TKR » Topics » Other Income and Expense:

This excerpt taken from the TKR 10-K filed Mar 15, 2005.

Other Income and Expense:

  2003 2002 $ Change

(Dollars in millions)
CDSOA receipts, net of expenses
Impairment charge – equity investment
Other expense, net

$ 65.6
$ (45.7)
$ (10.0)

$ 50.2
$ –
$ (13.4)
$ 15.4
$ (45.7)
$ 3.4

CDSOA receipts are reported net of applicable expenses. In addi–
tion, amounts received in 2003 are net of a one–time repayment,
due to a miscalculation by the U.S. Treasury Department of funds
received by the company in 2002. The amounts received in 2003
related to the original Timken tapered roller, ball and cylindrical
bearing businesses and the Torrington tapered roller bearing
business. Pursuant to the terms of the agreement under which the
company purchased the Torrington business, Timken must deliver
to the seller of the Torrington business 80% of any CDSOA
payments received in 2003 and 2004 related to the Torrington
business.

During 2000, the company’s Steel Group invested in PEL to
commercialize a proprietary technology that converts iron units into
engineered iron oxide for use in pigments, coatings and abrasives.
The company previously accounted for its investment in PEL,
which is a development stage company, using the equity method.
In the fourth quarter of 2003, the company concluded that its

investment in PEL was impaired due to the following indicators
of impairment: history of negative cash flow and losses; 2004 oper–
ating plan with continued losses and negative cash flow; and the
continued required support from the company or another party.
Accordingly, the company recorded a non–cash impairment charge
totaling $45.7 million, which is comprised of the PEL indebtedness
that the company has guaranteed of $26.5 million and the write–off
of the advances to and investments in PEL that the company has
made of $19.2 million.

In 2003, “other expense, net” included losses from other equity
investments, losses from the sale of assets, foreign currency
exchange gains (including acquisition–related currency exchange
gains), and one–time net gains from the sales of non–strategic
assets. In 2002, “other expense, net” included foreign currency
exchange losses, losses on the disposal of assets and losses from
equity investments.

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