SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
1-1169 34-0577130
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(Commission File Number) (I.R.S. Employer Identification No.)
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ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
On February 18, 2003, The Timken Company ("Timken") completed the acquisition of the Engineered Solutions business ("Engineered Solutions" or "Torrington") of Ingersoll-Rand Company Limited ("IR"). Under the terms of the definitive Stock and Asset Purchase Agreement, dated as of October 16, 2002, as amended as of February 18, 2003, by and between Timken, on behalf of itself and certain of its subsidiaries, and IR, on behalf of itself and certain of its subsidiaries (the "Purchase Agreement"), Timken acquired certain IR subsidiaries, including The Torrington Company, joint venture interests and other assets, including real property, manufacturing facilities and related machinery and equipment used in the Engineered Solutions business, effective as of February 16, 2003 (the "Acquisition"). Pursuant to the Purchase Agreement, Timken paid IR cash consideration of $700 million, which is subject to post-closing purchase price adjustments, and issued approximately $140 million of Timken's common stock to Ingersoll-Rand Company, a subsidiary of IR.
Attached as an exhibit are unaudited pro-forma financial information for the six months ended June 30, 2003, and for the year ended December 31, 2002.
The unaudited pro forma financial statements have been prepared to assist in the analysis of the financial effects of Timken's acquisition of the Engineered Solutions business. The following unaudited pro forma financial statements are based on Timken's historical consolidated financial statements and the historical combined financial statements of Engineered Solutions as of and for the year ended December 31, 2002, and the period from January 1, 2003 to February 15, 2003. The historical financial statements of Timken and Engineered Solutions have been prepared in accordance with accounting principles generally accepted in the United States. The unaudited pro forma financial statements should be read in conjunction with Timken's audited consolidated financial statements and notes included in Timken's Annual Report on Form 10-K for the year ended December 31, 2002, the consolidated condensed unaudited financial statements and notes included in Timken's Quarterly Report on Form 10-Q for the six months ended June 30, 2003, and the combined financial statements of Engineered Solutions as of and for the year ended December 31, 2002. The unaudited pro forma statements of operations give effect to the Acquisition as if it had occurred at the beginning of the relevant period presented, after giving effect to certain adjustments, including intercompany sales, the amortization of intangible assets, interest expense on acquisition debt, depreciation of fixed assets, employee benefits and income tax effects. Unaudited pro forma earnings for each quarter presented include higher than normal cost of products sold, resulting from the one-time write-up of acquired inventories required by the purchase accounting rules. This charge decreased earnings per share by approximately $0.05 for both the six months ended June 30, 2003, for the year ended December 31, 2002, based on the preliminary asset valuation. The unaudited pro forma financial statements reflect pro forma adjustments that are described in the accompanying notes and are based on available information and certain assumptions Timken believes are reasonable, but are subject to change. The unaudited pro forma financial statements presented below do not reflect any anticipated operating efficiencies or cost savings from the integration of Engineered Solutions into Timken's business. Timken has made, in its opinion, all adjustments that are necessary to present fairly the pro forma information. The unaudited pro forma financial
statements do not purport to represent what Timken's actual results of operations or financial position would have been if the Acquisition and related transactions had occurred on such dates or to project Timken's results of operations or financial position for any future period.
99.1 Unaudited Pro Forma Financial Information for the six months ended June 30, 2003 and for the year ended December 31, 2002.
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 hereunto duly authorized.
THE TIMKEN COMPANY
By: /s/ William R. Burkhart
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William R. Burkhart
Senior Vice President and General Counsel
Date: September 12, 2003
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EXHIBIT INDEX
Exhibit Number Description of Document
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99.1 Unaudited Pro Forma Financial Information for the six months
ended June 30, 2003 and for the year ended December 31, 2002.
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Exhibit 99.1
Unaudited Pro Forma Statement of Operations For the Six Months Ended June 30, 2003
(In thousands of U.S. dollars, except per share data)
The Timken
Company Torrington Pro Forma
Historical Historical* Adjustments Pro Forma
------------ ------------ ------------ ------------
Net sales $ 1,828,260 $ 152,688 $ (1,445) (a) $ 1,979,503
Cost of products sold 1,539,925 140,481 71 (b) 1,680,477
------------ ------------ ------------ ------------
Gross profit 288,335 12,207 (1,516) 299,026
Selling, administrative and general expenses 240,468 16,555 18 $ 257,041
Impairment and restructuring charges 853 - - (c) 853
------------ ------------ ------------ ------------
Operating income (loss) 47,014 (4,348) (1,534) 41,132
Interest expense (23,275) (1,589) (748)(d) (25,612)
Interest income 418 - - 418
Other income (expense) 1,276 (13) - 1,263
------------ ------------ ------------ ------------
Income (loss) before income taxes 25,433 (5,950) (2,282) 17,201
Provision for income taxes 10,173 (468) (912)(f) 8,793
------------ ------------ ------------ ------------
Net income (loss) $ 15,260 $ (5,482) $ (1,370) $ 8,408
============ ============ ============ ============
Earnings per share $ 0.19 $ 0.11
Earnings per share - assuming dilution $ 0.19 $ 0.11
Average shares outstanding 79,198,167 79,198,167
Average shares outstanding - assuming dilution 79,402,600 79,402,600
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* The Torrington Statement of Operations is for the period from January 1, 2003 to February 15, 2003.
Unaudited Pro Forma Statement of Operations For the Year Ended December 31, 2002
(In thousands of U.S. dollars, except per share data)
The Timken
Company Torrington Pro Forma
Historical Historical Reclassifications* Adjustments Pro Forma
---------- ---------- ------------------ ----------- ---------
Net sales $ 2,550,075 $ 1,215,952 $ - $ (9,375) (a) $ 3,756,652
Cost of products sold 2,080,498 979,350 35,300 (6,974)(b) 3,088,174
----------- ----------- ---------- --------- --------
Gross profit 469,577 236,602 (35,300) (2,401) 668,478
Selling, administrative and general expenses 358,866 123,448 ** - (1,385)(c) 480,929
Impairment and restructuring charges 32,143 3,040 - - 35,183
----------- ----------- ---------- --------- --------
Operating (loss) income 78,568 110,114 (35,300) (1,016) 152,366
Interest expense (31,540) (16,439) - (6,374)(d) (54,353)
Interest income 1,676 - - - 1,676
Receipt of US Continuous Dumping and Subsidy
Offset Act payment 50,202 - 68,130 (68,130)(e) 50,202
Other income (expense) (13,388) 37,488 (32,830) - (8,730)
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Income before income taxes and cumulative effect
of change in accounting principle 85,518 131,163 - (75,520) 141,161
Provision for income taxes 34,067 53,708 - (30,292)(f) 57,483
----------- ----------- ---------- --------- --------
Income before cumulative effect of change in
accounting principle $ 51,451 $ 77,455 $ - $ (45,228) $ 83,678
=========== =========== ========== ========= ========
Before cumulative effect of change in accounting
principle:
Earnings per share $ 0.84 $ 1.01
Earnings per share - assuming dilution $ 0.83 $ 1.00
Average shares outstanding 61,128,005 61,128,005
Shares issued to Ingersoll-Rand - 9,395,973 9,395,973
Shares issued to public - 12,650,000 12,650,000
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61,128,005 22,045,973 83,173,978 (g)
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Average shares outstanding - assuming dilution 61,635,339 - 61,635,339
Shares issued to Ingersoll-Rand - 9,395,973 9,395,973
Shares issued to public - 12,650,000 12,650,000
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61,635,339 22,045,973 83,681,312 (g)
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* Certain amounts related to Torrington have been reclassified to conform with Timken's presentation.
** Amount includes $21.7 million for the year ended December 31, 2002 of allocated Ingersoll-Rand costs for srvices provided to Torrington.
Notes to Unaudited Pro Forma Statement of Operations
(a) Reflects the elimination of sales by Timken to Torrington.
(b) Reflects the following:
Jun. 30, 2003 Dec. 31, 2002
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i) Elimination of cost of products sold by Timken to Torrington. $ (1,173) $ (8,166)
ii) Adjustment to reduce depreciation expense for property, plant and
equipment purchased in the acquisition, based on a composite useful
life of 12 years. (862) (13,366)
iii) Adjustment to recognize additional pension expense. 1,775 6,282
iv) Expense associated with the write-up of acquired inventory based on
the preliminary asset valuation. - 6,254
v) Amortization of acquired identifiable intangible assets based on the
preliminary asset valuation and related useful lives. 1,100 6,600
vi) Elimination of periodic postretirement benefits costs related to
retirees not assumed by Timken in the acquisition and adjustment to
increase postretirement benefits costs related to active employees
acquired based on Timken plan provisions. (769) (4,578)
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$ 71 $ (6,974)
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(c) Reflects the following: Jun. 30, 2003 Dec. 31, 2002
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i) Adjustment to recognize additional pension expense. $ 17 $ 141
ii) Elimination of periodic postretirement benefits costs related to
retirees not assumed by Timken in the acquisition and adjustment to
increase postretirement benefits costs related to active employees
acquired based on Timken plan provisions. 1 (1,526)
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$ 18 $ (1,385)
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(d) Reflects interest expense on the pro forma acquisition debt instruments, as follows: Jun. 30, 2003 Dec. 31, 2002
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i) $250.0 million aggregate principal amount of unsecurred senior notes at 5.75% $(1,935) $ (14,375)
ii) $186.1 million in borrowings under our new senior credit facility at 2.78% (663) (5,173)
iii) Commitment fee on $313.9 million of unused revolver at 0.375% (164) (1,177)
iv) $125.0 million in borrowings under our new accounts receivable facility at 1.80% (303) (2,250)
v) Elimination of Torrington's interest expense 2,213 16,439
vi) Eliminate of commercial paper interset expense at 1.80% 104 162
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$ (748) $ (6,374)
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(e) Reflects the elimination of receipts under the US Continuous Dumping and Subsidy Offset Act (the "Act"). Pursuant to the Agreement, all amounts received under the Act for 2002 were retained by Ingersoll-Rand. Eighty percent (80%) of any amounts received by Torrington under the Act for 2003 and 2004 will be paid to Ingersoll-Rand.
(f) Reflects the income tax effects of the pro forma adjustments, based on an effective tax rate of 40%.
(g) Reflects Timken's average shares outstanding and average shares outstanding
- assuming dilution, based on (i) 9,395,973 shares issued to Ingersoll-Rand
and 12,650,000 shares issued to the public and (ii) a per share price of
$14.90.