UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
| x | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2011
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-1169
THE TIMKEN COMPANY SAVINGS PLAN FOR
TORRINGTON BARGAINING ASSOCIATES
(Full title of the Plan)
THE TIMKEN COMPANY, 1835 Dueber Avenue, S.W., Canton, Ohio 44706
(Name of issuer of the securities held pursuant to the Plan
and the address of its principal executive office)
The Timken Company Savings Plan
for Torrington Bargaining Associates
Unaudited Financial Statements
December 31, 2011 and 2010, and
Year Ended December 31, 2011
| Unaudited Financial Statements |
||||
| 1 | ||||
| 2 | ||||
| 3 | ||||
The Timken Company Savings Plan
for Torrington Bargaining Associates
Statements of Net Assets Available for Benefits
(unaudited)
| December 31, | ||||||||
| 2011 | 2010 | |||||||
| Assets |
||||||||
| Investments, at fair value: |
||||||||
| Interest in The Master Trust Agreement for The Timken Company Defined Contribution Plans |
$ | 1,680,742 | $ | 2,011,254 | ||||
|
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|
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|
|||||
| Total assets reflecting investments at fair value |
1,680,742 | 2,011,254 | ||||||
| Adjustment from fair value to contract value for interest in The Master Trust Agreement for The Timken Company Defined Contribution Plans relating to fully benefit-responsive investment contracts |
(1,819 | ) | 10,844 | |||||
|
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|
|
|
|||||
| Net assets available for benefits |
$ | 1,678,923 | $ | 2,022,098 | ||||
|
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|
|||||
See accompanying notes.
1
The Timken Company Savings Plan
for Torrington Bargaining Associates
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2011
(unaudited)
| Additions |
||||
| Investment income: |
||||
| Net investment loss from The Master Trust Agreement for The Timken Company Defined Contribution Plans |
$ | (65,680 | ) | |
| Deductions |
||||
| Benefits paid directly to participants |
277,495 | |||
| Net decrease |
(343,175 | ) | ||
| Net assets available for benefits: |
||||
| Beginning of year |
2,022,098 | |||
|
|
|
|||
| End of year |
$ | 1,678,923 | ||
|
|
|
|||
See accompanying notes.
2
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
(unaudited)
December 31, 2011 and 2010, and
Year Ended December 31, 2011
1. Description of Plan
The following description of The Timken Company Savings Plan for Torrington Bargaining Associates (the Plan) provides only general information. Participants should refer to the Summary Plan Description for a more complete description of the Plan’s provisions. The Plan was established on February 16, 2003. On February 18, 2003, The Timken Company (Timken) acquired Ingersoll-Rand Company Limited’s Engineered Solutions business, which was comprised of certain operating assets and subsidiaries including The Torrington Company.
General
During 2006, The Timken Company closed its Standard Plant, the full-time hourly employees of which were represented by the United Auto Workers Local 1645. As a result of this transaction, all participants in the Plan terminated their employment with The Timken Company and the Plan will no longer have any new participants or contributions. However, The Timken Company, the Plan administrator, will continue to sponsor the Plan for those participants who have elected not to transfer their accounts to another plan. The Plan is a defined contribution plan which covered full-time hourly employees of Timken US Corporation (the Company) who were represented by the United Auto Workers Local 1645. Employees of the Company became eligible to participate in the Plan on the first of the month coincident with or immediately following completion of one year of service (including service with The Torrington Company prior to The Timken Company’s purchase of The Torrington Company). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Contributions
Under the provisions of the Plan, participants were able to elect to contribute up to 20% of their eligible earnings on a pretax basis directly to the Plan subject to Internal Revenue Service (IRS) limitations. Participants were also able to contribute amounts representing distributions from other qualified defined benefit or 401(k) defined contribution plans. The Company matched participant contributions, “Company Matching Contributions” at an amount equal to 100% on the first 3% of the participant’s eligible earnings, and then 50% on the subsequent 3% of the participant’s eligible earnings.
3
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
1. Description of Plan (continued)
Upon enrollment, a participant was required to direct his or her contribution in 1% increments to any of the Plan’s investment options. The Company Matching Contributions were invested in Timken common shares. Participants were not permitted to direct the investment of the Company Matching Contributions until their service with the Company was terminated. Participants have access to their account information and the ability to make changes on a daily basis, subject to the next available payroll for contribution change election, through an automated telecommunications system. Account information and certain changes may also be made through the Internet.
Participant Accounts
Each participant’s account was credited with the participant’s contributions and allocations of (a) the Company’s contributions and (b) Plan earnings, and is charged with an allocation of administrative expenses. Plan earnings are allocated based on the participant’s share of net earnings or losses of their respective elected investment options. Allocations of administrative expenses are based on the participant’s account balances, as defined. Forfeited balances of terminated participants’ nonvested accounts are used to reduce future Company Matching Contributions. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.
Vesting
Participants were immediately vested in their contributions and rollover contributions plus actual earnings thereon. Vesting in the Company Matching Contribution portion of their account plus actual earnings thereon occurred over a period of six years with 20% vested after two years and an additional 20% in each of the years three to six.
Participant Notes Receivable
Participants may borrow from their account related to their participant contributions and rollover contributions with a minimum of $1,000 up to a maximum equal to the lesser of (1) $50,000 minus the excess of the highest outstanding loan balance during the past 12 months or (2) 50% of their account balance related to participant contributions and rollover contributions. Loan terms generally cannot exceed five years.
4
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
1. Description of Plan (continued)
The loans are secured by the balance in the participant’s vested account and bear interest at an interest rate of 1% in excess of the prime rate, as published in the Wall Street Journal on the first business day of the month in which the loan is granted. Principal and interest are paid ratably through payroll deductions.
Payment of Benefits
As a result of their termination of service to The Timken Company due to the closure of the Standard Plant, participants having a vested account balance greater than $1,000 were given the option of (i) transferring their account balance to another plan, (ii) receiving a lump-sum amount equal to the vested balance of their account, (iii) receiving installment payments of their vested assets over a period of time not to exceed their life expectancy, or (iv) leaving their vested account balance in the Plan. Participants having a vested account balance less than $1,000 received a lump-sum amount equal to their vested account balance. Participants electing to leave their vested assets in the Plan may do so until age 70 1/2 after which time the lump-sum or installment distribution options would apply.
Hardship withdrawals are allowed for participants incurring an immediate and severe financial need, as defined by the Plan. Hardship withdrawals are strictly regulated by the IRS and a participant must exhaust all available loan options and distributions prior to requesting a hardship withdrawal.
Plan Termination
The Plan shall continue in full force and effect until December 31, 2008, and yearly thereafter, unless either the Company or the United Auto Workers Local 1645 shall notify the other party in writing that they desire to terminate the Plan. The Plan may generally be amended by mutual consent of the Company and the United Auto Workers Local 1645. In the event of Plan termination, the Plan’s trustee, JP Morgan (Trustee), shall distribute to each participant the amount standing to their credit in their separate account.
5
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
2. Accounting Policies
Basis of Accounting
The financial statements have been prepared on the accrual basis of accounting.
Investment Valuation and Income Recognition
The Plan’s investments are stated at fair value and are invested in The Master Trust Agreement for The Timken Company Defined Contribution Plans (Master Trust), which was established for the investment of assets of the Plan and the seven other defined contribution plans sponsored by The Timken Company.
The Plan’s trustee maintains a collective investment trust of Timken common shares in which the Company’s defined contribution plans participate on a unit basis. Timken common shares are traded on a national securities exchange and participation units in The Timken Company Common Stock Fund are valued at the last reported sales price on the last business day of the plan year. The valuation per unit of The Timken Company Common Stock Fund was $21.05 and $25.94 at December 31, 2011 and 2010, respectively.
Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
New Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2010-06, Improving Disclosures about Fair Value Measurements, (ASU 2010-06). ASU 2010-06 amended Accounting Standards Codification (ASC) 820 to clarify certain existing fair value disclosures and require a number of additional disclosures.
6
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
2. Accounting Policies (continued)
The guidance in ASU 2010-06 clarified that disclosures should be presented separately for each “class” of assets and liabilities measured at fair value and provided guidance on how to determine the appropriate classes of assets and liabilities to be presented. ASU 2010-06 also clarified the requirement for entities to disclose information about both the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. In addition, ASU 2010-06 introduced new requirements to disclose the amounts (on a gross basis) and reasons for any significant transfers between Levels 1, 2 and 3 of the fair value hierarchy and present information regarding the purchases, sales, issuances, and settlements of Level 3 assets and liabilities on a gross basis. With the exception of the requirement to present changes in Level 3 measurements on a gross basis, which is delayed until 2011, the guidance in ASU 2010-06 is effective for reporting periods beginning after December 15, 2009. Since ASU 2010-06 only affects fair value measurement disclosures, adoption of ASU 2010-06 did not affect the Plan’s net assets available for benefits or its changes in net assets available for benefits.
In May 2011, the FASB issued Accounting Standards Update 2011-04, Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs, (ASU 2011-04). ASU 2011-04 amended ASC 820, Fair Value Measurements and Disclosures, to converge the fair value measurement guidance in U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS). Some of the amendments clarify the application of existing fair value measurement requirements, while other amendments change a particular principle in ASC 820. In addition, ASU 2011-04 requires additional fair value disclosures (although certain of these new disclosures will not be required for nonpublic entities). The amendments are to be applied prospectively and are effective for annual periods beginning after December 15, 2011. Plan management is currently evaluating the effect that the provisions of ASU 2011-04 will have on the Plan’s financial statements.
7
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
3. Investments
The Plan’s assets are held in the Master Trust, commingled with assets of other Timken-sponsored benefit plans.
Each participating plan’s interest in the investment funds (i.e., separate accounts) of the Master Trust is based on account balances of the participants and their elected investment funds. The Master Trust assets are allocated among the participating plans by assigning to each plan those transactions (primarily contributions, benefit payments, and plan-specific expenses) that can be specifically identified and by allocating among all plans, in proportion to the fair value of the assets assigned to each plan, income and expenses resulting from the collective investment of the assets of the Master Trust. The Plan’s interest in the Master Trust as of December 31, 2011 and 2010 was 0.15% and 0.17%, respectively.
At December 31, 2011 and 2010, The Timken Company Common Stock Fund consisted of 14,235,559 and 13,839,282 units, respectively, of The Timken Company’s common stock.
8
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
3. Investments (continued)
The following table presents the fair values of the net assets in the Master Trust and the Plan’s percentage interest in each investment fund of the Master Trust:
| December 31, 2011 | ||||||||||||||||||||||||
| Company Stock |
Registered Investment Companies |
Common Collective |
Investment Contracts |
Total Assets | Plan’s Ownership Percentage |
|||||||||||||||||||
| Investments, at Fair Value: |
||||||||||||||||||||||||
| The Timken Company Common Stock Fund |
$ | 299,608,700 | $ | — | $ | — | $ | — | $ | 299,608,700 | 0.12 | % | ||||||||||||
| Morgan Stanley Small Company Growth |
— | 14,124,854 | — | — | 14,124,854 | 0.00 | % | |||||||||||||||||
| American Funds EuroPacific Growth |
— | 72,122,610 | — | — | 72,122,610 | 0.06 | % | |||||||||||||||||
| American Funds Washington Mutual Investors |
— | 16,322,636 | — | — | 16,322,636 | 0.00 | % | |||||||||||||||||
| American Beacon Small Cap Value |
— | 19,995,849 | — | — | 19,995,849 | 0.08 | % | |||||||||||||||||
| Vanguard Target Retirement Income |
— | 9,032,047 | — | — | 9,032,047 | 0.01 | % | |||||||||||||||||
| Vanguard Target Retirement 2005 |
— | 8,463,967 | — | — | 8,463,967 | 0.65 | % | |||||||||||||||||
| Vanguard Target Retirement 2015 |
— | 61,428,882 | — | — | 61,428,882 | 0.41 | % | |||||||||||||||||
| Vanguard Target Retirement 2025 |
— | 30,074,232 | — | — | 30,074,232 | 0.11 | % | |||||||||||||||||
| Vanguard Target Retirement 2035 |
— | 30,092,816 | — | — | 30,092,816 | 0.68 | % | |||||||||||||||||
| Vanguard Target Retirement 2045 |
— | 12,163,963 | — | — | 12,163,963 | 0.00 | % | |||||||||||||||||
| Vanguard Target Retirement 2020 |
— | 43,531 | — | — | 43,531 | 0.00 | % | |||||||||||||||||
| Vanguard Target Retirement 2030 |
— | 38,305 | — | — | 38,305 | 0.00 | % | |||||||||||||||||
| Vanguard Target Retirement 2040 |
— | 25,722 | — | — | 25,722 | 0.00 | % | |||||||||||||||||
| Vanguard Target Retirement 2050 |
— | 14,981 | — | — | 14,981 | 0.00 | % | |||||||||||||||||
| JPMorgan S&P 500 Index |
— | — | 30,539,328 | — | 30,539,328 | 0.07 | % | |||||||||||||||||
| JPMorgan Core Bond |
— | — | 102,933,082 | — | 102,933,082 | 0.07 | % | |||||||||||||||||
| JPMorgan Equity Index |
— | — | 123,489,446 | — | 123,489,446 | 0.00 | % | |||||||||||||||||
| Nuveen Winslow Large-Cap Growth |
— | — | 63,463,896 | — | 63,463,896 | 0.04 | % | |||||||||||||||||
| SSgA Russell 2000-A Index |
— | — | 41,177,230 | — | 41,177,230 | 0.04 | % | |||||||||||||||||
|
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|
|||||||||||||||
| $ | 299,608,700 | $ | 273,944,395 | $ | 361,602,982 | $ | — | $ | 935,156,077 | |||||||||||||||
|
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|||||||||||||||
| JPMorgan Stable Value |
$ | — | $ | — | $ | — | $ | 171,581,331 | $ | 171,581,331 | ||||||||||||||
| Wrapper Value |
— | — | — | 25,677 | 25,677 | |||||||||||||||||||
| Adjustments from fair value to contract value |
— | — | — | (536,503 | ) | (536,503 | ) | |||||||||||||||||
|
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|||||||||||||||
| $ | — | $ | — | $ | — | $ | 171,070,505 | $ | 171,070,505 | 0.34 | % | |||||||||||||
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|||||||||||||||
| Net Assets of Master Trust |
$ | 299,608,700 | $ | 273,944,395 | $ | 361,602,982 | $ | 171,070,505 | $ | 1,106,226,582 | 0.15 | % | ||||||||||||
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9
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
3. Investments (continued)
| December 31, 2010 | ||||||||||||||||||||||||
| Company Stock | Registered Investment Companies |
Common Collective |
Investment Contracts |
Total Assets | Plan’s Ownership Percentage |
|||||||||||||||||||
| Investments, at Fair Value: |
||||||||||||||||||||||||
| The Timken Company Common Stock Fund |
$ | 359,007,594 | $ | — | $ | — | $ | — | $ | 359,007,594 | 0.13 | % | ||||||||||||
| Morgan Stanley Small Company Growth |
— | 15,390,870 | — | — | 15,390,870 | 0.00 | % | |||||||||||||||||
| American Funds EuroPacific Growth |
— | 87,015,017 | — | — | 87,015,017 | 0.07 | % | |||||||||||||||||
| American Funds Growth Fund of America |
— | 72,503,692 | — | — | 72,503,692 | 0.05 | % | |||||||||||||||||
| American Funds Washington Mutual Investors |
— | 13,842,649 | — | — | 13,842,649 | 0.08 | % | |||||||||||||||||
| American Beacon Small Cap Value |
— | 20,557,770 | — | — | 20,557,770 | 0.08 | % | |||||||||||||||||
| Vanguard Target Retirement Income |
— | 8,276,245 | — | — | 8,276,245 | 0.02 | % | |||||||||||||||||
| Vanguard Target Retirement 2005 |
— | 8,449,741 | — | — | 8,449,741 | 0.62 | % | |||||||||||||||||
| Vanguard Target Retirement 2015 |
— | 59,391,774 | — | — | 59,391,774 | 0.58 | % | |||||||||||||||||
| Vanguard Target Retirement 2025 |
— | 26,852,983 | — | — | 26,852,983 | 0.12 | % | |||||||||||||||||
| Vanguard Target Retirement 2035 |
— | 28,901,726 | — | — | 28,901,726 | 0.84 | % | |||||||||||||||||
| Vanguard Target Retirement 2045 |
— | 11,017,836 | — | — | 11,017,836 | 0.00 | % | |||||||||||||||||
| JPMorgan S&P 500 Index |
— | — | 155,476,744 | — | 155,476,744 | 0.02 | % | |||||||||||||||||
| JPMorgan Core Bond |
— | — | 90,402,233 | — | 90,402,233 | 0.10 | % | |||||||||||||||||
| SSgA Russell 2000-A Index |
— | — | 43,163,523 | — | 43,163,523 | 0.04 | % | |||||||||||||||||
|
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|
|||||||||||||||
| $ | 359,007,594 | $ | 352,200,303 | $ | 289,042,500 | $ | — | $ | 1,000,250,397 | |||||||||||||||
|
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|||||||||||||||
| JPMorgan Stable Value |
$ | — | $ | — | $ | — | $ | 172,580,987 | $ | 172,580,987 | ||||||||||||||
| Adjustments from fair value to contract value |
— | — | — | 3,152,367 | 3,152,367 | |||||||||||||||||||
|
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|||||||||||||||
| $ | — | $ | — | $ | — | $ | 175,733,354 | $ | 175,733,354 | 0.34 | % | |||||||||||||
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|||||||||||||||
| Net Assets of Master Trust |
$ | 359,007,594 | $ | 352,200,303 | $ | 289,042,500 | $ | 175,733,354 | $ | 1,175,983,751 | 0.17 | % | ||||||||||||
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10
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
3. Investments (continued)
Investment loss for the Master Trust is as follows:
| Year Ended December 31, 2011 |
||||
| Net (depreciation) appreciation in fair value of investments |
||||
| The Timken Company Common Stock Fund |
$ | (62,166,676 | ) | |
| Registered investment companies |
(21,415,770 | ) | ||
| Common collective funds |
6,538,248 | |||
|
|
|
|||
| (77,044,198 | ) | |||
| Net appreciation in investment contracts |
3,151,609 | |||
| Interest and dividends |
11,795,129 | |||
|
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|
|||
| Total Master Trust |
$ | (62,097,460 | ) | |
|
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4. Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The FASB provides accounting guidance that classifies the inputs used to measure fair value into the following hierarchy:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
Level 3 – Unobservable inputs for the asset or liability.
11
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
4. Fair Value (continued)
The following tables present the fair value hierarchy for those investments of the Master Trust measured at fair value on a recurring basis as of December 31, 2011 and 2010:
| Assets at Fair Value as of December 31, 2011 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Assets: |
||||||||||||||||
| The Timken Company |
||||||||||||||||
| Common Stock Fund |
$ | 299,608,700 | $ | — | $ | 299,608,700 | $ | — | ||||||||
| Registered Investment Companies: |
||||||||||||||||
| Morgan Stanley Small Company Growth |
14,124,854 | 14,124,854 | — | — | ||||||||||||
| American Funds EuroPacific Growth |
72,122,610 | 72,122,610 | — | — | ||||||||||||
| American Funds Washington Mutual Investors |
16,322,636 | 16,322,636 | — | — | ||||||||||||
| American Beacon Small Cap Value |
19,995,849 | 19,995,849 | — | — | ||||||||||||
| Vanguard Target Retirement Income |
9,032,047 | 9,032,047 | — | — | ||||||||||||
| Vanguard Target Retirement 2005 |
8,463,967 | 8,463,967 | — | — | ||||||||||||
| Vanguard Target Retirement 2015 |
61,428,882 | 61,428,882 | — | — | ||||||||||||
| Vanguard Target Retirement 2020 |
43,531 | 43,531 | — | — | ||||||||||||
| Vanguard Target Retirement 2025 |
30,074,232 | 30,074,232 | — | — | ||||||||||||
| Vanguard Target Retirement 2030 |
38,305 | 38,305 | — | — | ||||||||||||
| Vanguard Target Retirement 2035 |
30,092,816 | 30,092,816 | — | — | ||||||||||||
| Vanguard Target Retirement 2040 |
25,722 | 25,722 | — | — | ||||||||||||
| Vanguard Target Retirement 2045 |
12,163,963 | 12,163,963 | — | — | ||||||||||||
| Vanguard Target Retirement 2050 |
14,981 | 14,981 | — | — | ||||||||||||
| Common Collective Funds: |
||||||||||||||||
| JPMorgan S&P 500 Index |
30,539,329 | — | 30,539,329 | — | ||||||||||||
| JPMorgan Core Bond |
102,933,082 | — | 102,933,082 | — | ||||||||||||
| SSgA Russell 2000-A Index |
41,177,230 | — | 41,177,230 | — | ||||||||||||
| JPMorgan Equity Index |
123,489,446 | — | 123,489,446 | — | ||||||||||||
| Nuveen Winslow Large-Cap Growth |
63,463,895 | — | 63,463,895 | — | ||||||||||||
| Investment Contracts: |
||||||||||||||||
| JPMorgan Liquidity |
14,307,860 | — | — | 14,307,860 | ||||||||||||
| JPMorgan Intermediate Tax |
||||||||||||||||
| Free Bond |
157,273,471 | — | — | 157,273,471 | ||||||||||||
| Wrapper Value |
25,677 | — | — | 25,677 | ||||||||||||
|
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|||||||||
| Total assets |
$ | 1,106,763,085 | $ | 273,944,395 | $ | 661,211,682 | $ | 171,607,008 | ||||||||
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12
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
4. Fair Value (continued)
| Assets at Fair Value as of December 31, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Assets: |
||||||||||||||||
| The Timken Company |
||||||||||||||||
| Common Stock Fund |
$ | 359,007,594 | $ | — | $ | 359,007,594 | $ | — | ||||||||
| Registered Investment Companies: |
||||||||||||||||
| Morgan Stanley Small Company Growth |
15,390,870 | 15,390,870 | — | — | ||||||||||||
| American Funds EuroPacific Growth |
87,015,017 | 87,015,017 | — | — | ||||||||||||
| American Funds Growth Fund of America |
72,503,692 | 72,503,692 | — | — | ||||||||||||
| American Funds Washington Mutual Investors |
13,842,649 | 13,842,649 | — | — | ||||||||||||
| American Beacon Small Cap Value |
20,557,770 | 20,557,770 | — | — | ||||||||||||
| Vanguard Target Retirement Income |
8,276,245 | 8,276,245 | — | — | ||||||||||||
| Vanguard Target Retirement 2005 |
8,449,741 | 8,449,741 | — | — | ||||||||||||
| Vanguard Target Retirement 2015 |
59,391,774 | 59,391,774 | — | — | ||||||||||||
| Vanguard Target Retirement 2025 |
26,852,983 | 26,852,983 | — | — | ||||||||||||
| Vanguard Target Retirement 2035 |
28,901,726 | 28,901,726 | — | — | ||||||||||||
| Vanguard Target Retirement 2045 |
11,017,836 | 11,017,836 | — | — | ||||||||||||
| Common Collective Funds: |
||||||||||||||||
| JPMorgan S&P 500 Index |
155,476,744 | — | 155,476,744 | — | ||||||||||||
| JPMorgan Core Bond |
90,402,233 | — | 90,402,233 | — | ||||||||||||
| SSgA Russell 2000-A Index |
43,163,523 | — | 43,163,523 | — | ||||||||||||
| Investment Contracts: |
||||||||||||||||
| JPMorgan Liquidity |
22,364,691 | — | — | 22,364,691 | ||||||||||||
| JPMorgan Intermediate Tax |
150,216,296 | — | — | 150,216,296 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total assets |
$ | 1,172,831,384 | $ | 352,200,303 | $ | 648,050,094 | $ | 172,580,987 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The Timken Company Stock Fund participates in units and is valued based on the closing price of Timken common shares traded on a national securities exchange.
Registered investment companies are valued based on quoted market prices reported on the active market on which the individual securities are traded.
13
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
4. Fair Value (continued)
The JP Morgan S&P 500 Index fund and JP Morgan Equity Index fund include investments that provide exposure to a broad equity market and are designed to mirror the aggregate price and dividend performance of the S&P 500 Index. The fair values of the investments in this category have been determined using the net asset value per share.
The JP Morgan Core Bond fund includes investments that seek to maximize total return by investing primarily in a diversified portfolio of intermediate- and long-term debt securities. The fair value of the investments in this category has been determined using the net asset value per share.
The SSgA Russell 2000-A Index fund includes investments seeking an investment return that approximates as closely as practicable, before expenses, the performance of the 2000 Index over the long term. The fund includes exposure to stocks of small U.S. companies. The fair value of the investments in this category has been determined using the net asset value per share.
The Nuveen Winslow Large-Cap growth fund is a portfolio that invests at least 80% of its net assets in equity securities of U.S. companies with market capitalization in excess of $4 billion at the time of purchase. The fair value of the investments in this category has been determined using the net asset value per share.
Investment contracts include a common collective trust fund that is designed to deliver safety and stability by preserving principal and accumulating earnings. This fund is primarily invested in guaranteed investment contracts and synthetic investment contracts. See Note 6 - Investment Contracts for further discussion on investment contracts.
14
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
4. Fair Value (continued)
The table below presents a summary of changes in the fair value of the Master Trust’s Level 3 assets as of December 31, 2011:
| JPMorgan Liquidity |
JPMorgan Intermediate Tax Free Bond |
Wrapper Value |
Total | |||||||||||||
| Balance, January 1, 2011 |
$ | 22,364,691 | $ | 150,216,296 | $ | — | $ | 172,580,987 | ||||||||
| Purchases |
104,304,862 | — | — | 104,304,862 | ||||||||||||
| Sales |
(112,343,663 | ) | (274,898 | ) | — | (112,618,561 | ) | |||||||||
| Realized gains/(losses) |
— | 63,612 | — | 63,612 | ||||||||||||
| Unrealized gains/(losses) |
— | 7,268,461 | 25,677 | 7,294,138 | ||||||||||||
| Interest income |
57,570 | — | — | 57,570 | ||||||||||||
| Administration fees |
(75,600 | ) | — | — | (75,600 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Balance, December 31, 2011 |
$ | 14,307,860 | $ | 157,273,471 | $ | 25,677 | $ | 171,607,008 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
15
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
5. Non-Participant-Directed Investments
Information about the net assets and the significant components of changes in net assets related to non-participant-directed investments is as follows:
| December 31, | ||||||||
| 2011 | 2010 | |||||||
| Investments, at fair value: |
||||||||
| Interest in Master Trust related to The Timken Company Common Stock Fund |
$ | 355,013 | $ | 475,068 | ||||
|
|
|
|
|
|||||
| Year Ended December 31, 2011 |
||||
| Change in net assets: |
||||
| Net depreciation in fair value of investments |
$ | (87,425 | ) | |
| Dividends |
7,536 | |||
| Benefits paid directly to participants |
(50,166 | ) | ||
| Transfers to participant-directed accounts (net) |
10,000 | |||
|
|
|
|||
| $ | (120,055 | ) | ||
|
|
|
|||
6. Investment Contracts
The Master Trust invests in guaranteed investment contracts (GICs), or a Stable Value Fund, that credit a stated interest rate for a specified period of time. The Stable Value Fund provides principal preservation plus accrued interest through fully benefit-responsive wrap contracts issued by a third party which back the underlying assets owned by the Master Trust. The account is credited with earnings on the underlying investments and charged for participant withdrawals and administrative expenses. The investment contract issuer is contractually obligated to repay the principal at a specified interest rate that is guaranteed to the Plan.
16
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
6. Investment Contracts (continued)
Investment contracts held by a defined contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits attributable to the fully benefit-responsive investment contracts. Contract value represents contributions made under the contracts, plus earnings, less participant withdrawals and administrative expenses. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value.
The Plan’s wrapper contracts permit all allowable participant-initiated transactions to occur at contract value. There are no events known to the Plan that are probable of occurring and which would limit its ability to transact at contract value with the issuer of the wrapper contract, which also limit the ability of the Plan to transact at contract value with participants. The wrapper contracts cannot be terminated by its issuer at a value other than contract value or prior to the scheduled maturity date, except under a limited number of very specific circumstances including termination of the Plan or failure to qualify, material misrepresentations by the Plan sponsor or investment manager, failure by these same parties to meet material obligations under the contract, or other similar types of events.
There are no reserves against contract value for credit risk of the contract issuer or otherwise. The crediting interest rates for the wrap contracts are calculated on a quarterly basis (or more frequently if necessary) using contract value, market value of the underlying fixed income portfolio, the yield of the portfolio, and the duration of the index, but cannot be less than zero.
| December 31, | ||||||||
| Average Yields for Synthetic GICs |
2011 | 2010 | ||||||
| Based on actual earnings |
2% | 3% | ||||||
| Based on interest rate credited to participants |
2% | 2% | ||||||
17
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
7. Reconciliation of Financial Statements to the Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:
| December 31, | ||||||||
| 2011 | 2010 | |||||||
| Net assets available for benefits per the financial statements |
$ | 1,678,923 | $ | 2,022,098 | ||||
| Adjustment from contract value to fair value for fully benefit-responsive investment contracts |
1,819 | (10,844 | ) | |||||
|
|
|
|
|
|||||
| Net assets available for benefits per the Form 5500 |
$ | 1,680,742 | $ | 2,011,254 | ||||
|
|
|
|
|
|||||
The fully benefit-responsive investment contracts have been adjusted from fair value to contract value for purposes of the financial statements. For purposes of the Form 5500, the investment contracts will be stated at fair value.
The following is a reconciliation of total additions per the financial statements to total income per the Form 5500 for the year ended December 31, 2011:
| Total additions per the financial statements |
$ | (65,680 | ) | |
| Add: Adjustment from fair value to contract value for fully benefit-responsive investment contracts at December 31, 2010 |
10,844 | |||
| Add: Adjustment from fair value to contract value for fully benefit-responsive investment contracts at December 31, 2011 |
1,819 | |||
|
|
|
|||
| Total income per the Form 5500 |
$ | (53,017 | ) | |
|
|
|
18
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
8. Risks and Uncertainties
The Master Trust invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statement of net assets available for benefits.
9. Income Tax Status
The Plan has received a determination letter from the IRS dated March 27, 2003, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the Code), and therefore, the related trust is exempt from taxation. Subsequent to this determination by the IRS, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan, as amended, is qualified and the related trust is tax-exempt.
Accounting principles generally accepted in the United States require plan management to evaluate uncertain tax positions taken by the Plan. The financial statement effects of a tax position are recognized when the position is more likely than not, based on the technical merits, to be sustained upon examination by the IRS. The Plan Administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2011, there are no uncertain positions taken or expected to be taken. The Plan has recognized no interest or penalties related to uncertain tax positions. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Plan Administrator believes it is no longer subject to income tax examinations for years prior to 2008.
19
The Timken Company Savings Plan
for Torrington Bargaining Associates
Notes to Financial Statements
10. Related-Party Transactions
Related-party transactions included the investments in the common stock of The Timken Company and the investment funds of the Trustee. Such transactions are exempt from being prohibited transactions.
The following is a summary of transactions in Timken common shares with the Master Trust for the year ended December 31, 2011:
| Shares | Dollars | |||||||
| Purchased |
1,342,260 | $ | 32,487,330 | |||||
| Issued to participants for payment of benefits |
155,990 | 2,396,475 | ||||||
Benefits paid to participants include payments made in Timken common shares valued at quoted market prices at the date of distribution.
Certain legal and accounting fees and certain administrative expenses relating to the maintenance of participant records are paid by The Timken Company. Fees paid during the year for services rendered by parties in interest were based on customary and reasonable rates for such services.
20
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other person who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
| THE TIMKEN COMPANY SAVINGS PLAN FOR TORRINGTON BARGAINING ASSOCIATES
| ||||
| Date: June 22, 2012 | By: | /s/ Scott A. Scherff | ||
| Scott A. Scherff Corporate Secretary and Vice President – Ethics and Compliance | ||||