
was approved in 1992 with 1,400,000 shares to be issued at the discretion of
the Compensation Committee of the Board of Directors to officers and key
associates in the form of stock options, stock appreciation rights,
restricted shares and deferred shares. The Long-term Incentive Plan also
allows the awarding of shares to directors not employed by the company. At
its inception, the 1985 Incentive Plan reserved 1,000,000 shares to be issued
in the form of stock options and restricted stock rights to officers and key
associates.
At December 31, 1993, options for 682,578 shares were exercisable under
the 1985 Incentive Plan at option prices ranging from $21.12 to $35.75. A
total of 85,454 restricted stock rights have been awarded. Of the total
restricted stock rights, 25,700 were not vested and 11,044 have been
cancelled. During 1993, 18,311 common shares were distributed, and 20,570
common shares were distributed in 1992.
At December 31, 1993, options for 55,125 shares were exercisable under
the Long-term Incentive Plan at an option price of $28.88. A total of 26,400
deferred shares and restricted shares have been awarded to date of which
1,000 shares vested prior to December 31,1993. During 1993, 10,500 deferred
shares and 500 restricted shares were granted. In addition during 1993,
1,400 shares of common stock were awarded to outside directors.
The following table summarizes certain information relative to stock
options:
1993 1992
_____________________________________________________________________________
Number Number
of Option Price of Option Price
Shares Per Share Shares Per Share
=============================================================================
Outstanding at beginning
of year 1,043,593 $21.12-$35.75 862,193 $21.12-$35.75
Granted 219,800 $31.25 238,900 $28.88
Exercised (18,015) $25.00-$28.88 (13,600) $22.63-$25.00
Cancelled or expired (13,325) $25.75-$35.75 (43,900) $25.75-$35.75
_____________________________________________________________________________
Outstanding at end of year 1,232,053 $21.12-$35.75 1,043,593 $21.12-$35.75
=============================================================================
Reserved for future use 991,915 1,207,653
<PAGE>
6. Retirement Plans
The company and its subsidiaries sponsor a number of defined benefit pension
plans, which cover substantially all of their associates except those at
certain non-U.S. locations who are covered by government plans. These plans
provide benefits primarily based on associates' compensation. In general,
the company's funding policy is to contribute amounts to the plans sufficient
to meet the minimum funding requirements set forth by regulations of each
country, such as the Employee Retirement Income Security Act of 1974, plus
such additional amounts as the company may determine to be appropriate.
In arriving at the pension obligation and net periodic pension costs for the
company's plans covering most of its associates, the consulting actuary used
certain assumptions. These included a discount rate of 7.5% in 1993 and 9.5%
in 1992 and 1991, a long-term average rate of increase in employment costs,
which varies from 3% to 4% in
27
<PAGE>
<PAGE>
Notes to Consolidated Financial Statements
1993 and 3% to 5% in 1992 and 1991, dependent upon the plan; and an expected
long-term rate of return on the plans' assets of 9.5%. A summary of the
components of net periodic pension costs for the defined benefit plans
follows:
1993 1992 1991
=============================================================================
(Thousands of dollars)
Defined benefit plans:
Service cost--benefits earned during
the period $ 19,351 $ 19,454 $ 19,027
Interest cost on projected benefit
obligation 73,380 69,062 65,667
Actual return on plan assets (99,202) (43,607) (135,523)
Net amortization and deferral 30,279 (27,292) 71,570
_____________________________________________________________________________
Total pension expense $ 23,808 $ 17,617 $ 20,741
=============================================================================
</TABLE>
<TABLE>
The following table sets forth the funded status and amounts recognized in the consolidated
balance sheets at December 31, 1993, and 1992, for the company's defined benefit plans:
<CAPTION>
1993 1992
__________________________________________________________________________________________________
Plans Where Plans Where Plans Where Plans Where
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
==================================================================================================
(Thousands of dollars)
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation $(294,531) $(440,405) $(225,335) $(346,771)
==================================================================================================
Accumulated benefit obligation $(335,973) $(506,239) $(253,107) $(443,867)
==================================================================================================
Projected benefit obligation $(397,910) $(561,088) $(321,730) $(481,181)
Plan assets at fair value 402,724 414,727 369,164 395,603
__________________________________________________________________________________________________
Projected benefit obligation (in excess
of) or less than plan assets 4,814 (146,361) 47,434 (85,578)
Unrecognized net gain (18,508) (23,739) (67,909) (68,660)
Prior service (credit) cost not yet
recognized in net periodic pension cost (9,299) 90,846 (8,965) 101,138
Unrecognized net asset at transition dates,
net of amortization (14,268) (12,258) (17,105) (14,178)
__________________________________________________________________________________________________
Net pension liability recognized in the
balance sheet $ (37,261) $ (91,512) $ (46,545) $ (67,278)
==================================================================================================
</TABLE>
<PAGE>
The projected benefit obligation in excess of plan assets increased
approximately $100,000,000 from 1992 to 1993 primarily as a result of
reducing the discount rate from 9.5% to 7.5%.
Approximately 80% of the plans' assets at December 31, 1993, were
invested in listed stocks and bonds.
The company also sponsors certain defined contribution retirement and
savings plans covering substantially all associates in the United States.
The company contributes Timken Company common stock to the salaried and
certain other hourly plans based on formulas established in the respective
plan agreements. At December 31, 1993, the plans had net assets of
$139,882,000, including 2,925,056 shares of Timken Company common stock as
well as other stock and cash investments. Company contributions to the plans
amounted to $5,936,000 in 1993; $5,881,000 in 1992, and $5,609,000 in 1991.
7. Postretirement Benefits
Effective January 1, 1993, the company and its subsidiaries adopted FAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
FAS No. 106 requires the projected cost of providing postretirement health
care and life insurance benefits be recognized as an expense as associates
render service instead of when benefits are paid, as the company has
historically done. In doing so, the company elected immediate recognition of
the transition obligation.
28
<PAGE>
<PAGE>
The company and its subsidiaries sponsor several unfunded postretirement
plans that provide health care and life insurance benefits for eligible
retirees and dependents. Depending on retirement date and associate
classification, certain health care plans contain contributions and
cost-sharing features such as deductibles and coinsurance. The remaining
health care plans and the life insurance plans are noncontributory.
The postretirement benefit obligation and net periodic postretirement
benefit cost were determined by application of the terms of the current
medical and life insurance plans, including established deductibles,
coinsurance and maximums, together with relevant actuarial assumptions. To
establish the accumulated postretirement benefit obligation at January 1,
1993 and expense for 1993, the company assumed a weighted-average annual rate
of increase in the per capita cost of health care benefits (health care cost
trend rate) of 12.75% declining gradually to 6.5% in 2003 and thereafter.
The weighted average discount rate used was 9.5%. Net periodic
postretirement benefit cost included the following components for 1993 (in
thousands of dollars):
Service cost $ 4,039
Interest cost on accumulated postretirement
benefit obligation 35,046
_____________________________________________________________
Net periodic postretirement benefit cost $39,085
=============================================================
The net periodic postretirement benefit cost shown above is about
$19,000,000 higher than what it would have been under the previous
pay-as-you-go method. In 1992 and 1991, the company paid postretirement
benefit costs of $21,355,000 and $18,244,000, respectively.
For measurement purposes, at December 31, 1993, the health care cost
trend rate was 10% and is assumed to decrease gradually to 5.5% in 2003 and
remain at that level thereafter. The weighted-average discount rate used was
7.5%.
The following table sets forth the components of the accumulated
postretirement benefit obligation recognized in the balance sheet at December
31, 1993 (in thousands of dollars):
Accumulated postretirement benefit obligation:
Retirees $(276,499)
Fully eligible active plan participants (75,366)
Other active plan participants (94,985)
___________________________________________________________
(446,850)
Unrecognized net loss 49,080
__________________________________________________________
Postretirement obligation recognized
in the balance sheet $(397,770)
===========================================================
Increasing the assumed health care cost trend rate by one percentage
point in each year would increase the accumulated postretirement benefit
obligation as of December 31, 1993 by approximately $41,700,000 and the net
periodic postretirement benefit cost for 1993 by approximately $3,700,000.
<PAGE>
In addition to providing the above postretirement benefits, the company
also provides certain benefits to former or inactive associates after
employment but before retirement. Certain of these benefits have
historically been recognized as expense on a pay-as-you-go basis rather than
when earned. FAS No. 112, "Employers' Accounting for Postemployment
Benefits," requires accrual accounting for these benefits beginning no later
than January 1, 1994. The company and its subsidiaries elected to adopt FAS
No. 112 effective January 1, 1993. The adoption of FAS No. 112 did not
materially affect the cumulative effect adjustment or 1993 operations.
8. Research and Development
Expenditures committed to research and development amounted to $37,145,000 in
1993; $41,749,000 in 1992 and $40,905,000 in 1991.
29
<PAGE>
<PAGE>
Notes to Consolidated Financial Statements
9. Income Taxes
Effective January 1, 1993, the company and its subsidiaries adopted FAS No.
109, "Accounting for Income Taxes." Under FAS No. 109, deferred tax assets
and liabilities are recognized for the differences between the financial
statement carrying amounts of assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
marginal tax rates and laws. Prior to this, income tax expense was
determined under the provisions of Accounting Principles Board Opinion No. 11
using the deferred method. Deferred tax expense was based on items of income
and expense that were reported in different years in the financial statements
and tax returns and were measured at the tax rate in effect in the year the
difference originated. In adopting FAS No. 109, no prior periods were
restated, and the cumulative effect of the accounting change was not material
to the company's financial condition or to operations.
The provision (credit) for income taxes consisted of the following:
1993 1992 1991
___________________________________________________________________________
Current Deferred Current Deferred Current Deferred
===========================================================================
(Thousands of dollars)
United States:
Federal $16,835 $(24,047) $ 4,600 $ (616) $4,400 $(16,410)
State and local 2,778 (1,843) (21) -0- 129 -0-
Foreign 5,870 (2,843) 6,504 (1,488) 5,406 212
___________________________________________________________________________
$25,483 $(28,733) $11,083 $(2,104) $9,935 $(16,198)
===========================================================================
The company made income tax payments of approximately $20,000,000 in
1993; $2,500,000 in 1992 and $16,400,000 in 1991. Taxes paid differ from
current taxes provided, primarily due to the timing of payments.
The effect of temporary differences giving rise to deferred tax assets
and liabilities at December 31, 1993 was as follows (in thousands of
dollars):
Deferred tax assets:
Accrued postretirement benefits cost $148,886
Accrued pension cost 44,845
Benefit accruals 22,025
Impairment and restructuring charges 16,405
Foreign tax loss and credit carryforwards 20,224
Alternative minimum tax credit carryforwards 12,205
Inventory valuation 10,112
Other--net 9,784
Valuation allowance (20,224)
__________________________________________________________
264,262
Deferred tax liability--depreciation (153,140)
__________________________________________________________
Net deferred tax asset $111,122
==========================================================
<PAGE>
FAS No. 109 specifies that deferred tax assets are to be reduced by a
valuation allowance if it is more likely than not that some portion or all of
the deferred tax assets will not be realized. As of December 31, 1993, the
company has deferred tax assets attributable to foreign tax loss and credit
carryforwards. As a majority of these carryforwards expire in five years or
less, realization is considered uncertain and a valuation allowance has been
recorded. The items generating the remaining deferred tax assets, except for
accrued postretirement benefits cost, are expected to reverse over the same
general period as depreciation and are therefore likely to be realized. The
deferred tax asset relative to accrued postretirement benefits cost, which
has a very long reversal period, is deemed realizable based on the company's
anticipated future earnings.
30
<PAGE>
<PAGE>
The reasons for the difference between the provision (credit) for income
taxes and the amount computed by applying the statutory U.S. federal income
tax rate (35% in 1993 and 34% in 1992 and 1991) to income (loss) before taxes
were as follows:
1993 1992 1991
=============================================================================
(Thousands of dollars)
Income tax (credit) at the statutory
federal rate $(7,322) $4,567 $(14,263)
Adjustments:
Tax on remitted foreign earnings 1,021 405 994
Amortization of costs in excess of net
assets of acquired business 902 876 876
Losses without current tax benefits 3,668 2,065 3,951
Higher tax rates outside the United States -0- 963 1,636
State and local income taxes, net of federal
tax benefit 608 -0- 85
Change in deferred tax rate upon enactment
of new tax law (1,981) -0- -0-
Non-deductible unrealized exchange losses -0- -0- 1,206
Other items (146) 103 (748)
_____________________________________________________________________________
Total income taxes (credit) $(3,250) $8,979 $ (6,263)
=============================================================================
Effective income tax rate (16)% 67% (15)%
=============================================================================
10. Common Stock Activity
A summary of activity in shares and dollar amounts of common stock, other
paid-in capital and treasury stock is as follows:
Common Stock Treasury Stock
___________________________ __________________
Amount
________________
Number Other Number
of Stated Paid-In of
Shares Capital Capital Shares Amount
=============================================================================
(Thousands of dollars, except share data)
Year Ended December 31, 1991
Balance at January 1, 1991 30,625,858 $53,064 $243,683 1,279,379 $(35,241)
Shares issued in connection
with various benefit plans (629) (373,044) 10,246
Shares issued in connection
with dividend reinvestment
plan (647) (261,869) 7,188
Treasury shares purchased 87,600 (2,258)
_____________________________________________________________________________
Balance at December 31, 1991 30,625,858 $53,064 $242,407 732,066 $(20,065)
Year Ended December 31, 1992
Shares issued in connection
with various benefit plans (725) (325,233) 8,909
Shares issued in connection
with dividend reinvestment
plan (414) (298,526) 8,186
_____________________________________________________________________________
Balance at December 31, 1992 30,625,858 $53,064 $241,268 108,307 $ (2,970)
<PAGE>
Year Ended December 31, 1993
Shares issued in connection
with various benefit plans 85,415 2,362 (56,955) 1,562
Shares issued in connection
with dividend reinvestment
plan 131,679 4,069 (51,312) 1,407
_____________________________________________________________________________
Balance at December 31, 1993 30,842,952 $53,064 $247,699 40 $ (1)
=============================================================================
11. Contingencies
The company is subject to various lawsuits, claims and proceedings, including
environmental matters, which arise in the ordinary course of its business.
Management believes that any ultimate liability with respect to these actions
will not materially affect the company's operations or consolidated financial
position.
31
<PAGE>
<PAGE>
Notes to Consolidated Financial Statements
12. Segment Information
The company manufactures products that fall into two major classifications.
The first includes anti-friction bearings used in a multitude of applications
to reduce friction and conserve energy. The second classification is steel
products of alloy, intermediate alloy and carbon grades. Sales of these
products are made predominantly to manufacturers in the automotive,
machinery, railroad, aerospace, agricultural industries and service
replacement markets following normal credit practices.
Net sales by segment include both sales to unaffiliated customers and
intersegment sales. Intersegment sales and transfers between geographic
areas are accounted for at values based on market prices.
Information by Industry
1993 1992 1991
=============================================================================
(Thousands of dollars)
Net sales:
Bearings--To customers $1,153,987 $1,169,035 $1,128,972
Steel--To customers 554,774 473,275 518,453
Steel--Intersegment sales 162,133 156,525 132,513
_____________________________________________________________________________
716,907 629,800 650,966
Elimination--intersegment sales 162,133 156,525 132,513
_____________________________________________________________________________
Consolidated $1,708,761 $1,642,310 $1,647,425
=============================================================================
Operating income (loss): (1)
Bearings $ 12,821 $ 60,062 $ 33,854
Steel 7,635 (11,089) (34,982)
_____________________________________________________________________________
20,456 48,973 (1,128)
Other income (expense) (41,375) (35,542) (40,822)
_____________________________________________________________________________
Income (loss) before income taxes (20,919) 13,431 (41,950)
Provision (credit) for income taxes (3,250) 8,979 (6,263)
_____________________________________________________________________________
Income (loss) before cumulative effect
of accounting changes (17,669) 4,452 (35,687)
Cumulative effect of accounting changes (254,263) -0- -0-
_____________________________________________________________________________
Net income (loss) $ (271,932) $ 4,452 $ (35,687)
=============================================================================
Assets employed at year-end:
Bearings $ 996,549 $ 986,617 $1,023,047
Steel 793,170 751,833 736,092
_____________________________________________________________________________
$1,789,719 $1,738,450 $1,759,139
=============================================================================
Depreciation and amortization:
Bearings $ 62,965 $ 63,125 $ 60,635
Steel 55,438 51,308 48,617
_____________________________________________________________________________
$ 118,403 $ 114,433 $ 109,252
=============================================================================
<PAGE>
Capital expenditures:
Bearings $ 72,915 $ 73,292 $ 81,250
Steel 20,025 65,804 63,428
_____________________________________________________________________________
$ 92,940 $ 139,096 $ 144,678
=============================================================================
(1) The 1993 and 1991 impairment and restructuring charges of $48,000,000,
and $41,000,000, respectively have been treated as expenses of the related
industry segments.
32
<PAGE>
<PAGE>
Information by Geographic Area
1993 1992 1991
============================================================================
(Thousands of dollars)
Net sales from:
United States $1,351,565 $1,242,602 $1,246,088
Europe 209,688 255,625 262,061
Other countries 147,508 144,083 139,276
____________________________________________________________________________
$1,708,761 $1,642,310 $1,647,425
=============================================================================
Operating income (loss): (1)
United States $ 20,440 $ 32,145 $ (11,284)
Europe (12,074) 520 (155)
Other countries 12,090 16,308 10,311
_____________________________________________________________________________
$ 20,456 $ 48,973 $ (1,128)
=============================================================================
Income (loss) before income taxes:
United States $ (11,232) $ 5,603 $ (38,645)
Europe (14,485) (1,722) (5,181)
Other countries 4,798 9,550 1,876
_____________________________________________________________________________
$ (20,919) $ 13,431 $ (41,950)
=============================================================================
Income (loss) before cumulative
effect of accounting changes:
United States $ (4,955) $ 1,640 $ (26,764)
Europe (14,815) (2,161) (8,704)
Other countries 2,101 4,973 (219)
_____________________________________________________________________________
$ (17,669) $ 4,452 $ (35,687)
=============================================================================
Assets employed at year-end:
United States $1,533,882 $1,454,961 $1,435,187
Europe 188,376 204,468 239,981
Other countries 67,461 79,021 83,971
_____________________________________________________________________________
$1,789,719 $1,738,450 $1,759,139
=============================================================================
(1) The 1993 and 1991 impairment and restructuring charges of $48,000,000
and $41,000,000, respectively have been treated as expenses of the
related geographic segments.
Note: Foreign currency exchange losses were $7,246,000 in 1993; $4,853,000 in
1992 and $10,317,000 in 1991.
<PAGE>
Report of Independent Auditors
Board of Directors
The Timken Company
We have audited the accompanying consolidated balance sheets of The Timken
Company and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Timken Company and subsidiaries at December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles.
As described in Note 2 to the financial statements, in 1993 the company
changed its methods of accounting for postretirement benefits, postemployment
benefits and income taxes.
Canton, Ohio
February 3, 1994
33
<PAGE>
<PAGE>
Summary of Operations and Other Comparative Data
The Timken Company and Subsidiaries
1993 1992 1991
_____________________________________________________________________________
Statements of Income
Net sales:
Bearings $1,153,987 $1,169,035 $1,128,972
Steel 554,774 473,275 518,453
_____________________________________________________________________________
Total net sales 1,708,761 1,642,310 1,647,425
Cost of products sold 1,366,164 1,296,511 1,309,893
Selling, administrative and general
expenses 274,141 296,826 297,660
Impairment and restructuring charges 48,000 -0- 41,000
Operating income (loss) 20,456 48,973 (1,128)
Earnings before interest and taxes
(EBIT) 8,700 42,091 (15,277)
Interest expense 29,619 28,660 26,673
Income (loss) before income taxes (20,919) 13,431 (41,950)
Provision for income taxes (credit) (3,250) 8,979 (6,263)
Income (loss) before extraordinary
item and cumulative effect of
accounting changes (17,669) 4,452 (35,687)
Net income (loss) $ (271,932) $ 4,452 $ (35,687)
Balance Sheets
Inventory $ 299,783 $ 310,947 $ 320,076
Current assets 586,384 556,017 562,496
Working capital 153,971 165,553 148,950
Property, plant and equipment
(less depreciation) 1,024,664 1,049,004 1,058,872
Total assets 1,789,719 1,738,450 1,759,139
Total debt 276,476 320,515 273,104
Total liabilities 1,104,407 753,387 740,168
Shareholders' equity $ 685,312 $ 985,063 $1,018,971
Other Comparative Data
Net income (loss)/Total assets (15.2)% 0.3% (2.0)%
Net income (loss)/Net sales (15.9)% 0.3% (2.2)%
EBIT/Beginning invested capital 0.5% 2.6% (0.9)%
Inventory days (FIFO) 122.8 138.3 140.5
Net sales per associate $ 106,898 $ 98,171 $ 92,865
Capital expenditures $ 92,940 $ 139,096 $ 144,678
Depreciation and amortization $ 118,403 $ 114,433 $ 109,252
Capital expenditures/Depreciation 80.2% 124.4% 135.6%
Dividends paid per share (Note 2) $ 1.00 $ 1.00 $ 1.00
Income (loss) before extraordinary
item and cumulative effect of
accounting changes per share
(Notes 1 and 2) $ (0.57) $ 0.15 $ (1.21)
Debt to total capitalization 28.7% 24.5% 21.1%
Number of associates 15,985 16,729 17,740
Number of shareholders (Note 3) 20,684 24,041 26,048
Notes
(1) Excludes the cumulative effect of accounting changes in 1993, which
related to the adoption of FAS No. 106, 109 and 112, and the cumulative
effect of accounting changes in 1986, which related to the adoption of
FAS No. 87 and a change in the method of accounting for depreciation.
Also excluded is the extraordinary item recorded in 1985, which resulted
from the utilization of foreign tax credit carryforwards.
(2) Based on the average number of shares outstanding during each year.
(3) Includes an estimated count of shareholders having common stock held for
their accounts by banks, brokers and trustees for benefit plans.
<PAGE> 34
<PAGE>
1990* 1989 1988 1987 1986 1985 1984
_____________________________________________________________________________
(Thousands of dollars, except per share data)
$1,173,056 $1,042,122 $1,002,412 $ 826,383 $ 762,903 $ 774,922 $ 808,610
527,955 490,840 551,731 403,875 295,152 315,752 341,298
_____________________________________________________________________________
1,701,011 1,532,962 1,554,143 1,230,258 1,058,055 1,090,674 1,149,908
1,284,232 1,157,125 1,178,839 959,847 875,006 883,590 863,323
286,427 250,676 235,072 222,207 219,654 233,131 231,599
-0- -0- -0- -0- 80,000 -0- -0-
130,352 125,161 140,232 48,204 (116,605) (26,047) 54,986
125,155 113,710 132,745 47,891 (118,902) (32,797) 53,199
26,339 17,217 20,879 25,037 25,069 1,748 1,587
98,816 96,493 111,866 22,854 (143,971) (34,545) 51,612
43,574 41,148 45,954 12,535 (61,233) (27,579) 5,555
55,242 55,345 65,912 10,319 (82,738) (6,966) 46,057
$ 55,242 $ 55,345 $ 65,912 $ 10,319 $ 2,736 $ (3,903) $ 46,057
$ 379,543 $ 344,135 $ 350,410 $ 278,567 $ 247,615 $ 242,562 $ 259,143
657,865 608,224 619,456 485,163 406,206 415,511 433,141
238,486 359,773 348,322 255,910 100,716 151,915 112,743
1,025,565 932,828 941,121 957,641 976,600 935,673 814,423
1,814,909 1,565,961 1,593,031 1,466,634 1,403,529 1,375,419 1,279,124
266,392 80,647 182,341 180,805 263,219 218,530 238,111
740,208 501,157 619,315 543,541 596,907 586,138 489,253
$1,074,701 $1,064,804 $ 973,716 $ 923,093 $ 806,622 $ 789,281 $ 789,871
3.0% 3.5% 4.1% 0.7% 0.2% (0.3)% 3.6%
3.2% 3.6% 4.2% 0.8% 0.3% (0.4)% 4.0%
8.3% 7.6% 9.6% 3.6% (9.2)% (2.6)% 4.8%
163.2 167.5 161.0 162.9 165.7 164.8 175.0
$ 90,191 $ 88,878 $ 86,102 $ 73,576 $ 63,873 $ 62,108 $ 59,541
$ 120,090 $ 91,536 $ 78,943 $ 52,119 $ 55,175 $ 195,288 $ 241,640
$ 101,260 $ 91,070 $ 88,756 $ 84,649 $ 87,646 $ 77,682 $ 76,839
120.4% 100.5% 88.9% 61.6% 63.0% 251.4% 314.5%
$ 0.98 $ 0.92 $ 0.70 $ 0.50 $ 0.50 $ 0.90 $ 1.00
$ 1.85 $ 1.88 $ 2.34 $ 0.39 $ (3.35) $ (0.29) $ 1.96
19.9% 7.0% 15.8% 16.4% 24.6% 21.7% 23.2%
18,860 17,248 18,050 16,721 16,565 17,561 19,313
25,090 22,445 21,184 22,470 23,186 26,136 26,958
*Includes MPB Corporation operations for seven months.
35
<PAGE>
<PAGE>
APPENDIX TO EXHIBIT 13
On page 34 of the printed document, two bar charts were shown that contain
the following information:
(1) Total Net Sales (in Billions of Dollars)
Bearings Steel
________ _____
1984 $ 0.809 $ 0.341
1985 0.775 0.316
1986 0.763 0.295
1987 0.826 0.404
1988 1.002 0.552
1989 1.042 0.491
1990 1.173 0.528
1991 1.129 0.518
1992 1.169 0.473
1993 1.154 0.555
(2) Return on Net Sales (before extraordinary items and cumulative effect of
accounting changes):
Operating Income (Loss) Income (Loss)
_______________________ _____________
1984 4.8% 4.0%
1985 -2.4% -.6%
1986 -11.0% -7.8%
1987 3.9% .8%
1988 9.0% 4.2%
1989 8.2% 3.6%
1990 7.7% 3.2%
1991 -.1% -2.2%
1992 3.0% .3%
1993 1.2% -1.0%
On page 35 of the printed document, two bar charts were shown that contain
the following information:
(1) Earnings (before extraordinary items and cumulative effect of accounting
changes) and Dividends per Share:
Earnings Dividends
________ _________
1984 $1.96 $1.00
1985 -.29 0.90
1986 -3.35 0.50
1987 .39 0.50
1988 2.34 0.70
1989 1.88 0.92
1990 1.85 0.98
1991 -1.21 1.00
1992 .15 1.00
1993 -.57 1.00
<PAGE>
(2) Total Assets (in Billions of Dollars)
Bearings Steel
________ _____
1984 $0.661 $0.618
1985 0.639 0.737
1986 0.662 0.741
1987 0.717 0.750
1988 0.803 0.790
1989 0.823 0.743
1990 1.046 0.769
1991 1.023 0.736
1992 0.987 0.752
1993 0.997 0.793
<PAGE>
Exhibit 21. Subsidiaries of the Registrant
___________________________________________
The Timken Company has no parents.
The active subsidiaries of the Company (all of which are included in the
consolidated financial statements of the Company and its subsidiaries) are
as follows:
State or sovereign Percentage of
power under laws voting securities
Name of which organized owned by Company
____________________________________________________________________________
Timken Communications Company Ohio 100%
Timken do Brasil State of Sao Paulo, 100%
Commercio e Industria, Ltda. Brazil
Timken de Mexico S.A. de C.V. Mexico 100%
Australian Timken Proprietary, State of Victoria, 100%
Limited Australia
Timken Europa GmbH West Germany 100%
Timken South Africa (Pty.) South Africa 100%
Limited
Canadian Timken, Limited Province of Ontario, 100%
Canada
Nihon Timken K.K. Japan 100%
Latrobe Steel Company Pennsylvania 100%
The Timken Service & Sales Co. Ohio 100%
Timken Italia, S.R.L. Italy 100%
EDC, Inc. Ohio 100%
M.P.B. Corporation Delaware 100%
Timken Espana, S.L. Spain 100%
____________________
The Company also has a number of inactive subsidiaries which were
incorporated for name-holding purposes.
EXHIBIT 21
<PAGE>
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference of our report dated
February 3, 1994, with respect to the consolidated financial
statements and schedules of The Timken Company included in this
Annual Report (Form 10-K) for the year ended December 31, 1993,
in the following Registration Statements and in the related
Prospectuses:
Registration Registration Dated
Number Statement
2-93847 Form S-3 October 30, 1984
2-81738 Post-effective October 30, 1984
Amendment
No. 3 to Form S-3
33-11823 Form S-3 February 6, 1987
33-35773 Form S-3 July, 19, 1990
2-97340 Post-effective November 19, 1990
Amendment
No. 1 to Form S-8
33-36839 Post-effective November 19, 1990
Amendment
No. 1 to Form S-8
33-47185 Form S-8 April 20, 1992
33-50872 Form S-8 August 10, 1992
33-54360 Form S-8 November 6, 1992
33-54362 Form S-8 November 6, 1992
33-54452 Form S-8 November 6, 1992
33-62904 Form S-3 May 18, 1993
33-50609 Form S-8 October 15, 1993
33-50613 Form S-8 October 15, 1993
ERNST & YOUNG
Canton, Ohio
March 28, 1994
<PAGE>
POWER OF ATTORNEY
The undersigned Directors and Officers of The Timken Company,
an Ohio corporation (the "Company"), hereby constitute and appoint W.
R. Timken, Jr., Joseph F. Toot, Jr., Gene E. Little and Larry R.
Brown, and each of them, their true and lawful attorney or
attorneys-in-fact, with full power of substitution and
resubstitution, for them and in their name, place and stead, to sign
on their behalf as a Director of the Company, an Annual Report
pursuant to Section 13 or 15 (d) of the Securities Exchange Act of
1934 on Form 10-K for the fiscal year ended December 31, 1993 and to
sign any and all amendments to such Annual Report, and to file the
same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto
said attorney or attorney-in-fact, and each of them, full power and
authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully to all
intents and purposes as they might or could do in person, hereby
ratifying and confirming all that said attorney or attorneys-in-fact
or any of them or their substitutes, may lawfully do or cause to be
done by virtue thereof.
EXECUTED this 4th day of February, 1994.
/s/ Robert Anderson /s/ Ward J. Timken
_______________________________ _________________________________
Robert Anderson, Director Ward J. Timken, Director
/s/ Peter J. Ashton /s/ W. R. Timken, Jr.
_______________________________ _________________________________
Peter J. Ashton, Director; W. R. Timken, Jr., Director and
Executive Vice President/ Chairman - Board of Directors
President - Bearings
/s/ Stanley C. Gault /s/ Joseph F. Toot, Jr.
_______________________________ _________________________________
Stanley C. Gault, Director Joseph F. Toot, Jr., Director;
President and Chief Executive
Officer
/s/ J. Clayburn La Force, Jr. /s/ Charles H. West
_______________________________ ________________________________
J. Clayburn La Force, Jr., Charles H. West, Director;
Director Executive Vice President/
President - Steel
/s/ Robert W. Mahoney /s/ Alton W. Whitehouse
_______________________________ _________________________________
Robert W. Mahoney, Director Alton W. Whitehouse, Director
/s/ James W. Pilz /s/ Gene E. Little
_______________________________ _________________________________
James W. Pilz, Director Gene E. Little, Vice President -
Finance (Principal Financial
/s/ John M. Timken, Jr. Accounting Officer)
_______________________________
John M. Timken, Jr., Director
EXHIBIT 24
<PAGE>
