Notes to Consolidated Financial Statements
(Thousands of dollars, except share data)
3 Earnings Per Share
The following table sets forth the reconciliation of the numerator and the denominator of earnings per share and earnings per share - assuming dilution for the years ended December 31:
|
| |
2003 |
2002 |
2001 |
|
| Numerator: |
|
|
|
Net income (loss) for earnings per share and earnings per share - assuming
dilution – income available to common shareholders |
$ 36,481 |
$ 38,749 |
$ (41,666) |
| Denominator: |
|
|
|
| Denominator for earnings per share – weighted-average shares |
82,945,174 |
61,128,005 |
$ 59,947,568 |
Effect of dilutive securities:
Stock options and awards – based on the treasury stock method |
214,147 |
507,334 |
(1) |
|
Denominator for earnings per share - assuming dilution – adjusted
weighted-average shares |
83,159,321 |
61,635,339 |
59,947,568 |
|
| Earnings per share |
$ 0.44 |
$ 0.63 |
$ (0.69) |
|
| Earnings per share - assuming dilution |
$ 0.44 |
$ 0.62 |
$ (0.69) |
|
(1) Addition of 161,211 shares would result in antidilution.
The exercise prices for certain of the stock options that the company
has awarded exceed the average market price of the company’s common stock. Such stock options are antidilutive and were not included in the computation of diluted earnings per share. The
antidilutive stock options outstanding were 4,414,626 and 4,083,100 at December 31, 2003 and 2002, respectively.
Under the performance unit component of the company’s long term
incentive plan, the Compensation Committee of the Board of Directors can elect to make payments that become due in the form of cash or shares of the company’s common stock (refer to
Note 9 - Stock Compensation Plans for additional discussion). Performance units granted if fully earned would represent 452,344 shares of the company’s common stock at December 31, 2003.
4 Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss consists of the following:
|
| |
2003 |
2002 |
2001 |
|
| Foreign currency translation adjustment |
$ (5,458) |
$ (80,520) |
$ (94,570) |
| Minimum pension liability adjustment |
(351,282) |
(383,095) |
(128,777) |
| Fair value of open foreign currency cash flow hedges |
(1,642) |
(2,062) |
(1,191) |
|
| |
$ (358,382) |
$ (465,677) |
$ (224,538) |
|
5 Financing Arrangements
Long-term debt at December 31, 2003 and 2002 was as follows:
|
| |
2003 |
2002 |
|
Fixed-rate Medium-Term Notes, Series A, due at various dates through
May 2028, with interest rates ranging from 6.20% to 7.76% |
$ 287,000 |
$ 292,000 |
Variable-rate State of Ohio Air Quality and Water Development
Revenue Refunding Bonds, maturing on November 1, 2025
(1.12% at December 31, 2003) |
21,700 |
21,700 |
Variable-rate State of Ohio Pollution Control Revenue Refunding
Bonds, maturing on June 1, 2033 (1.12% at December 31, 2003) |
17,000 |
17,000 |
Variable-rate State of Ohio Water Development Revenue
Refunding Bonds, maturing on May 1, 2007 (1.15% at December 31, 2003) |
8,000 |
8,000 |
Variable-rate State of Ohio Water Development Authority Solid Waste
Revenue Bonds, maturing on July 1, 2032 (1.18% at December 31, 2003) |
24,000 |
24,000 |
| Fixed-rate Unsecured Notes, maturing on February 15, 2010 with an interest rate of 5.75% |
250,000 |
- |
| Other |
12,471 |
11,166 |
|
| |
620,171 |
373,866 |
| Less current maturities |
6,725 |
23,781 |
|
| Long-term debt |
$ 613,446 |
$ 350,085 |
|
The maturities of long-term debt for the five years subsequent
to December 31, 2003, are as follows: 2004–$6,725; 2005–$3,400; 2006–$91,106; 2007–$8,538; and 2008–$17,299.
Interest paid was approximately $43,000 in 2003 and $33,000 in 2002 and 2001. This differs from interest expense due to timing of payments and interest capitalized of $0 in 2003; $436 in 2002; and $1,400 in 2001 as a part of major capital additions. The weighted average interest rate on commercial paper borrowings during the year was 1.7% in 2003, 2.1% in 2002 and 4.3% in 2001. The weighted-average interest rate on short-term debt, the majority of
which related to foreign debt, was 4.1% in 2003, 4.8% in 2002 and 5.8% in 2001.
In connection with the Torrington acquisition, the company entered
into new $875 million senior credit facilities on December 31, 2002, with a syndicate of financial institutions, comprised of a five-year revolving credit facility of up to $500 million and a one-year term loan facility of up to $375 million. The one-year term loan facility expired unused on February 18, 2003. The new revolving facility replaced the company’s then existing senior credit facility. Proceeds of the new senior credit facility were used to repay the amounts outstanding under the then existing credit facility.
Under the $500 million senior credit facility, the company has three
financial covenants: consolidated net worth; leverage ratio; and fixed charge coverage ratio. At December 31, 2003, the company was in compliance with the covenants under its senior credit
facility and its other debt agreements. At December 31, 2003, the company had outstanding letters of credit totaling $64.1 million, which reduced the availability under the $500 million senior credit facility to $435.9 million.
On December 19, 2002, the company entered into an Accounts Receivable Securitization financing agreement (Asset Securitization), which provides for borrowings up to $125 million, limited to certain borrowing base calculations, and is secured by certain trade receivables. Under the terms of the Asset Securitization, the company sells, on an ongoing basis, certain domestic trade receivables to Timken Receivables Corporation, a wholly owned consolidated subsidiary, that in turn uses the trade receivables to secure the borrowings, which are funded through a vehicle that issues commercial paper in the short-term market. As of December 31, 2003, there were no amounts outstanding under this facility. Any amounts outstanding under this facility would be reported on the company’s consolidated balance sheet in short-term debt. The yield on the commercial paper, which is the commercial paper rate plus program fees, is considered a financing cost, and is included in interest expense on the consolidated statement of operations. This rate was 1.56% at December 31, 2003.
The company and its subsidiaries lease a variety of real property
and equipment. Rent expense under operating leases amounted to $19,374, $14,536, and $16,799 in 2003, 2002 and 2001, respectively. At December 31, 2003, future minimum lease payments
for noncancelable operating leases totaled $81,052 and are payable as follows: 2004–$15,726; 2005–$14,747; 2006–$10,142; 2007–$8,050; 2008–$6,933; and $25,454 thereafter.
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