The Timken Company (USA) reported third quarter 2002 sales and earnings both rose from 2001, while the company showed a net loss due to one-time charges related to reorganization expenses and goodwill amortization.

Third quarter sales rose 9%, to $628.6 million from 2001's $577.7 million. Gross profit in the period rose 22%, to $111.3 million from $90.9 million.

However, in the third quarter, Timken took charges and adjustments of $12.7 million, including a $20.5 million goodwill adjustment. Including these adjustments, the company recorded a net loss of $10.9 million in the quarter, against a loss of $30.5 million for third quarter of 2001.

Since the release of these earnings numbers, Timken has been strongly criticized in the financial community for distributing only "adjusted" or pro forma earnings, rather than earnings calculated according to GAAP (Generally Accepted Accounting Principles). Since last year and in the wake of widespread financial scandals, the initiative to curtail the use of pro forma financial statements has gained significant momentum. In a recent rare appearance on the television financial network CNBC, Timken's President and CEO James Griffith was distracted from his message about the company; instead, he was forced to spend much of his time defending the company's release of pro forma rather than GAAP financials.

Mr. Griffith commented on the quarter's results: "Our third-quarter results demonstrate the ongoing success of our strategic manufacturing restructuring and cost-cutting actions, which are improving our profitability. These initiatives are on track to deliver an annualized savings rate of $80 million by the end of the year. Automotive demand also continued strong in the quarter due to incentive programs from automakers which spurred light vehicle production. Changing environmental regulations for heavy trucks created a surge in demand in that sector. While industrial sales continue to be sluggish, the third quarter reflected an improved sales mix which contributed to profitability."

For the remainder of 2002, Mr. Griffith was cautiously optimistic. "The automotive sector continues to be strong, but we expect some seasonal impact in the fourth quarter and slowing demand in the heavy truck segment because of emissions regulations for trucks taking effect in October. Industrial markets are recovering slowly, and we expect the recovery to continue at this slow pace into next year. Our operating improvements have had a positive impact on our performance this year, and they have us well-prepared for the economic upturn."

Sales for the quarter hit $207.1 million, up from $176.5 million in 2001.

The company credited the U.S. market improvements on the incentive programs and environmental regulations mentioned by Mr. Griffith. In addition, the rollout of new light truck platforms using Timken bearings also boosted U.S. sales. Demand in the rest of the world remained flat.

For the year to date, sales are also well ahead of 2001, now at $630.0 million from $565.7 million in the first nine months of 2001.

Sales for the quarter hit $217.2 million, up from $214.1 million in 2001.

While sales improved only slightly from 2001, Timken indicated that the product mix was more favorable. Improvement in global industrial markets continues to be slow, while global aerospace and military markets have not improved.

Year to date sales continue to lag, hitting only $658.2 million versus $678.0 million for the same period in 2001.

Sales for the quarter were $246.8 million, including transfer sales within Timken, up from $222.1 million in 2001.

Timken credited strong shipments to the automotive industry, higher capacity utilization and consequently improved efficiency.

For the year to date, steel sales to external customers remain below 2001, hitting $616.9 million, down from $629.8 million in 2001. Sales within Timken have risen, to $123.7 million so far this year from $114.5 million in 2001.