1. UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
[X]Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended September 30, 1995.
Commission File No. 1-1169
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
(216) 438-3000
Registrant's telephone number, including area code
Not Applicable
Former name, former address and former fiscal year if changed
since last report.
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
___ ___
Common shares outstanding at September 30, 1995, 31,287,961.
<PAGE>
PART I. FINANCIAL INFORMATION 2.
THE TIMKEN COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
Sep. 30 Dec. 31
1995 1994
ASSETS ------ ------
Current Assets (Thousands of dollars)
Cash and cash equivalents......................... $9,506 $12,121
Accounts receivable, less allowances,
(1995-$7,147; 1994-$6,268)........................ 297,645 263,533
Deferred income taxes............................. 42,381 49,222
Inventories (Note 2) ............................. 381,935 332,304
------ ------
Total Current Assets.................... 731,467 657,180
Property, Plant and Equipment..................... 2,310,114 2,230,004
Less allowances for depreciation................. 1,279,190 1,199,553
------ ------
1,030,924 1,030,451
Costs in excess of net assets of acquired business,
less amortization, (1995-$14,129; 1994-$11,818)... 101,556 91,249
Deferred income taxes............................. 44,600 45,395
Other assets...................................... 46,700 34,459
------ ------
Total Assets................................ $1,955,247 $1,858,734
====== ======
LIABILITIES
Current Liabilities
Accounts payable and other liabilities............ $216,892 $216,568
Short-term debt and commercial paper.............. 134,367 128,612
Accrued expenses.................................. 166,203 133,444
------ ------
Total Current Liabilities............... 517,462 478,624
Noncurrent Liabilities
Long-term debt (Note 3) .......................... 151,162 150,907
Accrued pension cost.............................. 90,233 109,644
Accrued postretirement benefits cost.............. 392,916 386,668
------ ------
634,311 647,219
Shareholders' Equity (Note 4)
Common stock...................................... 315,336 307,060
Earnings invested in the business................. 499,387 440,083
Cumulative foreign currency translation adjustment (11,249) (14,252)
------ ------
Total Shareholders' Equity.............. 803,474 732,891
Total Liabilities and Shareholders' Equity.. $1,955,247 $1,858,734
====== ======
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION 3.
Continued
THE TIMKEN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Nine Months Ended Three Months Ended
Sep. 30 Sep. 30 Sep. 30 Sep. 30
1995 1994 1995 1994
------ ------ ------ ------
(Thousands of dollars, except per share data)
<S> <C> <C> <C> <C>
Net sales....................................... $1,674,159 $1,426,872 $519,463 $466,344
Cost of product sold............................ 1,286,640 1,121,927 403,912 365,728
------ ------ ------ ------
Gross Profit................................. 387,519 304,945 115,551 100,616
Selling, administrative and general expenses.... 225,974 211,905 77,552 70,744
------ ------ ------ ------
Operating Income............................. 161,545 93,040 37,999 29,872
Interest expense................................ (15,162) (19,293) (4,781) (5,130)
Other - net..................................... (9,575) (2,628) (2,427) (2,554)
------ ------ ------ ------
Other Income (Expense)....................... (24,737) (21,921) (7,208) (7,684)
Income Before Income Taxes................... 136,808 71,119 30,791 22,188
Provision for Income Taxes (Note 5)............. 52,261 28,447 11,763 7,896
------ ------ ------ ------
Net Income................................... $84,547 $42,672 $19,028 $14,292
======== ======== ======== ========
Net Income Per Share * ...................... $2.71 $1.38 $0.61 $0.46
======== ======== ======== ========
Dividends Per Share.......................... $0.81 $0.75 $0.27 $0.25
======== ======== ======== ========
* Per average shares outstanding................ 31,159,689 30,921,919 31,244,711 30,987,827
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION Continued 4.
THE TIMKEN COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
Cash Provided (Used) Sep. 30 Sep. 30
1995 1994
------ ------
OPERATING ACTIVITIES (Thousands of dollars)
<S> <C> <C>
Net Income.............................................. $84,547 $42,672
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.......................... 92,756 88,985
Provision (credit) for deferred income taxes........... 5,790 1,485
Stock issued in lieu of cash to employee benefit plans. 4,383 1,492
Changes in operating assets and liabilities:
Accounts receivable................................... (32,058) (35,756)
Inventories and other assets.......................... (72,561) (23,327)
Accounts payable and accrued expenses................. 22,469 5,493
Foreign currency translation.......................... (22) (99)
------ ------
Net Cash Provided (Used) by Operating Activities..... 105,304 80,945
INVESTING ACTIVITIES
Purchases of property, plant and equipment - net....... (89,313) (79,351)
FINANCING ACTIVITIES
Cash dividends paid to shareholders.................... (21,493) (19,284)
Payments on long-term debt............................. 269 (259)
Short-term debt activity - net......................... 2,755 23,053
------ ------
Net Cash Provided (Used) by Financing Activities..... (18,469) 3,510
Effect of exchange rate changes on cash................. (137) 274
Increase or (Decrease) in Cash and Cash Equivalents..... (2,615) 5,378
Cash and Cash Equivalents at Beginning of Period........ 12,121 5,284
------ ------
Cash and Cash Equivalents at End of Period.............. $9,506 $10,662
====== ======
</TABLE>
<PAGE>
<TABLE>
PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited) 5.
Note 1 -- Basis of Presentation
The accompanying consolidated condensed financial statements (unaudited) have
been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) and
disclosures considered necessary for a fair presentation have been included.
For further information, refer to the consolidated financial statements and
footnotes included in the company's annual report on Form 10-K for the year
ended December 31, 1994.
<CAPTION>
9/30/95 12/31/94
Note 2 -- Inventories ------ ------
(Thousands of dollars)
<C> <C>
Finished products $122,724 $94,162
Work-in-process and raw materials 217,647 198,161
Manufacturing supplies 41,564 39,981
------ ------
$381,935 $332,304
====== ======
Note 3 -- Long-term Debt 9/30/95 12/31/94
------ ------
(Thousands of dollars)
7-1/2% State of Ohio Pollution Control
Revenue Refunding Bonds, maturing on
January 1, 2002 $17,000 $17,000
State of Ohio Water Development Revenue
Refunding Bond, maturing on May 1, 2007.
The variable interest rate is tied to the
bank's tax exempt weekly interest rate.
The rate at September 30, 1995 is 4.20%. 8,000 8,000
State of Ohio Air Quality and Water Development
Revenue Refunding Bonds, maturing on
June 1, 2001. The variable interest rate
is tied to the bank's tax exempt weekly
interest rate. The rate at September 30, 1995
is 4.20% 21,700 21,700
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
Other 1,742 1,430
------ ------
181,442 181,130
Less: Current Maturities 30,280 30,223
------ ------
$151,162 $150,907
====== ======
</TABLE>
<PAGE>
PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited) 6.
Continued
Note 4 -- Shareholders' Equity 09/30/95 12/31/94
------ ------
Class I and Class II serial preferred stock (Thousands of dollars)
without par value:
Authorized -- 10,000,000 shares each class
Issued - none $0 $0
Common Stock without par value:
Authorized -- 100,000,000 shares
Issued (including shares in treasury)
1995 - 31,288,420 shares
1994 - 31,061,538 shares
Stated Capital 53,064 53,064
Other paid-in capital 262,293 254,002
Less cost of Common Stock in treasury
1995 - 459 shares
1994 - 180 shares 21 6
------ ------
$315,336 $307,060
====== ======
<TABLE>
An analysis of the change in capital and earnings invested in the business is as follows:
<CAPTION>
Common Stock
-------------------- Earnings Foreign
Other Invested Currency
Stated Paid-In in the TranslationTreasury
Capital Capital Business Adjustment Stock Total
------ ------ ------ ------ ------ ------
(Thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1994 $53,064 $254,002 $440,083 ($14,252) ($6) $732,891
Net Income 84,547 84,547
Dividends paid - $.81 per share (25,243) (25,243)
Employee benefit and dividend reinvestment plans: 8,291 (15) 8,276
Treasury - issued/acquired 279 shares
Common Stock - issued 226,882 shares
Foreign currency translation adjustment 3,003 3,003
------ ------ ------ ------ ------ ------
Balance September 30, 1995 $53,064 $262,293 $499,387 ($11,249) ($21) $803,474
====== ====== ====== ====== ====== ======
</TABLE>
<PAGE>
PART I. NOTES TO FINANCIAL STATEMENTS 7.
(Unaudited) Continued
Note 5 -- Income Tax Provision Nine Months Ended Three Months Ended
Sep. 30 Sep. 30 Sep. 30 Sep. 30
1995 1994 1995 1994
------ ------ ------ ------
U.S. (Thousands of dollars)
Federal $35,684 $20,283 $7,359 $6,231
State & Local 6,604 1,843 1,911 (382)
Foreign 9,973 6,321 2,493 2,047
------ ------ ------ ------
$52,261 $28,447 $11,763 $7,896
====== ====== ====== ======
Taxes provided exceed the U.S. statutory rate primarily due to state
and local taxes.
<PAGE>
8.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Continuing strong demand for the company's products, rising
productivity, and slightly improved pricing contributed to strong
increases in sales and profits for the quarter ended September 30,
1995. Sales and earnings for the first nine months set all-time
company records.
Although the company's performance was impacted somewhat by a
softening in the U.S. economy, particularly in the automotive
market, strong worldwide demand combined with the intense efforts of
the company's associates produced solid results. Sales in Mexico
remain light as a result of the unfavorable economic conditions
there. A slowdown has also occurred in Brazil; however, the company
has redirected excess production capacity at its manufacturing
facility there to meet the high demands in other parts of the world.
The company continues to operate near capacity in most of its
plants.
Higher overtime and training costs associated with increased
customer demand also slowed earnings growth in the third quarter.
The company expects this pattern to continue through the remainder
of 1995. Initiatives to reduce structural costs and improve
productivity remain on track.
Net sales for the third quarter were $519.5 million, up 11.4% from
$466.3 million a year earlier. The company increased sales in
virtually all of its markets except Mexico and Brazil. Gross profit
for the quarter was $115.6 million (22.2% of net sales) compared to
$100.6 million (21.6% of net sales) in the same period a year ago.
The higher sales volume and improved prices contributed to the
increase in profits. Gains resulting from efforts to reduce costs,
increase productivity, and improve capacity utilization were offset
in part by higher overtime and training costs incurred to meet
increased customer demand.
Selling, administrative, and general expenses were $77.6 million
(14.9% of net sales) in the third quarter of 1995 compared to $70.7
million (15.2% of net sales) in 1994. The company continues to
focus on continuous improvement in its administrative functions with
the intent of increasing overall effectiveness and efficiency.
Bearing Business net sales increased by 10.8% to $351.5 million in
the third quarter of 1995 compared to $317.3 million in the year-
<PAGE>
9.
Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont.)
Results of Operations (Cont.)
earlier period. Bearing Business operating income was $33.4 million
in the 1995's third quarter, up 53.9% over the $21.7 million reported
in the third quarter of 1994. The business recognized income in the
third quarter from a write-up related to the annual taking of
physical inventory which improved profitability. In addition, strong
volume, improved sales mix, and better pricing also occurred. These
gains were offset by higher employment costs related to the higher
level of activity, which continues to require higher than normal
training, overtime and the shift of some products to less efficient
processes.
Steel Business sales of $168 million were 12.8% higher than the $149
million recorded a year earlier. Operating income in 1995's third
quarter was $4.6 million, down from the $8.2 million in the year-
earlier period. An inventory write-down, including an adjustment
from the annual taking of its physical inventory, reduced earnings.
Although the Steel Business experienced higher sales volume, profits
were adversely affected by sharply higher scrap prices.
Interest expense was slightly lower in the third quarter of 1995
compared to the year-ago period. Interest expense for the first nine
months of 1995 is also lower primarily due to the lower interest on
loans outstanding at the company's subsidiary in Brazil. Other
expense - net for the first nine months of 1995 was high in
comparison to the same period in 1994 primarily due to a favorable
currency translation adjustment in 1994 that related to the company's
subsidiary in Brazil.
Financial Condition
Total assets increased by $96.5 million from December 31, 1994,
primarily as a result of increased accounts receivable and
inventories. The $32.1 million increase in accounts receivable, as
reflected in the Consolidated Statements of Cash Flows, relates
primarily to the increase in sales. The $72.6 million increase in
inventories and other assets relates primarily to the higher level of
production activity. The number of days' sales in receivables and
the number of days' supply in inventory at the end of the third
quarter were basically unchanged compared to the previous year-end
levels.
The increase in accounts payable and accrued expenses relates to the
increased level of activity, higher pension expense and higher
<PAGE>
10.
Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont.)
Financial Condition (Cont.)
income taxes payable related to the company's increased
profitability. In spite of substantially higher working capital
needs, the increase in debt was limited to a nominal amount. The
company continues to expect that debt will be reduced significantly
in 1995. The ratio of debt to total capital of 26.2% was lower than
the 27.6% at year-end 1994 primarily due to the increase in equity
that resulted from higher earnings.
Purchases of property, plant and equipment - net in the third quarter
of 1995 were $31.4 million compared to $27.3 million one year
earlier. The company is continuing to invest in advanced and
innovative technologies in its plants throughout the world. Capital
investments within existing plants have allowed the company to
increase capacity needed to meet the higher customer demand for its
products.
The increase in costs in excess of acquired business primarily
relates to the company's first quarter 1995 acquisition of Rail
Bearing Service, Inc.
The company continues to make excellent progress in its program
to accelerate continuous improvement in its manufacturing plants
worldwide and to strengthen its long-term competitive position.
The program, announced in December 1993, seeks to reduce the
company's manufacturing cost structure by about 15% based on 1993
volume levels. Total net savings resulting from the program are
expected to be at least $200 million on an annual basis. Certain
costs to implement the program, approximately $28 million, were
charged to operations in 1993 as part of a restructuring charge.
Incremental costs for engineering, employee training and other
manufacturing-related activities are expected to exceed $50
million during the implementation phase of the project. Such
costs will be reflected in the company's financial statements
when incurred and will be paid from operations. Incremental
capital expenditures relating to the program will be about $100
million and will result in increased depreciation in future
years.
The manufacturing improvement program is continuing at virtually
every manufacturing site worldwide. Most facilities are in the
process of implementing cost saving ideas that were generated in the
initial phase of the program. Since the inception of the program,
the company has spent and charged to operations
<PAGE>
11.
Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont.)
Financial Condition (Cont.)
approximately $7.9 million (of the projected $50 million) on
manufacturing-related costs involved with implementing completed
cost saving ideas. Approximately $1.7 million of these costs
were charged to operations in the third quarter 1995. In
addition, the company has spent approximately $21 million (of the
projected $100 million) on capital expenditures related to the
implementation of completed cost saving ideas, of which
approximately $2 million was spent in the third quarter of 1995.
A net positive cash flow from completed ideas of approximately
$16 million has been realized since the inception of the program
in 1994, with approximately $11 million being realized in 1995.
In addition, the continuous improvement ideas implemented as a
part of this program have also contributed to the increased
capacity needed to meet the high customer demand.
Of the $28 million reserve established in 1993 for certain
implementation costs, $14.2 million remained at December 31,
1994. In the third quarter of 1995, the company charged $2.0
million to the reserve which consisted mainly of consulting fees
paid to a third party for the cost reduction methodology and
specialized expertise in this area. Other charges to the reserve
in the third quarter 1995 related to employee separation and
equipment relocation costs. To-date, there have been
approximately 40 layoffs resulting from the implementation of
cost savings ideas. Management believes that the remaining
reserve of approximately $10 million is sufficient to cover
future cash expenditures which relate primarily to separation
costs.
In 1993, the company also provided $3 million for administrative
streamlining of which $1.8 million remained at December 31, 1994.
In the third quarter of 1995, approximately $0.2 million was
charged against the reserve, bringing year-to-date spending to
$0.5 million. The company believes that the $1.3 million reserve
balance at September 30, 1995, is adequate to cover future
expenditures.
During the third quarter, the company finalized revisions to its
unsecured, $300 million revolving credit agreement. The
modifications included a pricing change which will reduce the
company's fees and borrowing rates. The term of the credit
agreement was extended from August 31, 1999, to August 31, 2000.
<PAGE>
12.
Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont.)
Financial Condition (Cont.)
In addition, the existing $100 million 364-day term portion of
the credit agreement was terminated on August 31, 1995, and
incorporated as part of the 5-year term portion of the revised
$300 million agreement.
Other Information
During the third quarter, the company's Bearing Business
introduced a new family of custom-designed products -- SpexxTM
Performance Bearings. The product line includes both tapered and
cylindrical bearings that provide cost-effective options to
customers with particular lower volume needs. Customers can
match such needs as high corrosion resistance or maximum fatigue
life with specific SpexxTM performance attributes. The new
bearings serve a wide range of industrial applications and
incorporate the most advanced manufacturing technology in the
bearing industry.
On November 3, 1995, the Board of Directors declared a quarterly
cash dividend of $.30 per share payable December 4, 1995, to
shareholders of record at the close of business on November 17,
1995.
<PAGE>
13.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
The company is currently involved in negotiations with the
Ohio Attorney General's office regarding alleged
violations of the company's NPDES water discharge permits
at its Canton, Ohio location. The company believes it has
substantial defenses to the violations alleged by the
Attorney General, and that the matter will ultimately be
settled for an amount that will not be material to its
financial condition or results of operations.
In August 1994, the company's Latrobe Steel Company
subsidiary was served with a complaint by seven former
employees. Each of the employees had been terminated from
employment in late 1993 as part of the company's
administrative streamlining efforts. The plaintiffs'
claims include discrimination on account of age and/or
disability status, wrongful termination in violation of
public policy, breach of contract and promissory estoppel.
The relief requested includes reinstatement, back pay,
front pay, liquidated damages, attorneys' fees and
compensatory and punitive damages under the Americans With
Disabilities Act and Pennsylvania law.
The company has denied all of the plaintiff's allegations
and believes that it has valid defenses to the plaintiffs'
claims. Discovery in the case is now completed, and a
motion for summary judgment has been filed by the company.
The company believes that the ultimate resolution of this
matter will not be material to its financial condition or
results of operations.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
<PAGE>
14.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
4 Fourth Amended Agreement dated August 15,
1995, to the amended and restated credit
agreement as amended February 23, 1993, May
31, 1994, and November 15, 1994, between
Timken and certain banks.
10 The form of Deferred Compensation Agreement
entered into with Joseph F. Toot, Jr. and
W. R. Timken, Jr.
10.1 The Timken Company 1996 Deferred Compensation
Plan for officers and other key employees.
11 Computation of Per Share Earnings
27 Article 5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
The Timken Company
_______________________________
Date November 10, 1995 BY /s/ J. F. Toot, Jr.
________________________ _______________________________
J. F. Toot, Jr., Director;
President and Chief
Executive Officer
Date November 10, 1995 BY /s/ G. E. Little
________________________ _______________________________
G. E. Little
Vice President - Finance
FOURTH AMENDMENT AGREEMENT
TO THE AMENDED AND RESTATED CREDIT AGREEMENT
Fourth amendment agreement ("Amendment Agreement") made as
of the 15th day of August, 1995, by and among THE TIMKEN
COMPANY, an Ohio corporation ("Borrower"), SOCIETY
NATIONAL BANK ("Society"), successor by merger to
Ameritrust Company National Association, the various other
commercial banking institutions signatories hereto,
together with Society (the "Banks"), and Society, as Agent
(the "Agent") for the Banks.
WHEREAS, Borrower, Banks and Agent are parties to a
certain Amended and Restated Credit Agreement dated as of
December 31, 1991, as amended on February 26, 1993 (First
Amendment Agreement), May 31, 1994 (Second Amendment
Agreement), and November 15, 1994 (Third Amendment
Agreement), which provides, among other things, for a
revolving credit in the original aggregate amount of Three
Hundred Fifty Million Dollars ($350,000,000) at any one
time outstanding, subsequently amended to the current
aggregate amount of Two Hundred Million Dollars
($200,000,000) at any one time outstanding, all upon
certain terms and conditions (the "Credit Agreement");
WHEREAS, Borrower, Banks and Agent are parties to a
certain Revolving Credit Agreement dated November 15,
1994, which provides for a 364-day revolving credit
facility in the maximum principal amount of One Hundred
Million Dollars ($100,000,000) (the "364-Day Facility");
WHEREAS, as of the date hereof, there is no outstanding
principal or interest due and owing under the 364-Day
Facility or any Revolving Credit Note relating thereto;
WHEREAS, Borrower, Banks and Agent desire to cancel the
364 Day Facility in its entirety and to further amend the
Credit Agreement by increasing the amount of the revolving
credit to Three Hundred Million Dollars ($300,000,000), by
extending the Commitment Period to August 31, 2000, by
amending Annex A to the Credit Agreement and by making
certain other amendments thereto;
WHEREAS, each capitalized term used herein and not defined
herein shall be defined in accordance with the Credit
Agreement;
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants herein and for other valuable
consideration, Borrower, Banks and Agent agree as follows:
1. The Credit Agreement is hereby amended by deleting
the definition of "Commitment Period" in Article I in its
entirety, and substituting the following in place thereof:
"'Commitment Period' shall mean the period from the date
hereof to August 31, 2000."
2. The Credit Agreement is hereby amended by deleting
thedefinition of "LIBOR Margin" in Article I in its
entirety, and substituting the following in place thereof:
"'LIBOR Margin' shall mean Twenty-Five (25) Basis
Points so long as Moody's Investors Service, Inc.
('Moody's') or Standard & Poor's Corporation ('S&P')
accords to Borrower's bonds or debentures (or any
thereof) a ratingof A3 or higher (in the case of
Moody's), or a rating of A- or higher(in the case of
S&P); provided, however, that if at any time both
Moody's and S&P shall have lowered the ratings which
they accord any of to Borrower's bonds or debentures
to ratings the higher of which (in the case of
Moody's) is Baa1 or (in the case of S&P) is BBB+,
then during any such period and for so long as both
of such lowered ratings are in effect, the 'LIBOR
Margin' shall be increased to Thirty (30) Basis
Points; further provided, however, that if at any
time both Moody's and S&P shall have lowered the
ratings which they accord to any of Borrower's bonds
or debentures to ratings the higher of which (in the
case of Moody's) is Baa2 or (in the case of S&P) is
BBB then during any such period and for so long as
both of such lowered ratings are in effect, the
'LIBOR Margin' shall be increased to ThirtyFive (35)
Basis Points; and further provided, however, that if
at any time both Moody's and S&P shall have lowered
the ratings which they accord to any of Borrower's
bonds or debentures to ratings the higher of which
(in the case of Moody's) is Baa3 (or some lower
rating ssigned by Moody's) or (in the case of S&P) is
BBB(or some lower rating assigned by S&P) then during
any such period and for so long as both of such
lowered ratings are in effect, the 'LIBOR Margin'
shall be increased to Forty (40) Basis Points."
3. The Credit Agreement is hereby amended by deleting
the amount "Two Hundred Million and 00/100 Dollars
($200,000,000)" from the first paragraph of Section 2.1,
and substituting in place thereof, the amount "Three
Hundred Million and 00/100 Dollars ($300,000,000)".
4. The Credit Agreement is hereby amended by deleting
the date "August 31, 1999" wherever it appears in Section
2.1, and substituting for that deleted date, the date
"August 31, 2000".
5. The Credit Agreement is hereby amended by deleting
Section 2.5 in its entirety and substituting the following
in place thereof:
"SECTION 2.5. FACILITY FEES; TERMINATION OR REDUCTION OF
COMMITMENTS. Borrower agrees to pay to Agent, for the
ratable account of each Bank, as a consideration for its
Commitment hereunder, a facility fee calculated at a rate
or rates as hereinafter provided in this Section 2.5
(based on a year having 360 days and calculated for the
actual number of days elapsed) from the date hereof to and
including the last day of the Commitment Period, on the
average daily amount of such Bank's Commitment hereunder,
payable on September 30, 1995, and quarterannually
thereafter. The facility fee shall be calculated at a
rate expressed in terms of Basis Points per annum as
follows: The applicable facility fee shall be at a rate
of Ten (10) Basis Points per annum so long as Moody's
Investors Service, Inc. ('Moody's') or Standard & Poor's
Corporation ('S&P') accords to Borrower's bonds or
debentures (or any thereof) a rating of A3 or higher (in
the case of Moody's), or a ratingof Aor higher (in the
case of S&P); provided, however, that if at any time both
Moody's and S&P shall have lowered the ratings which they
accord to any of Borrower's bonds or debentures to ratings
the higher of which (in the case of Moody's) is Baa1 or
(in the case of S&P) is BBB+, then during any such period
and for so long as both of such lowered ratings are in
effect, the applicable facility fee shall be increased to
a rate of Twelve and One-Half (12.5) Basis Points per
annum; further provided, however, that if at any time both
Moody's and S&P shall have lowered the ratings which they
accord to any of Borrower's bonds or debentures to ratings
the higher of which (in the case of Moody's) is Baa2 or
(in the case of S&P) is BBB, then during any such period
and for so long as both of such lowered ratings are in
effect, the applicable facility fee shall be increased to
a rate of Fifteen (15) Basis Points per annum; and further
provided, however, that if at any time both Moody's and
S&P shall have lowered the ratings which they accord to
any of Borrower's bonds or debentures to ratings the
higher of which (in the case of Moody's) is Baa3 (or some
lower rating assigned by Moody's) or (in the case of S&P)
is BBB(or some lower rating assigned by S&P), then during
any such period and for so long as both of such lowered
ratings are in effect, the applicable facility fee shall
be increased to a rate of Twenty-Two and OneHalf (22.5)
Basis Points per annum. Borrower may at any time or from
time to time terminate in whole or ratably in part the
Commitments of the Banks hereunder to an amount not less
than the aggregate principal amount of the loans then
outstanding, by giving Agent not less than two (2)
Cleveland banking days' notice, provided that any such
partial termination shall be in an aggregate amount for
all the Banks of Ten Million Dollars ($10,000,000) or any
integral multiple thereof. The Agent shall promptly
notify each Bank of its proportionate amount and the date
of each such termination. After each such termination,
the facility fees payable hereunder shall be calculated
upon the Commitments of the Banks as so reduced. If the
Borrower terminates in whole the Commitments of the Banks,
on the effective date of such termination (the Borrower
having prepaid in full the unpaid principal balance, if
any, of the Notes outstanding together with all interest
(if any) and facility fees accrued and unpaid) all of the
Notes outstanding shall be delivered to the Agent marked
'Cancelled' and redelivered to the Borrower. Any partial
reduction in the Commitments of the Banks shall be
effective during the remainder of the Commitment Period."
6. The Credit Agreement is hereby amended by deleting
Annex A, and substituting in place thereof, a new Annex A
in the form of Annex A attached hereto.
7. The Credit Agreement is hereby amended by deleting
Exhibit A and Exhibit A-1 and substituting in place
thereof, new Exhibit A and new Exhibit A-1 in the form of
Exhibit A and Exhibit A-1 attached hereto.
8. Concurrently with the execution of this Amendment
Agreement, Borrower shall execute and deliver to each Bank
a Revolving Credit Note (Prime Rate Loans and Domestic
Fixed Rate Loans) and a Revolving Credit Note
(LIBOR Loans), of even date herewith, and being in the
form and substance of Exhibit A and Exhibit A-1 attached
hereto with the blanks appropriate filled. After receipt
of such new promissory notes, each Bank will mark the
promissory notes being replaced hereby "Replaced" and
return the same to Borrower.
9. Effective on the date hereof, the 364-Day Facility is
hereby cancelled in its entirety and shall no longer be in
force and effect. Concurrently with the execution of this
Amendment Agreement, Borrower shall pay, in good and
collected funds, all fees and expenses associated with the
364-Day Facility which are currently due and owing.
10. Borrower hereby represents and warrants to the Agent
and the Banks that (a) Borrower has the legal power and
authority to execute and deliver this Amendment Agreement;
(b) the officials executing this Amendment Agreement have
been duly authorized to execute and deliver the same and
bind Borrower with respect to the provisions hereof; (c)
the execution and delivery hereof by Borrower and the
performance and observance by Borrower of the provisions
hereof do not violate or conflict with the organizational
agreements of Borrower or any law applicable to Borrower
or result in a breach of any provision of or constitute a
default under any other agreement, instrument or document
binding upon or enforceable against Borrower; (d) as of
the date of this Amendment Agreement, the representations
and warranties contained in Article VII of the Credit
Agreement are true and correct, and (e) this Amendment
Agreement constitutes a valid and binding obligation of
Borrower in every respect, enforceable in accordance with
its terms.
11. Borrower hereby represents and warrants to the Agent
and the Banks that no Possible Default exists under the
Credit Agreement, nor will any occur immediately after the
execution and delivery of this Amendment Agreement by the
performance or observance of any provision hereof.
12. Each reference to the Credit Agreement that is made
in the Credit Agreement or any other writing shall
hereafter be construed as a reference to the Credit
Agreement as amended hereby. Except as herein otherwise
specifically provided, all provisions of the Credit
Agreement shall remain in full force and effect and be
unaffected hereby.
13. The rights and obligations of all parties hereto
shall be governed by the laws of the State of Ohio.
14. This Amendment Agreement may be executed in any
number of counterparts each of which, when so executed and
delivered, shall be an original, but such counterparts
shall together constitute one and the same instrument.
After execution of this Amendment Agreement by all the
parties hereto, this Amendment Agreement shall be
effective as of __________________, 1995.
<PAGE>
THE TIMKEN COMPANY SOCIETY NATIONAL BANK,
individually and as
Agent
By:\S\ G. E. Little By: \s\ Marianne Mail
and___________________________
MORGAN GUARANTY TRUST COMPANY THE BANK OF NEW YORK
OF NEW YORK
By:\s\ Timothy S. Broadbent By:\s\ Robert J. Joyce
THE BANK OF NOVA SCOTIA BANK ONE, AKRON,
N.A.
By:\s\ A. S. Norsworthy By:\s\ Bernard McRae, Jr.
CREDIT SUISSE MELLON BANK, N.A.
By:\s\ Christopher J. Eldin By:\s\Dwayne R. Finney
NATIONSBANK OF NORTH NBD BANK, N.A.
CAROLINA, N.A.
By:\s\ Michael Monte By:\s\ Paul DeMelo
THE NORTHERN TRUST COMPANY MIDLAND BANK, PLC
By:\s\ Curtis Tatham By:\s\ David Phillips
<PAGE>
ANNEX A
Banking Institutions Parties to the
Amended and Restated Credit Agreement Dated
as of December 31, 1991, as amended, with The
Timken Company; Commitments and Percentages
Name of Bank Maximum Amount Percentages
SOCIETY NATIONAL BANK $ 44,906,000 14.969
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK 36,826,000 12.2753333
THE BANK OF NEW YORK 24,252,000 8.084
THE BANK OF NOVA SCOTIA 24,252,000 8.084
BANK ONE, AKRON, N.A. 24,252,000 8.084
CREDIT SUISSE 24,252,000 8.084
MELLON BANK, N.A. 24,252,000 8.084
NBD BANK, N.A. 24,252,000 8.084
THE NORTHERN TRUST COMPANY 24,252,000 8.084
NATIONSBANK OF NORTH
CAROLINA, N.A. 24,252,000 8.084
MIDLAND BANK, PLC 24,252,000 8.084
TOTALS $300,000,000 100.00
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
(Prime Rate Loans and Domestic Fixed Rate Loans)
$_________________ Canton, Ohio
_________________, 1995
FOR VALUE RECEIVED, the undersigned, THE TIMKEN COMPANY,
an Ohio corporation (the "Borrower"), promises to pay
on August 31, 2000, to the order of
_______________________________________ (the "Bank")
at the Main Office of Society National Bank, Agent,
127 Public Square, Cleveland, Ohio 44114-1306, the
principal sum of
______________________________________________DOLLARS
or the aggregate unpaid principal amount of all
Prime Rate Loans and all Domestic Fixed Rate Loans
evidenced by this note made by the Bank to the
Borrower pursuant to Section 2.1 of the credit
agreement hereinafter referred to, whichever is
less, in lawful money of the United States of
America. Capitalized terms used herein shall have
the meanings ascribed to them in said credit
agreement.
The Borrower promises also to pay interest
on the unpaid principal amount of each such loan
from time to time outstanding from the date of
such loan until the payment in full thereof at
the rates per annum which shall be determined in
accordance with the provisions of Section 2.1 of
the credit agreement. Said interest shall be
payable on each date provided for in said Section
2.1; provided, however, that interest on any
principal portion which is not paid when due
shall be payable on demand.
The portions of the principal sum hereof from
time to time representing Prime Rate Loans and
Domestic Fixed Rate Loans, and payments of
principal of either thereof, will be shown on the
grid(s) attached hereto and made a part hereof.
All loans by the Bank to the Borrower pursuant to
the credit agreement (except LIBOR Loans) and all
payments on account of principal hereof shall be
recorded by the Bank prior to transfer hereof and
endorsed on such grid(s).
If this note shall not be paid at maturity,
whether such maturity occurs by reason of lapse
of time or by operation of any provision for
acceleration of maturity contained in the credit
agreement hereinafter referred to, the principal
hereof and the unpaid interest thereon shall bear
interest, until paid, for Prime Rate Loans and
Domestic Fixed Rate Loans at a rate per annum
which shall be two per cent (2%) above the Prime
Rate from time to time in effect. All payments
of principal of and interest on this note shall
be made in immediately available funds.
This note is issued in substitution of and as a
replacement for that certain Revolving Credit
Note dated November 15, 1994, and is one of the
Revolving Credit Notes referred to in the amended
and restated credit agreement dated as of
December 31, 1991, between the Borrower, the
banks named therein and Society National Bank, as
Agent, as may be amended from time to time, and
is entitled to the benefits thereof. Reference is
made to such credit agreement for a description
of the right of the undersigned to anticipate
payments hereof, the right of the holder
hereof to declare this note due prior to its
stated maturity, and other terms and conditions
upon which this note is issued.
Address:1835 Dueber Avenue THE TIMKEN COMPANY
Canton, Ohio 44706 By:\s\ G. E. Little
and__________________
<PAGE>
EXHIBIT A-1
REVOLVING CREDIT NOTE
(LIBOR Loans)
$_______________ Canton,Ohio
____________________, 1995
FOR VALUE RECEIVED, the undersigned, THE TIMKEN
COMPANY, an Ohio corporation (the "Borrower"),
promises to pay on August 31, 2000, to the order
of _______________________________________ (the
"Bank") at the Main Office of Society National
Bank, 127 Public Square, Cleveland, Ohio 44114-
1306 the principal sum of
_________________________________________ DOLLARS
or the aggregate unpaid principal amount of all
LIBOR Loans evidenced by this note made by the
Bank to the Borrower pursuant to Section 2.1 of
the credit agreement hereinafter referred to,
whichever is less, in lawful money of the United
States of America. Capitalized terms used herein
shall have the meanings ascribed to them in said
credit agreement.
The Borrower promises also to pay interest
on the unpaid principal amount of each such loan
from time to time outstanding from the date of
such loan until the payment in full thereof at
the rates per annum which shall be determined in
accordance with the provisions of Section 2.1 of
the credit agreement. Said interest shall be
payable on each date provided for in said Section
2.1; provided, however, that interest on any
principal portion which is not paid when due
shall be payable on demand.
The portions of the principal sum hereof from
time to time representing LIBOR Loans, and
payments of principal thereof, will be shown on
the grid(s) attached hereto and made a part
hereof. All LIBOR Loans by the Bank to the
Borrower pursuant to the credit agreement and all
payments on account of principal hereof shall be
recorded by the Bank prior to transfer hereof and
endorsed on such grid(s).
If this note shall not be paid at maturity,
whether such maturity occurs by reason of lapse
of time or by operation of any provision for
acceleration of maturity contained in the credit
agreement hereinafter referred to, the principal
hereof and the unpaid interest thereon shall bear
interest, until paid, for LIBOR Loans at a rate
per annum which shall be two per cent (2%) above
the Prime Rate from time to time in effect. All
payments of principal of and interest on this
note shall be made in immediately available
funds.
This note is issued in substitution of and
as a replacement for that certain Revolving
Credit Note dated November 15, 1994, and is one
of the Revolving Credit Notes referred to in the
amended and restated credit agreement dated as of
December 31, 1991, between the Borrower, the
banks named therein and Society National Bank, as
Agent, as may be amended from time to time, and
is entitled to the benefits thereof. Reference is
made to such credit agreement for a description
of the right of the undersigned to anticipate
payments hereof, the right of the holder hereof
to declare this note due prior to its stated
maturity, and other terms and conditions upon
which this note is issued.
Address:1835 Dueber Avenue THE TIMKEN COMPANY
Canton, Ohio 44706
By:\s\ G. E. Little
and___________________
DEFERRED COMPENSATION AGREEMENT
AGREEMENT dated as of ______________________, between The
Timken Company, an Ohio corporation (the "Company"), and
("Executive").
The Ominibus Budget Reconciliation Act of 1993 included a
new provision, Section 162(m) of the Internal Revenue Code (the
"Code"), which generally disallows a tax deduction to public
companies for compensation over $1 million paid to persons named
in the Summary Compensation Table for proxy statement purposes
and employed by the company at the end of the applicable year.
Executive and the Company desire to take action to ensure
that the Company is not denied a tax deduction for any
compensation paid to Executive owing to the limitation set forth
in Section 162(m) of the Code.
NOW, THEREFORE, in consideration of the premises, the
parties hereto have agreed, and do agree, as follows:
1. Deferral of Compensation. If, but for the application
of this Agreement, the Company's deduction of a portion of the
compensation due to Executive in a tax year would, in the
reasonable judgment of the Company, be disallowed pursuant to
Section 162(m) of the Code, then the Company shall defer payment
of that portion of the compensation due to Executive.
2. Period of Deferral. Executive may specify in a writing
substantially in the form attached hereto as Exhibit A (the
"Election Agreement") whether the period of deferral for an
amount deferred will be until (i) December 31 of the first
succeeding tax year in which such amount, when added to all other
compensation received or to be received by the Executive in such
year, would not be non-deductible by the Company by reason of
Section 162(m) of the Code, (ii) the date the Executive ceases to
be an employee of the Company by reason of death, retirement or
otherwise (or 90 days thereafter in the event the Executive
ceases to be an employee on December 31 of a year) or (iii) a
period of time following the date the Executive ceases to be an
employee by reason of death, retirement or otherwise, as
specified by the Executive in the Election Agreement. Executive
also may specify in the Election agreement whether the amount
deferred shall be paid to the Executive in a lump sum or in a
number of approximately equal quarterly installments (not to
exceed 40). Executive shall complete and deliver an initial
Election Agreement to the Vice President and General Counsel of
the Company on or before December 31, 1994. This Election
Agreement shall be effective for the 1995 tax year and shall
continue to be effective from year to year until revoked or
modified by written notice to the Vice President and General
Counsel of the Company. In order to be effective to revoke or
modify an election, a revocation or modification must be
delivered prior to the beginning of the year of service for which
such compensation is earned.
3. Interest on Deferred Amounts. Compensation that the
Executive elects to defer shall be treated as if it were set
aside in an account ("Account") on the date the compensation
would otherwise have been paid to the Executive. Such Account
will be credited with interest computed quarterly (based on
calendar quarters) on the lowest balance in the Account during
each quarter at the prime rate in effect according to The Wall
Street Journal on the last day of each calendar quarter plus one
percent. Interest for a calendar quarter shall be credited to
the Account as of the first day of the following quarter.
4. Death of the Executive. In the event of the death of
the Executive, the amount of the Executive's Account shall be
paid to the beneficiary ("Beneficiary") designated in a writing
substantially in the form attached hereto as Exhibit B (the
"Beneficiary Designation"), in accordance with the Executive's
Election Agreement. The Executive's Beneficiary Designation may
be changed at any time prior to his death by the execution and
delivery of a new Beneficiary Designation. The Beneficiary
Designation on file with the Company that bears the latest date
at the time of the Executive's death shall govern. In the
absence of a Beneficiary Designation or the failure of any
Beneficiary to survive the Executive, the amount of the
Executive's Account shall be paid to the Executive's estate in a
lump sum 90 days after the appointment of an executor or
administrator. In the event of the death of the Beneficiary or
all of the Beneficiaries after the death of the Executive, the
remaining amount of the Account shall be paid in a lump sum to
the estate of the last Beneficiary to receive payments 90 days
after the appointment of an executor or administrator.
5. Acceleration. Notwithstanding the provisions of the
foregoing: (i) if a Change in Control (as defined in the
Severance Agreement dated, (Sev Date) between (Name) and the
Company) occurs, the amount of the Executive's Account shall
immediately be paid to the Executive or Beneficiary in full; (ii)
in the event of an unforeseeable emergency, as defined in section
1.457-2(h) (4) and (5) of the Income Tax Regulations, that is
caused by an event beyond the control of the Executive or
Beneficiary and that would result in severe financial hardship to
the individual if acceleration were not permitted, the Company
may in its sole discretion accelerate the payment to the
Executive or Beneficiary of the amount of his Account, but only
up to the amount necessary to meet the emergency.
6. Non-alienation of Deferred Compensation. Except as
permitted by this Agreement, no right or interest under this
Agreement of the Executive or Beneficiary shall, without the
written consent of the Company, be (i) assignable or transferable
in any manner, (ii) subject to the alienation, anticipation,
sale, pledge, encumbrance, attachment, garnishment or other legal
process or (iii) in any manner liable for or subject to the debts
or liabilities of the Executive or Beneficiary.
7. Interest of Executive. The obligation of the Company
under this Agreement to make payment of amounts reflected in an
Account merely constitutes the unsecured promise of the Company
to make payments from its general assets as provided herein, and
neither Executive nor any Beneficiary shall have any interest in,
or a lien or prior claim upon, any property of the Company. The
Company may create a trust to hold funds, securities or other
assets to be used in payment of its obligations under this
Agreement, and may fund such trust; provided, however, that any
funds contained therein shall remain liable for the claims of the
Company's general creditors.
8. Governing Law. The provisions of this Agreement shall
be governed and construed in accordance with the laws of the
State of Ohio.
IN WITNESS WHEREOF, (Name) and the Company, by a duly
authorized officer, have executed this Agreement as of the day
and year first above written.
Attest: THE TIMKEN COMPANY
By:
Vice President and General Counsel Vice President - Human Resources
and Logistics
<PAGE>
EXHIBIT A
THE TIMKEN COMPANY
ELECTION AGREEMENT
This Election Agreement is being filed pursuant to the
Agreement dated as of ______________________ between The Timken
Company (the "Company") and the undersigned.
1. PERIOD OF DEFERRAL
Please defer payment or make payment of the first
installment of amounts deferred under the Agreement
as follows (check one):
a. Defer until December 31 of the first succeeding
year in which the deferred amount, or portion of
such deferred amount, would not be non-
deductible to the Company by reason of Section
162(m) of the Code [ ].
b. Deferred until the date I cease to be an
employee of the Company [ ].
c. Defer until ________________ after the date I
cease to be an employee of the Company [ ]
(specify period).
2. METHOD OF PAYMENT
Please make payment of the above specified
deferred amount together with all accrued interest
as follows (check one):
a. Pay in lump sum [ ].
b. Pay in ____ approximately equal quarterly
installments (may not be more than 40) [ ].
I understand that (i) this Election Agreement shall continue
to be effective from year to year and (ii) in order to be
effective to revoke or modify this Election Agreement with
respect to compensation otherwise payable in a particular year, a
revocation or modification must be delivered to the Secretary of
the Company prior to the beginning of the year of service for
which such compensation is earned. Capitalized terms used, but
not otherwise defined, in this Election Agreement shall have the
respective meanings assigned to them in the Agreement.
Dated this ______ day of ________________, 1994.
______________________________ ______________________________
(Signature) (Print or type name)
<PAGE>
EXHIBIT B
THE TIMKEN COMPANY
BENEFICIARY DESIGNATIONS
In accordance with the terms and conditions of the Agreement
dated as of __________________ between The Timken Company and the
undersigned, I hereby designate the person(s) indicated below as
my beneficiary(ies) to receive the amounts payable under said
Agreement.
Name
Address
Social Sec. Nos. of Beneficiary(ies)
Relationship(s)
Date(s) of Birth
In the event that the above-named beneficiary(ies)
predecease(s) me, I hereby designate the following person as
beneficiary(ies):
Name
Address
Social Sec. Nos. of Beneficiary(ies)
Relationship(s)
Date(s) of Birth
I hereby expressly revoke all prior designations of
beneficiary(ies), reserve the right to change the
beneficiary(ies) herein designated and agree that the rights of
said beneficiary(ies) shall be subject to the terms of the
Agreement. In the event that there is no beneficiary living at
the time of my death, I understand that the amounts payable under
the Agreement will be paid to my estate.
______________________ ______________________________
Date (Signature)
______________________________
(Print or type name)
THE TIMKEN COMPANY
1996 DEFERRED COMPENSATION PLAN
The Timken Company hereby establishes, effective as of
November 3, 1995, the 1996 Deferred Compensation Plan for
the Company. Such Plan provides key executives with the
opportunity to defer base salary or incentive compensation
payments in cash and in Common shares, in accordance with
the provisions of this Plan.
ARTICLE I
DEFINITIONS
For the purposes hereof, the following words and
phrases shall have the meanings indicated.
1. "Account" shall mean a bookkeeping account in
which Base Salary or Incentive Compensation which is
deferred by a Participant shall be recorded and to which
dividends, distributions and interest may be credited in
accordance with the Plan.
2. "Base Salary" shall mean the annual fixed or
base compensation, payable monthly or otherwise to a
Participant.
3. "Beneficiary" or "Beneficiaries" shall mean
the person or persons designated by a Participant in
accordance with the Plan to receive payment of the remaining
balance of the Participant's Account in the event of the
death of the Participant prior to receipt of the entire
amount credited to the Participant's Account.
4. "Board" shall mean the Board of Directors of
the Company.
5. "Code" shall mean the Internal Revenue Code
of 1986, as amended.
6. "Change in Control" shall mean that:
(i) 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 percent of the outstanding securities entitled to
vote generally in the election of directors or other
capital interests of the acquiring corporation or entity is
owned, directly or indirectly, by the shareholders of the
Company generally prior to the transaction; or
(ii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report
thereto), 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 thereto under the Exchange Act) of securities
representing 30 percent or more of the combined voting
power of the then-outstanding voting securities of the
Company; or
(iii) The Company shall file a report or proxy
statement with the Securities and Exchange Commission (the
"SEC") 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,
report or item thereto) 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
(iv) The individuals who constituted the Board at
the beginning of any period of two consecutive calendar
years cease for any reason to constitute at least a
majority thereof unless the nomination for election by the
Company's shareholders of each new member of the Board
was approved by a vote of at least two-thirds of the
members of the Board still in office who were members of the
Board at the beginning of any such period.
7. "Committee" shall mean the Compensation
Committee of the Board or such other Committee as may be
authorized by the Board to administer the Plan.
8. "Common Shares" shall mean shares of common
stock without par value of the Company or any security into
which such Common Shares may be changed by reason of any
transaction or event of the type referred to in Section 9 of
Article II of the Plan.
9. "Company" shall mean The Timken Company and
its successors, including, without limitation, the surviving
corporation resulting from any merger or consolidation of
The Timken Company with any other corporation or
corporations.
10. "Election Agreement" shall mean an agreement
in substantially the form attached hereto as Exhibit A, as
modified from time to time by the Company.
11. "Eligible Associate" shall mean an associate
of the Company (or a Subsidiary that has adopted the Plan)
who is a participant in the Management Performance Plan of
the Company. In the case of associates who are residents of
the United States, an Eligible Associate shall include only
those associates whose position with the Company has a mid-
point compensation of at least $100,000 and who is a
participant in the Management Performance Plan of the
Company. Unless otherwise determined by the Committee, an
Eligible Associate shall continue as such until termination
of employment.
12. "Incentive Compensation" shall mean (i) cash
incentive compensation earned as an associate pursuant to an
incentive compensation plan now in effect or hereafter
established by the Company, including, without limitation,
the Management Performance Plan, the Long-Term Incentive
Plans, and the Post-Tax Savings and Investment Pension Plan
Employee Contributions and Match and (ii) incentive
compensation payable in the form of Common Shares pursuant
to the Long-Term Incentive Plans or any similar plan
approved by the Committee for purposes of this Plan.
13. "Insolvent" shall mean that the Company has
become subject to a pending voluntary or involuntary
proceeding under the United States Bankruptcy Code or has
become unable to pay its debts as they mature.
14. "Long-Term Incentive Plans" shall mean The
Timken Company Long-Term Incentive Plan, as amended from
time to time, and The Timken Company 1985 Incentive Plan.
15. "Participant" shall mean any Eligible
Associate who has at any time elected to defer the receipt
of Base Salary or Incentive Compensation in accordance with
the Plan.
16. "Plan" shall mean this deferred compensation
plan, which shall be known as the 1996 Deferred Compensation
Plan for The Timken Company.
17. "Subsidiary" shall mean any corporation,
joint venture, partnership, unincorporated association or
other entity in which the Company has a direct or indirect
ownership or other equity interest and directly or
indirectly owns or controls more than 50 percent of the
total combined voting or other decision-making power.
18. "Year" shall mean a calendar year.
ARTICLE II
ELECTION TO DEFER
1. Eligibility. An Eligible Associate may elect
to defer receipt of all or a specified part of his or her
Base Salary or Incentive Compensation for any Year in
accordance with Section 2 of this Article. An Eligible
Associate's entitlement to defer shall cease with respect to
the Year following the Year in which he or she ceases to be
an Eligible Associate.
2. Election to Defer. An Eligible Associate who
desires to defer all or part of his or her Base Salary or
Incentive Compensation pursuant to this Plan must complete
and deliver an Election Agreement to the Director of
Compensation and Benefits of the Company prior to the
beginning of the first year of service for which such
compensation is payable. An Eligible Associate who timely
delivers an Election Agreement to the Director of
Compensation and Benefits of the Company shall be a
Participant. An Election Agreement that is timely delivered
shall be effective for the succeeding Year and, except as
otherwise specified by an Eligible Associate in his or her
Election Agreement, shall continue to be effective from Year
to Year until revoked or modified by written notice to the
Director of Compensation and Benefits of the Company or
until terminated automatically upon either the termination
of the Plan or the Company becoming Insolvent. In order to
be effective to revoke or modify an election to defer
compensation payable in any particular Year, a revocation or
modification must be delivered prior to the beginning of the
Year of service for which such compensation is payable.
3. Amount Deferred; Period of Deferral. A
Participant shall designate on the Election Agreement the
percentage or the dollar amount of his or her Base Salary or
Incentive Compensation that is to be deferred. A
Participant may specify in the Election Agreement that
different percentages or dollar amounts shall apply to
different compensation plans or different forms of payment,
i.e., cash or Common Shares. The applicable percentage(s)
or dollar amount(s) of Base Salary or Incentive Compensation
shall be deferred until (i) the date the Participant ceases
to be an associate by death, retirement or otherwise or (ii)
the date otherwise specified by the Participant in the
Election Agreement, including a date determined by reference
to the date the Participant ceases to be an associate by
death, retirement or otherwise.
4. Accounts.
(i) Cash compensation that a Participant elects
to defer shall be treated as if it were set aside in an
Account on the date the Base Salary or Incentive
Compensation would otherwise have been paid to the
Participant. Such Account will be credited with interest
computed quarterly (based on calendar quarters) on the
lowest balance in the Account during each quarter at such
rate and in such manner as determined from time to time
by the Committee. Unless otherwise determined by the
Committee, interest to be credited hereunder shall be
credited at the prime rate in effect according to the Wall
Street Journal on the last day of each calendar quarter
plus one percent. Interest for a calendar quarter shall be
credited to the Account as of the first day of the following
quarter.
(ii) Incentive Compensation payable in the form of
Common shares that a Participant elects to defer shall be
reflected in a separate Account, which shall be credited
with the number of Common Shares that would otherwise have
been issued or transferred and delivered to the Participant.
Such Account, following any applicable vesting period,
shall be credited from time to time with amounts equal
to dividends or other distributions paid on the number of
Common Shares reflected in such Account, and such Account
shall be credited with interest on cash amounts credited
to such Account from time to time in the manner provided
in Subsection (i) above.
5. Payment of Accounts. The amounts in
Participants' Accounts shall be paid as provided in this
Section 5.
(i) The amount of a Participant's Account
attributable to deferral of cash Incentive Compensation
shall be paid to the Participant in a lump sum or in a
number of approximately equal quarterly installments, as
designated by the Participant in the Election Agreement.
The amount of such Account remaining unpaid shall
continue to bear interest, as provided in Section 4 of this
Article. The lump sum payment or the first quarterly
installment, as the case may be, shall be made as soon as
practicable following the end of the period of deferral as
specified in Section 3 of this Article.
(ii) The number of Common Shares in a
Participant's Account attributable to deferral of
Incentive Compensation payable in the form of Common
Shares shall be issued or transferred to the Participant in
one installment or in a number of approximately equal
quarterly installments, as designated by the
Participant in the Election Agreement. The one installment
or first quarterly installment, as the case may be, shall
be made as soon as practicable following the end of the
period of deferral as specified in Section 3 of this
Article. All amounts credited to such Account in respect
of dividends, distributions and interest thereon as
provided in Subsection (ii) of Section 5 of this Article
shall likewise be paid to the Participant at the same
time the shares causing the dividend, distribution or
interest are transferred to the Participant.
6. Death of a Participant. In the event of the
death of a Participant, the amount of the Participant's
Account or Accounts shall be paid to the Beneficiary or
Beneficiaries designated in a writing substantially in the
form attached hereto as Exhibit B (the "Beneficiary
Designation"), in accordance with the Participant's Election
Agreement and Section 5 of this Article. A Participant's
Beneficiary Designation may be changed at any time prior to
his or her death by the execution and delivery of a new
Beneficiary Designation. The Beneficiary Designation on
file with the Company that bears the latest date at the time
of the Participant's death shall govern. In the absence of
a Beneficiary Designation or the failure of any Beneficiary
to survive the Participant, the amount of the Participant's
Account or Accounts shall be paid to the Participant's
estate in a lump sum 90 days after the appointment of an
executor or administrator. In the event of the death of the
Beneficiary or Beneficiaries after the death of a
Participant, the remaining amount of the Account or Accounts
shall be paid in a lump sum to the estate of the last
Beneficiary to receive payments 90 days after the
appointment of an executor or administrator.
7. Small Payments. Notwithstanding the
foregoing, if installment payments elected by a Participant
would result in a payment with a value of less than $500,
the entire amount of the Participant's Account or Accounts
may at the discretion of the Committee be paid in a lump sum
in accordance with Section 6 of this Article.
8. Acceleration. Notwithstanding the provisions
of the foregoing: (i) if a Change in Control occurs,
the amount of each Participant's Account or Accounts shall
immediately be paid to the Participant in full; (ii) in the
event of an unforeseeable emergency, as defined in section
1.457-2(h) (4) and (5) of the Income Tax Regulations, that
is caused by an event beyond the control of the Participant
or Beneficiary and that would result in severe financial
hardship to the individual if acceleration were not
permitted, the Committee may in its sole discretion
accelerate the payment to the Participant or Beneficiary of
the amount of his or her Account or Accounts, but only up to
the amount necessary to meet the emergency.
9. Adjustments. The Committee may make or
provide for such adjustments in the numbers of Common Shares
credited to Participants' Accounts, and in the kind of
shares so credited, as the Committee in its sole discretion,
exercised in good faith, may determine is equitably required
to prevent dilution or enlargement of the rights of
Participants that otherwise would result from (i) any stock
dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of
the Company, or (ii) any merger, consolidation, spin-off,
split-off, spin-out, split-up, reorganization, partial or
complete liquidation or other distribution of assets,
issuance of rights or warrants to purchase securities, or
(iii) any other corporate transaction or event having an
effect similar to any of the foregoing. Moreover, in the
event of any such transaction or event, the Committee, in
its discretion, may provide in substitution for any or all
Common Shares deliverable under this Plan such alternative
consideration as it, in good faith, may determine to be
equitable in the circumstances.
10. Fractional Shares. The Company shall not be
required to issue any fractional Common Shares pursuant to
this Plan. The Committee may provide for the elimination of
fractions or for the settlement of fractions in cash.
<PAGE>
ARTICLE III
ADMINISTRATION
The Company, through the Committee, shall be
responsible for the general administration of the Plan and
for carrying out the provisions hereof. The Committee shall
have all such powers as may be necessary to carry out the
provisions of the Plan, including the power to (i) determine
all questions relating to eligibility for participation in
the Plan and the amount in the Account or Accounts of any
Participant and all questions pertaining to claims for
benefits and procedures for claim review, (ii) resolve all
other questions arising under the Plan, including any
questions or construction, and (iii) take such further
action as the Company shall deem advisable in the
administration of the Plan. The actions taken and the
decisions made by the Committee hereunder shall be final and
binding upon all interested parties.
ARTICLE IV
AMENDMENT AND TERMINATION
The Company reserves the right to amend or
terminate the Plan at any time by action of the Board;
provided, however, that no such action shall adversely
affect any Participant or Beneficiary who has an Account, or
result in the acceleration of payment of the amount of any
Account (except as otherwise permitted under the Plan),
without the consent of the Participant or Beneficiary.
<PAGE>
ARTICLE V
MISCELLANEOUS
1. Non-alienation of Deferred Compensation.
Except as permitted by this Plan, no right or interest under
this Plan of any Participant or Beneficiary shall, without
the written consent of the Company, be (i) assignable or
transferable in any manner, (ii) subject to alienation,
anticipation, sale, pledge, encumbrance, attachment,
garnishment or other legal process or (iii) in any manner
liable for or subject to the debts or liabilities of the
Participant or Beneficiary.
2. Participant by Associates of Subsidiaries.
An Eligible Associate who is employed by a Subsidiary and
elects to participate in the Plan shall participate on the
same basis as an associate of the Company. The Account or
Accounts of a Participant employed by a Subsidiary shall be
paid in accordance with the Plan solely by such Subsidiary
to the extent attributable to Base Salary or Incentive
Compensation that would have been paid by such Subsidiary in
the absence of deferral pursuant to the Plan.
3. Interest of Associate. The obligation of
the Company under the Plan to make payment of amounts
reflected in an Account merely constitutes the unsecured
promise of the Company to make payments from its general
assets or in the form of its Common Shares, as the case may
be, as provided herein, and no Participant or Beneficiary
shall have any interest in, or a lien or prior claim upon,
any property of the Company. Further, no Participant or
Beneficiary shall have any claim whatsoever against any
Subsidiary for amounts reflected in an Account. Nothing in
this Plan shall be construed as guaranteeing future
employment to Eligible Associates and nothing in this Plan
shall be considered in any manner a contract of employment.
It is the intention of the Company that the Plan be unfunded
for tax purposes of Title I of ERISA. The Company may
create a trust to hold funds, Common Shares or other
securities to be used in payment of its obligations under
the Plan, and may fund such trust; provided, however, that
any funds contained therein shall remain liable for the
claims of the Company's general creditors.
4. Claims of Other Persons. The provisions of
the Plan shall in no event be construed as giving any other
person, firm or corporation any legal or equitable right as
against the Company or any Subsidiary or the officers,
employees or directors of the Company or any Subsidiary,
except any such rights as are specifically provided for in
the Plan or are hereafter created in accordance with the
terms and provisions of the Plan.
5. Severability. The invalidity and
unenforceability of any particular provision of the Plan
shall not affect any other provision hereof, and the Plan
shall be construed in all respects as if such invalid or
unenforceable provision were omitted herefrom.
6. Governing Law. Except to the extent preempted
by federal law, the provisions of the Plan shall be governed
and construed in accordance with the laws of the State of
Ohio.
7. Relationship to Other Plans. This Plan is
intended to serve the purposes of and to be consistent with
the Long-Term Incentive Plans and any similar plan approved
by the Committee for purposes of this Plan. The issuance or
transfer of Common Shares pursuant to this Plan shall be
subject in all respects to the terms and conditions of the
Long-Term Incentive Plans and any other such plan. Without
limiting the generality of the foregoing, Common Shares
credited to the Accounts of Participants pursuant to this
Plan as Incentive Compensation shall be taken into account
for purposes of Section 3 of the Long-Term Incentive Plans
(Shares Available Under the Plans) and for purposes of the
corresponding provisions of any other such plan.
<PAGE>
EXHIBIT A
Page 1 of 3
1996 DEFERRED COMPENSATION PLAN
THE TIMKEN COMPANY
ELECTION AGREEMENT
I, ____________________________, hereby elect to
participate in the 1996 Deferred Compensation
Plan for The Timken Company (the "Plan") with respect to the
compensation that I may receive beginning January 1, 1996.
I hereby elect to defer payment of the compensation
which I otherwise would be entitled to receive as follows:
Deferral of Cash
1. Percentage or dollar amount of bonus, if any, payable
under the Management Performance Plan (a) in 1996 only []
or (b) in 1996 and in later years [ ] (check one):
25% [ ] 50% [ ] 100% [ ] ___% [ ] $_______ [ ]
2. Percentage or dollar amount, if any, payable under the
Post-Tax Savings and Investment Pension Plan Employee
Contributions and Match (a) in 1996 only [ ] or (b) in
1996 and in later years [ ] (check one):
25% [ ] 50% [ ] 100% [ ] ___% [ ] $_______ [ ]
3. Percentage or dollar amount of cash award, if any,
payable as a result of the vesting of Deferred Dividend
Shares (a) in 1996 only [ ] or (b) in 1996 and in later
years [ ] (check one):
25% [ ] 50% [ ] 100% [ ] ___% [ ] $_______ [ ]
4. Percentage or dollar amount of Base Salary (a) for 1996
only [ ] or (b) for 1996 and for later years [ ]
(check one):
25% [ ] 50% [ ] 100% [ ] ___% [ ] $_______ [ ]
<PAGE>
EXHIBIT A
Page 2 of 3
5. Please make payment of the above specified cash
compensation together with all accrued interest
reflected in my Account as follows:
a. Pay in lump sum [ ]
b. Pay in ____ approximately equal quarterly
installments [ ]
6. Please defer payment or make payment of first
installment as follows:
a. Defer until the date I cease to be an associate []
b. Defer until ________ [ ] (specify date or number
of years following termination of employment)
DEFERRAL OF COMMON SHARES
1. Percentage or dollar amount value of Common Shares, if
any, payable as a result of the vesting of Deferred
Dividend Shares (a) in 1996 only [ ] or (b) in 1996 and
in later years [ ] (check one):
25% [ ] 50% [ ] 100% [ ] ___% [ ] $_______ [ ]
2. Please make payment of the above Common Shares together
with all accrued amounts in my Account as follows:
a. Pay in lump sum [ ]
b. Pay in ____ approximately equal quarterly
installments [ ]
3. Please defer my receipt of Common Shares together with
the cash credited to my Account equal to dividends or other
distributions paid on the number of shares reflected in
such Account, together with all accrued interest, as
follows:
a. Defer until the date I cease to be an associate []
b. Defer until ________ [ ] (specify date or number
of years following termination of employment)
<PAGE>
EXHIBIT A
Page 3 of 3
I acknowledge that I have reviewed the Plan and
understand that my participation will be subject to the
terms and conditions contained in the Plan. Capitalized
terms used, but not otherwise defined, in this Election
Agreement shall have the respective meanings assigned to
them in the Plan.
I understand that (i) this Election Agreement shall
continue to be effective from Year to Year except as
specified above and except as otherwise provided in the Plan
and (ii) in order to be effective to revoke or modify this
Election Agreement with respect to compensation otherwise
payable in a particular Year, a revocation or modification
must be delivered to the Director of Compensation and
Benefits of the Company ____ prior to the beginning of the
first Year of service for which such compensation is
payable.
I acknowledge that I have been advised to consult with
my own financial, tax, estate planning and legal advisors
before making this election to defer in order to determine
the tax effects and other implications of my participation
in the Plan.
Dated this ______ day of _____, 1995.
________________________________ ______________________________
(Signature) (Print or type name)
<PAGE>
EXHIBIT B
1996 DEFERRED COMPENSATION PLAN
THE TIMKEN COMPANY
BENEFICIARY DESIGNATIONS
In accordance with the terms and conditions of the 1996
Deferred Compensation Plan of The Timken Company (the
"Plan"), I hereby designate the person(s) indicated below as
my beneficiary(ies) to receive the amounts payable under
said Plan.
Name
Address
Social Sec. Nos. of Beneficiary(ies)
Relationship(s)
Date(s) of Birth
In the event that the above-named beneficiary(ies)
predecease(s) me, I hereby designate the following person as
beneficiary(ies):
Name
Address
Social Sec. Nos. of Beneficiary(ies)
Relationship(s)
Date(s) of Birth
I hereby expressly revoke all prior designations of
beneficiary(ies), reserve the right to change the
beneficiary(ies) herein designated and agree that the rights
of said beneficiary(ies) shall be subject to the terms of
the Agreement. In the event that there is no beneficiary
living at the time of my death, I understand that the
amounts payable under the Agreement will be paid to my
estate.
______________________ ______________________________
Date (Signature)
______________________________
(Print or type name)
STOCK OPTION CALCULATION - EARNINGS PER SHARE
<TABLE>
Exhibit 11 - COMPUTATION OF PER SHARE EARNINGS
(Thousands of dollars, except per share data)
<CAPTION>
Nine Months Three Months
Ended September 30 Ended September 30
1995 1994 1995 1994
PRIMARY ------------------------ ------------------------
<S> <C> <C> <C> <C>
Average shares outstanding 31,159,689 30,921,919 31,244,711 30,987,827
Net effect of stock
options - based on the
treasury stock method using
average market price (1) (1) (1) (1)
------------------------ ------------------------
31,159,689 30,921,919 31,244,711 30,987,827
Net income (loss) $84,547 $42,672 $19,028 $14,292
Per-share amount $2.71 $1.38 $0.61 $0.46
===== ===== ===== =====
FULLY DILUTED
Average shares outstanding 31,159,689 30,921,919 31,244,711 30,987,827
Net effect of dilutive stock
options - based on the
treasury stock method using
the average quarterly market
price, if higher than exercise
price 317,760 152,755 380,489 228,789
------------------------ ------------------------
31,477,449 31,074,674 31,625,200 31,216,616
Net income (loss) $84,547 $42,672 $19,028 $14,292
Per-share amount $2.69 $1.37 $0.60 $0.46
===== ===== ===== =====
(1) Incremental number of shares excluded from calculation since they
do not have a dilutive effect.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
company's consolidated Balance Sheet and Profit & Loss financial statements and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 9,506
<SECURITIES> 0
<RECEIVABLES> 304,792
<ALLOWANCES> 7,147
<INVENTORY> 381,935
<CURRENT-ASSETS> 731,467
<PP&E> 2,310,114
<DEPRECIATION> 1,279,190
<TOTAL-ASSETS> 1,955,247
<CURRENT-LIABILITIES> 517,462
<BONDS> 151,162
<COMMON> 315,336
0
0
<OTHER-SE> 488,138
<TOTAL-LIABILITY-AND-EQUITY> 1,955,247
<SALES> 1,674,159
<TOTAL-REVENUES> 1,674,159
<CGS> 1,286,640
<TOTAL-COSTS> 1,286,640
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,162
<INCOME-PRETAX> 136,808
<INCOME-TAX> 52,261
<INCOME-CONTINUING> 84,547
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84,547
<EPS-PRIMARY> 2.71
<EPS-DILUTED> 2.69
</TABLE>
