The year 2003 was truly one of remarkable change and challenge. We took the boldest leap in our company’s history with our acquisition of The Torrington Company, increasing our size by nearly 50%. We now are a global leader in three complementary product and service lines – tapered roller bearings, needle roller bearings and alloy steels. By successfully integrating these two industry leaders, we are creating a platform for profitable growth – and boundless opportunities for our future.
Other 2003 achievements included:
- Record sales of $3.8 billion, including our first $1 billion quarter at the end of the year. The combination of Timken and Torrington product lines has expanded our market presence, creating greater opportunities to provide customers with valued solutions.
- Successful launches of innovative new products, adding approximately $174 million in sales.
- Startup of a joint-venture manufacturing facility in the United States that is expected to reduce bearing manufacturing costs.
- Significant expansion in key geographic and industrial markets, with a joint venture plant under construction in Suzhou, China; stronger business relationships with U.S. operations of Asian automakers and their suppliers; an expanded product line in industrial distribution; and greater penetration in aerospace and other key markets.
- Effective actions that improved our balance sheet following the $840 million acquisition of Torrington in February 2003. We had leveraged our balance sheet to purchase Torrington, with debt peaking at more than $1 billion. Then, we took steps to reduce our debt to $735 million or 40% of total capitalization – even lower than the 43% level at year-end 2002.
While our earnings fell short of our expectations, the Torrington acquisition was accretive to earnings in the first year. In order to deliver the rest of the shareholder value anticipated in the Torrington acquisition, our challenge is to:
- Improve the performance of our Automotive Group, which faced the simultaneous challenges of integrating two businesses and completing previously launched manufacturing rationalization programs.
- Mitigate record high prices for scrap steel and increased energy and alloy costs in our steel business.
- Overcome the impact of the continued cyclical trough in global industrial markets.
Boundless Change
We are optimistic. There are signs the markets are finally moving in our favor, and we have increased confidence that our
actions over the last few years position us well for continued profitable growth. |