Notes to Consolidated Financial Statements
(Thousands of dollars, except share data)
13 Retirement and Postretirement Benefit Plans
The company sponsors defined contribution retirement and savings plans covering substantially all associates in the United States and certain salaried associates at non-U.S. locations. The company contributes Timken Company common stock to certain plans based on formulas established in the respective plan agreements. At December 31, 2003, the plans had 13,019,194 shares of Timken Company common stock with a fair value of $261,165. Company contributions to the plans, including performance sharing, amounted to $21,029 in 2003; $14,603 in 2002; and $13,289 in 2001. The company paid dividends totaling $6,763 in 2003; $6,407 in 2002; and $8,192 in 2001, to plans holding common shares.
The company and its subsidiaries sponsor several unfunded postretirement plans that provide health care and life insurance benefits for eligible retirees and dependents. Depending on retirement date and associate classification, certain health care plans contain contributions and cost-sharing features such as deductibles and coinsurance. The remaining health care and life insurance plans are noncontributory.
The company and its subsidiaries sponsor a number of defined benefit pension plans, which cover many of their associates except those at certain locations who are covered by government plans.
As part of the Torrington purchase agreement, the company agreed to prospectively provide former Torrington associates with substantially comparable retirement benefits for a specified period of time. The active Torrington associates became part of Timken’s defined benefit pension plans, but prior service liabilities and defined benefit plan assets remained with IR for the U.S.-based pension plans; however, the company did assume prior service liabilities for certain non-U.S.-based pension plans.
During 2003, the company made revisions, which became effective on January 1, 2004, to certain of its benefit programs for its U.S.-based employees resulting in a pre-tax curtailment gain of $10,720. Depending on an associate’s combined age and years of service with the company, defined benefit pension plan benefits were reduced or replaced by a new defined contribution plan. The company will no longer subsidize retiree medical coverage for those associates who do not meet a threshold of combined age and years of service with the company.
The company uses a measurement date of December 31 to determine pension and other postretirement benefit measurements for the pension plans and other postretirement benefit plans.
The following tables set forth the change in benefit obligation, change in plan assets, funded status and amounts recognized in the consolidated balance sheet of the defined benefit pension and postretirement benefits as of December 31, 2003 and 2002:
| |
Defined Benefit Pension Plans |
Postretirement Plans |
|
| |
2003 |
2002 |
2003 |
2002 |
|
Change in benefit obligation |
|
|
|
|
| Benefit obligation at beginning of year |
$ 2,117,144 |
$1,825,602 |
$ 720,675 |
$ 640,701 |
| Service cost |
47,381 |
36,115 |
6,765 |
4,357 |
| Interest cost |
137,242 |
132,846 |
49,459 |
47,505 |
| Amendments |
(2,350) |
4,165 |
(3,586) |
- |
| Actuarial losses |
111,230 |
223,763 |
20,228 |
77,224 |
| Associate contributions |
821 |
936 |
- |
- |
| Acquisition |
34,905 |
- |
65,516 |
- |
| International plan exchange rate change |
33,278 |
20,791 |
479 |
29 |
| Curtailment loss (gain) |
1,066 |
6,706 |
(8,097) |
980 |
| Benefits paid |
(142,995) |
(133,780) |
(49,221) |
(50,121) |
|
| Benefit obligation at end of year |
$ 2,337,722 |
$2,117,144 |
$ 802,218 |
$ 720,675 |
|
Change in plan assets(1) |
|
|
|
|
| Fair value of plan assets at beginning of year |
$ 1,198,351 |
$1,295,214 |
|
|
| Actual return on plan assets |
287,597 |
(91,994) |
|
|
| Associate contributions |
821 |
936 |
|
|
| Company contributions |
173,990 |
112,297 |
|
|
| Acquisition |
7,009 |
- |
|
|
| International plan exchange rate change |
22,349 |
15,678 |
|
|
| Benefits paid |
(141,975) |
(133,780) |
|
|
|
| Fair value of plan assets at end of year |
$ 1,548,142 |
$1,198,351 |
|
|
|
Funded status |
|
|
|
|
| Projected benefit obligation in excess of plan assets |
$ (789,580) |
$ (918,793) |
$ (802,218) |
$ (720,675) |
| Unrecognized net actuarial loss |
657,781 |
711,396 |
307,003 |
306,520 |
| Unrecognized net asset at transition dates, net of amortization |
(660) |
(1,102) |
- |
- |
| Unrecognized prior service cost (benefit) |
109,421 |
131,173 |
(37,701) |
(45,335) |
|
| Accrued benefit cost |
$ (23,038) |
$ (77,326) |
$ (532,916) |
$ (459,490) |
|
Amounts recognized in the consolidated balance sheet |
|
|
|
|
| Accrued benefit liability |
$ (674,502) |
$ (802,327) |
$ (532,916) |
$ (459,490) |
| Intangible asset |
106,518 |
129,042 |
- |
- |
| Minimum pension liability included in accumulated other comprehensive loss |
544,946 |
595,959 |
- |
- |
|
| Net amount recognized |
(23,038) |
$ (77,326) |
$ (532,916) |
$ (459,490) |
|
(1) Plan assets are primarily invested in listed stocks and bonds and cash equivalents.
The current portion of accrued pension cost, which is included in salaries, wages and benefits on the consolidated balance sheet, was $250,088 and $79,139 at December 31, 2003 and 2002, respectively. The current portion of accrued postretirement benefit cost, which is included in salaries, wages and benefits on the consolidated balance sheet, was $55,950 and $48,186 at December 31, 2003 and 2002, respectively.
Financial Summary • Letter to Shareholders • Soaring with Opportunities • Driving New Opportunities
Beyond Boundaries • Boundless Innovation • Boundless Drive to Excel • Corporate Profile
Financial Information • Directors • Officers and Executives • Shareholder Information
2003 Annual Report in Print Friendly Format (600K - PDF format)
|