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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)
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.
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.
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
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
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
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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
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
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.
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
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
THE TIMKEN COMPANY AND SUBSIDIARIES
Year Ended December 31, 1993
______________________________________________________________________________________________________
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)
Land $ 18,268 $ 8 $ (341) $ (92)(1) $ 18,088
245 (2)
Buildings &
improvements 326,355 5,377 (1,740) (1,798)(1)
1,475 (3) 329,669
Machinery &
equipment 1,709,913 77,042 (22,844) (8,065)(1)
11,599 (3) 1,767,645
Fast depreciating
equipment 34,066 10,513 -0- (457)(1)
(11,875)(4) 32,247
________________________________________________________________________________
TOTAL $2,088,602 $ 92,940 $(24,925) $ (8,968) $2,147,649
________________________________________________________________________________
(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."
(2) The increase relates to assets transferred from "Miscellaneous Receivables and Other Assets."
(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."
(4) The deduction is due to amortization credited to the asset account and charged to operations.
(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.
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
THE TIMKEN COMPANY AND SUBSIDIARIES
Year Ended December 31, 1992
______________________________________________________________________________________________________
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)
Land $ 18,382 $ -0- $ (8) $ (106)(1) $ 18,268
Buildings &
improvements 329,344 3,798 (43) (5,194)(1)
(1,550)(2) 326,355
Machinery &
equipment 1,665,120 120,780 (10,136) (26,345)(1)
(39,506)(2) 1,709,913
Fast depreciating
equipment 34,290 12,972 (33) (828)(1)
(12,335)(3) 34,066
________________________________________________________________________________
TOTAL $2,047,136 $137,550 $(10,220) $(85,864) $2,088,602
________________________________________________________________________________
(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."
(2) The deduction represents the decommissioning of assets as a part of the restructuring program
initiated by the Company in 1991.
(3) The deduction is due to amortization credited to the asset account and charged to operations.
(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.
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
THE TIMKEN COMPANY AND SUBSIDIARIES
Year Ended December 31, 1991
______________________________________________________________________________________________________
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)
Land $ 17,995 $ 375 $ -0- $ (30)(1)
42 (2) $ 18,382
Buildings &
improvements 297,093 24,650 (791) (606)(1)
8,998 (2) 329,344
Machinery &
equipment 1,565,726 107,921 (28,518) (3,074)(1)
23,065 (2) (1,665,120)
Fast depreciating
equipment 32,881 13,150 (69) (82)(1)
(11,590)(3) 34,290
_______________________________________________________________________________
TOTAL $1,913,695 $146,096 ($29,378) $ 16,723 $2,047,136
_______________________________________________________________________________
(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."
(2) The increase relates to assets transferred from "Miscellaneous Receivables and Other Assets."
(3) The deduction is due to amortization credited to the asset account and charged to operations.
(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.
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
THE TIMKEN COMPANY AND SUBSIDIARIES
Year Ended December 31, 1993
______________________________________________________________________________________________________
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)
Buildings &
improvements $ 143,854 $ 16,544 $ (1,573) $ (862)(1) $ 157,963
Machinery &
equipment 895,744 86,771 (17,556) (3,680)(1)
3,743 (2) 965,022
________________________________________________________________________________
TOTAL $1,039,598 $103,315 $(19,129) $ (799) $1,122,985
________________________________________________________________________________
(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."
(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."
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
THE TIMKEN COMPANY AND SUBSIDIARIES
Year Ended December 31, 1992
______________________________________________________________________________________________________
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)
Buildings &
improvements $137,175 $10,314 $ (25) $ (2,488)(1) $ 143,854
(1,122)(2)
Machinery &
equipment 851,089 88,810 (7,685) (13,195)(1)
(23,275)(2) 895,744
________________________________________________________________________________
TOTAL $988,264 $99,124 $(7,710) $(40,080) $1,039,598
________________________________________________________________________________
(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."
(2) The deduction represents the decommissioning of assets as part of the restructuring program
initiated by the Company in 1991.
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
THE TIMKEN COMPANY AND SUBSIDIARIES
Year Ended December 31, 1991
______________________________________________________________________________________________________
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)
Buildings &
improvements $122,454 $10,015 $ 664 $ (316)(1)
5,686 (2) $137,175
Machinery &
equipment 765,676 84,687 21,259 (1,541)(1)
23,526 (2) 851,089
________________________________________________________________________________
TOTAL $888,130 $94,702 $21,923 $27,355 $988,264
________________________________________________________________________________
(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."
(2) The addition represents assets transferred from "Miscellaneous Receivables and Other Assets."
VIII--VALUATION AND QUALIFYING ACCOUNTS
THE TIMKEN COMPANY AND SUBSIDIARIES
_________________________________________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E
_________________________________________________________________________________________________________
Additions
_______________________
(1) (2)
Balance at Charged to Charged to Deductions
Beginning Costs and Other Accounts --Describe Balance at
DESCRIPTION of Period Expenses --Describe (3) End of Period
_________________________________________________________________________________________________________
(Thousands of dollars)
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
______ _______ ______ _______
(1) Provision for uncollectible accounts included in expenses.
(2) The increase relates to the adoption of FASB Statement No. 109, "Accounting for Income Taxes."
(3) Actual accounts written off against the allowance--net of recoveries.
SCHEDULE IX--SHORT-TERM BORROWINGS
THE TIMKEN COMPANY AND SUBSIDIARIES
______________________________________________________________________________________________________
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)
Year ended December 31, 1993:
Short-term debt (1) $ 32,129 6.2% $ 75,584 $ 40,415 7.7%
Commercial paper (2) 62,907 10.2% 103,790 79,056 7.8%
Year ended December 31, 1992:
Short-term debt (1) $ 64,423 6.5% $ 64,423 $ 38,830 8.2%
Commercial paper (2) 71,730 8.4% 143,395 121,353 8.4%
Year ended December 31, 1991:
Short-term debt (1) $ 64,116 7.3% $ 64,116 $ 42,391 8.5%
Commercial paper (2) 70,865 8.1% 126,181 95,323 8.4%
(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.
(2) Commercial paper matures generally one to six months from date of issue with no provisions for
the extension of its maturity.
(3) The average amount outstanding during the period was computed by dividing the total of month-end
outstanding principal balances by 12.
(4) The weighted average interest rate during the period was computed by dividing actual interest
expense by average short-term obligations outstanding.
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.