The Timken Company (NYSE: TKR) today reported sales of $763.6
million for the third quarter of 2009, a decrease of 43 percent
over the same period a year ago. The sales decline reflects weaker
demand in many of the company’s end markets and lower surcharges,
partially offset by improved pricing. Sales for all periods exclude
the results of the Needle Roller Bearings business, accounted for
as “discontinued operations.”
The company incurred a third-quarter loss of $50.1 million, or
$0.52 per share, including a loss of $30.8 million, or $0.32 per
share, from the Needle Roller Bearings business. The company’s
continuing operations incurred a loss of $19.3 million, or $0.20
per share, in the third quarter, compared with income of $123.9
million, or $1.28 per diluted share, a year ago.
Excluding special items, net income was $5.2 million, or $0.05
per share, for the third quarter, including a loss of $2.3 million,
or $0.03 per share, from discontinued operations. Income from the
company’s continuing operations for the third quarter was $7.5
million, or $0.08 per share, excluding special items, compared with
$129.2 million, or $1.34 per diluted share, in the prior year.
Earnings reflect lower sales volume and manufacturing utilization,
reduced surcharges and lower LIFO (last-in, first-out accounting)
income. These items were partially offset by cost reductions,
improved pricing and lower material costs compared with a year
ago.
Special items, net of tax, in the third quarter of 2009 amounted
to $55.4 million of expense, compared with $5.5 million in the same
period last year. Special items in the third quarter of 2009
included manufacturing rationalization, impairment and
restructuring charges, the largest being a $25.1-million
impairment, net of tax, associated with the pending sale of the
Needle Roller Bearings business.
Table 1: Third-Quarter 2009 Earnings Per
Share
As
Reported
Adjusted (a)
Continuing Operations $ (0.20 ) $ 0.08 Discontinued Operations
(0.32
)
(0.03
) Total Earnings Per Share $ (0.52 ) $ 0.05
(a): “Adjusted” earnings per share
exclude the impact of impairment andrestructuring, manufacturing
rationalization/reorganization and special chargesand credits.
“This quarter’s performance is more about how we’re managing the
business than a shift in marketplace trends,” said James W.
Griffith, Timken president and chief executive officer. “Without
the benefit of improved volume, we’re yielding better results from
structural changes we’ve made, in part from our Project O.N.E. and
portfolio management initiatives.”
In recent months, the company also:
- Signed an agreement to sell the
assets of its Needle Roller Bearings business to JTEKT Corporation,
for which Timken will receive approximately $330 million, subject
to certain closing conditions;
- Announced plans to streamline
its distribution footprint by consolidating its Ohio and South
Carolina distribution centers into a new facility;
- Entered into a three-year,
$500-million unsecured Senior Credit Facility, replacing a previous
facility set to expire in June 2010;
- Completed a $250-million public
offering of 6.00% unsecured Senior Notes due 2014, proceeds of
which will be used to repay the company’s 5.75% notes due February
15, 2010;
- Expanded its ability to offer
engineered steel solutions in Asia through collaboration with Daido
Steel Co. Ltd.; and
- Reached a tentative four-year
labor agreement with the United Steelworkers union, covering
approximately 2,300 associates in Canton, Ohio.
The company continues to maintain a strong balance sheet with
ample liquidity. Total debt was $800.9 million as of Sept. 30,
2009, or 33.5 percent of capital. Net debt at Sept. 30, 2009, was
$169.9 million, or 9.6 percent of capital, compared with $490.5
million, or 22.8 percent, as of Dec. 31, 2008. During the quarter
the company generated cash from operating activities of $170.9
million, driven primarily by inventory reductions.
Nine Months’
Results
For the first nine months of 2009, sales were $2.37 billion, a
decrease of 40 percent from the same period in 2008. The company
incurred a loss of $0.56 per share from continuing operations for
the first nine months of 2009, compared with earnings of $2.87 per
diluted share last year. Special items, net of tax, in the first
nine months of 2009 totaled $81.4 million of expense, compared with
$3.0 million in the prior-year period. Special items in 2009
primarily reflect impairment and severance charges, while
prior-year special items included a gain on a real estate
divestment associated with a prior plant closure, offset by charges
related to restructuring, rationalization and impairment. Excluding
special items, year-to-date income from continuing operations was
$0.22 per diluted share, versus earnings of $2.91 per diluted share
in the same period last year. During the first nine months of 2009,
the company was affected by weaker demand across most of its end
markets, partially offset by pricing and cost-reduction
initiatives.
Table 2: Nine Months’ 2009 Earnings Per
Share
As
Reported
Adjusted (a)
Continuing Operations $ (0.56 ) $ 0.22 Discontinued Operations
(0.62
)
(0.31
) Total Earnings Per Share $ (1.18 ) $ (0.09 )
(a): “Adjusted” earnings per share
exclude the impact of impairment andrestructuring, manufacturing
rationalization/reorganization and special chargesand credits.
The following business results reflect continuing operations,
excluding special items:
Bearings and Power
Transmission Group Results
The Bearings and Power Transmission Group had third-quarter
sales of $614.8 million, down 28 percent from $849.1 million for
the same period last year. Earnings before interest and taxes
(EBIT) for the third quarter were $48.9 million, down 47 percent
from $91.8 million in the third quarter of 2008.
For the first nine months of 2009, Bearings and Power
Transmission Group sales were $1.86 billion, down 28 percent from
the same period a year ago. EBIT for the first nine months of 2009
was $150.0 million, or 8.1 percent of sales, compared with EBIT of
$248.4 million, or 9.6 percent of sales, in the first nine months
of 2008.
Mobile Industries Segment
Results
In the third quarter, Mobile Industries sales were $327.6
million, a decrease of 23 percent from $426.5 million for the same
period a year ago. The sales decline was driven by weaker demand in
the off-highway, heavy-truck and rail market sectors, partially
offset by favorable pricing. Light-vehicle demand was up slightly
compared with a year ago, driven by the emergence of automotive
customers from bankruptcy and consumer stimulus programs, which
accelerated demand during the quarter.
Third-quarter EBIT was $13.7 million, an increase of 58 percent
from $8.7 million for the same period a year ago. The benefits from
cost reduction initiatives and pricing were partially offset by the
impact of lower global demand and underutilized capacity.
For the first nine months of 2009, Mobile Industries sales of
$920.4 million were down 34 percent from the same period a year
ago. EBIT for the first nine months was a loss of $0.6 million, or
0.1 percent of sales, compared with EBIT of $43.4 million, or 3.1
percent of sales, in the first nine months of 2008.
Process Industries Segment
Results
Process Industries had third-quarter sales of $187.0 million,
down 41 percent from $317.9 million for the same period a year ago.
Lower demand across most industrial market sectors more than offset
favorable pricing. Sales declines were significant in both original
equipment and distribution channels.
Third-quarter EBIT was $16.1 million, down 78 percent from $73.3
million in the same period a year ago. Lower EBIT primarily
resulted from volume, partially offset by pricing and cost
reduction initiatives.
For the first nine months of 2009, Process Industries sales were
$619.1 million, down 31 percent from the same period a year ago.
EBIT for the first nine months was $94.6 million, or 15.3 percent
of sales, compared with EBIT of $180.9 million, or 20.2 percent of
sales, in the same period a year ago.
Aerospace and Defense Segment
Results
Aerospace and Defense had third-quarter sales of $100.3 million,
down 4 percent from $104.7 million for the same period last year.
The decrease was driven by reduced demand across commercial and
civil aerospace markets, partially offset by pricing and
acquisitions.
Third-quarter EBIT was $19.1 million, up 95 percent from $9.8
million in the same period a year ago. Performance benefited
primarily from cost-reduction initiatives and pricing.
For the first nine months of 2009, Aerospace and Defense sales
were $318.8 million, up 5 percent from the same period a year ago.
The EXTEX acquisition accounted for approximately one-half of the
sales increase. EBIT for the first nine months of 2009 was $56.0
million, or 17.6 percent of sales, compared with EBIT of $24.0
million, or 8.0 percent of sales, in the first nine months of
2008.
Steel Group
Results
Sales for the Steel Group, including inter-group sales, were
$157.9 million during the third quarter, a decrease of 71 percent
from $536.5 million for the same period last year, with 53 percent
fewer shipped tons. The greatest market declines were from the
industrial and energy sectors, while light vehicle demand was up
slightly compared with a year ago due to consumer stimulus programs
in the U.S. Surcharges declined approximately $215 million from the
third quarter last year.
The Steel Group incurred an EBIT loss of $20.3 million compared
with EBIT of $133.8 million for the same period a year ago. The
decline primarily resulted from lower demand and underutilization
of manufacturing capacity, which affected EBIT by roughly $100
million. The remaining decline in EBIT resulted from lower
surcharges and reduced LIFO income, partially offset by favorable
material and energy costs and cost-reduction actions.
For the first nine months of 2009, Steel Group sales were $541.4
million, down 63 percent from the same period a year ago.
Year-to-date, the Steel Group incurred an EBIT loss of $60.4
million, or 11.2 percent of sales, compared with EBIT of $267.5
million, or 18.1 percent of sales in the same period last year.
Outlook
Timken’s sales for the full year 2009, excluding discontinued
operations, are expected to be down approximately 35 to 40 percent
from the prior year, principally due to weak end-market demand.
Mobile Industries sales are expected to be down approximately 30 to
35 percent for the year, driven by lower North American
light-vehicle production, and significant declines in heavy-truck
builds in North America and Europe. Process Industries sales are
expected to be down by about 30 to 35 percent in 2009, with
broad-based volume declines in most end markets, especially heavy
industrial equipment. Sales in the Aerospace and Defense segment
are expected to be up modestly for 2009, driven by a strong defense
sector, offsetting softer commercial and civil sectors. Steel Group
sales are expected to decline approximately 60 to 65 percent for
the year due to lower demand across all market sectors and reduced
surcharges.
The company is raising its full-year earnings estimate
(including discontinued operations and excluding special items), to
a loss of $(0.10) to $(0.30) per share, compared with its prior
estimate of a loss of $(0.40) to $(0.90) per share. The company
expects to deliver strong free cash flow in 2009, driven by
effective working capital management and reduced spending.
Conference Call
Information
The company will host a conference call for investors and
analysts today to discuss financial results.
Conference Call: Thursday, Oct. 29, 2009 11:00 a.m. Eastern
Time All Callers: Live Dial-In: 800-344-0593 or 706-634-0975
(Call in 10 minutes prior to be included.)
Conference ID: 68492845
Replay Dial-In through Nov. 6, 2009: 800-642-1687 or
706-645-9291 Live Webcast:
www.timken.com/investors
About The Timken
Company
The Timken Company keeps the world turning, with innovative
friction management and power transmission products and services,
enabling our customers’ machinery to perform more efficiently and
reliably. With sales of $5.7 billion in 2008 and operations in 26
countries, Timken is Where You Turn™ for better performance.
Certain statements in this news release (including statements
regarding the company’s forecasts, estimates and expectations) that
are not historical in nature are “forward-looking” statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. In particular, the statements related to expectations
regarding the company’s future financial performance and timing of
the closing of the Needle Roller Bearings transaction, including
information under the heading “Outlook”, are forward-looking. The
company cautions that actual results may differ materially from
those projected or implied in forward-looking statements due to a
variety of important factors, including: the finalization of the
company’s financial statements for the third quarter of 2009; the
inability to complete the sale of the Needle Roller Bearings
business due to either the failure to satisfy any condition to the
closing of the transaction, including receipt of regulatory
approval, or the occurrence of any event, change or other
circumstance that could give rise to the termination of the
purchase agreement; the company’s ability to respond to the changes
in its end markets that could affect demand for the company’s
products; unanticipated changes in business relationships with
customers or their purchases from the company; changes in the
financial health of the company’s customers, including any
disruptions or bankruptcies in the automotive industry which may
have an impact on the company’s revenues, earnings and impairment
charges; fluctuations in raw-material and energy costs and their
impact on the operation of the company’s surcharge mechanisms; the
impact of the company’s last-in first-out accounting; continued
weakness in global economic conditions and financial markets;
changes in the expected costs associated with product warranty
claims; the inability to obtain the union members’ ratification of
the tentative agreement covering the company’s associates at the
Canton area manufacturing facilities; the impact on operations of
general economic conditions, higher or lower raw-material and
energy costs, fluctuations in customer demand, and the company’s
ability to achieve the benefits of its future and ongoing programs
and initiatives, including, without limitation, the initiative to
reduce its employment levels and other costs, the implementation of
its Mobile Industries Segment restructuring program and initiatives
and the rationalization of the company’s Canton bearing operations.
These and additional factors are described in greater detail in the
company’s Annual Report on Form 10-K for the year ended Dec. 31,
2008, page 44 and in the company’s Form 10-Q for the quarter ended
June 30, 2009. The company undertakes no obligation to update or
revise any forward-looking statement.
(Unaudited)
CONDENSED CONSOLIDATED STATEMENT OF INCOME AS
REPORTED ADJUSTED (1) (Dollars in thousands,
except share data) Q3 2009 Q3 2008
Nine Months 2009 Nine Months 2008
Q3 2009
Q3 2008
Nine Months 2009 Nine Months
2008 Net sales
$ 763,644 $ 1,336,352
$
2,367,021 $ 3,942,848
$ 763,644 $ 1,336,352
$ 2,367,021 $ 3,942,848 Cost of products sold
633,122 954,490
1,953,883 2,967,057
633,122
954,490
1,953,883 2,967,057 Manufacturing rationalization /
reorganization
expenses - cost of products
sold
960 322
3,590 1,760
- -
-
-
Gross Profit $
129,562 $ 381,540
$ 409,548 $ 974,031
$
130,522 $ 381,862
$ 413,138 $ 975,791 Selling,
administrative & general expenses (SG&A)
106,716
176,861
357,061 515,881
106,716 176,861
357,061 515,881 Manufacturing rationalization /
reorganization expenses - SG&A
528 (370 )
1,638
1,687
- -
- - Impairment and restructuring
19,613 2,379
84,074 7,442
- -
-
-
Operating (Loss) Income
$ 2,705 $ 202,670
$ (33,225 ) $
449,021
$ 23,806 $ 205,001
$ 56,077 $
459,910 Other income (expense)
(1,932 ) 555
3,927 (4,167 )
(1,932 ) 555
3,927
(4,167 ) Special items - other income
(2,587
) (558 )
(608 )
19,987
- -
- -
(Loss) Earnings Before Interest and Taxes (EBIT) (2)
$ (1,814 ) $ 202,667
$ (29,906
) $ 464,841
$ 21,874 $ 205,556
$
60,004 $ 455,743 Interest expense, net
(9,971 ) (9,575 )
(25,934 ) (29,081 )
(9,971 ) (9,575 )
(25,934 ) (29,081 )
(Loss) Income
From Continuing Operations Before Income Taxes
(11,785 ) 193,092
(55,840 ) 435,760
11,903 195,981
34,070 426,662 Provision (benefit) for
income taxes
7,116 68,121
2,900 155,078
3,987 65,654
11,413 142,932
(Loss) Income From Continuing Operations $
(18,901 ) $ 124,971
$ (58,740 )
$ 280,682
$ 7,916 $ 130,327
$ 22,657 $
283,730 (Loss) Income from discontinued operations net of income
taxes (3)
(30,803 ) 6,539
(59,912 ) 26,099
(2,250 ) 6,595
(29,630 ) 26,325
Net (Loss) Income $ (49,704 ) $
131,510
$ (118,652 ) $ 306,781
$
5,666 $ 136,922
$ (6,973 ) $ 310,055
Less: Net Income (Loss) Attributable to Noncontrolling Interest
424 1,097
(4,877 ) 2,960
425 1,097
1,272 2,960
Net (Loss) Income
Attributable to The Timken Company $
(50,128 ) $ 130,413
$
(113,775 ) $ 303,821
$
5,241 $ 135,825
$
(8,245 ) $ 307,095
Net Income
per Common Share Attributable to The Timken Company Common
Shareholders: (Loss) Earnings Per Share -
Continuing Operations
$ (0.20 ) $ 1.28
$ (0.56 ) $ 2.89
$ 0.08 $ 1.34
$ 0.22 $ 2.92
(Loss) Earnings Per Share -
Discontinued Operations
(0.32 )
0.07
(0.62 ) 0.27
(0.03 ) 0.07
(0.31 ) 0.27
Earnings Per Share $ (0.52 ) $
1.35
$ (1.18 ) $ 3.16
$ 0.05 $
1.41
$ (0.09 ) $ 3.19
Diluted (Loss)
Earnings Per Share - Continuing Operations
$
(0.20 ) $ 1.28
$ (0.56 ) $ 2.87
$ 0.08 $ 1.34
$ 0.22 $ 2.91
Diluted
(Loss) Earnings Per Share - Discontinued Operations
(0.32 ) 0.07
(0.62 ) 0.27
(0.03 ) 0.06
(0.31 ) 0.27
Earnings Per
Share $ (0.52 ) $ 1.35
$
(1.18 ) $ 3.14
$ 0.05 $ 1.40
$
(0.09 ) $ 3.18 Average Shares Outstanding
96,176,091 95,878,978
96,111,847 95,574,420
96,176,091 95,878,978
96,111,847 95,574,420 Average
Shares Outstanding - assuming dilution
96,176,091 96,103,130
96,111,847 95,968,659
96,176,091 96,103,130
96,111,847
95,968,659
BUSINESS SEGMENTS
(Dollars in thousands)
(Unaudited) Q3 2009 Q3 2008
Nine Months 2009
Nine Months2008
Mobile Industries Segment
Net sales to external customers
$ 327,572 $ 426,489
$ 920,384 $
1,397,565 Adjusted (loss) earnings before interest and taxes (EBIT)
(2)
$ 13,745 $ 8,684
$ (601 ) $
43,387 Adjusted EBIT Margin (2)
4.2 % 2.0 %
-0.1 % 3.1 %
Process Industries Segment
Net sales to external customers
$ 186,392 $ 316,904
$ 616,885 $ 895,622 Intergroup sales
577 972
2,199 2,251 Total net sales
$ 186,969 $ 317,876
$ 619,084 $ 897,873
Adjusted earnings before interest and taxes (EBIT) (2)
$
16,081 $ 73,296
$ 94,626 $ 180,929 Adjusted
EBIT Margin (2)
8.6 % 23.1 %
15.3 %
20.2 %
Aerospace and Defense Segment
Net sales to external customers
$ 100,272 $ 104,711
$ 318,767 $ 302,208 Adjusted earnings before interest
and taxes (EBIT) (2)
$ 19,114 $ 9,819
$
55,955 $ 24,036 Adjusted EBIT Margin (2)
19.1
% 9.4 %
17.6 % 8.0 %
Total Bearings and Power Transmission
Group
Net sales to external customers
$ 614,236 $ 848,104
$ 1,856,036 $ 2,595,395 Intergroup sales
577 972
2,199 2,251 Total net sales
$ 614,813 $ 849,076
$ 1,858,235 $
2,597,646 Adjusted earnings before interest and taxes (EBIT) (2)
$ 48,940 $ 91,799
$ 149,980 $ 248,352
Adjusted EBIT Margin (2)
8.0 % 10.8 %
8.1
% 9.6 %
Steel Group
Net sales to external customers
$ 149,408 $ 488,248
$ 510,985 $ 1,347,453 Intergroup sales
8,539 48,291
30,365 133,002 Total net sales
$ 157,947 $ 536,539
$ 541,350 $
1,480,455 Adjusted (loss) earnings before interest and taxes (EBIT)
(2)
$ (20,266 ) $ 133,802
$
(60,435 ) $ 267,499 Adjusted EBIT Margin (2)
-12.8 % 24.9 %
-11.2 % 18.1 %
Unallocated corporate expense $ (10,310
) $ (19,024 )
$ (35,802 ) $ (54,724 )
Intergroup eliminations expense (income) (4)
$
3,510 $ (1,021 )
$ 6,261 $ (5,384 )
Consolidated
Net sales to external customers
$ 763,644 $ 1,336,352
$ 2,367,021 $ 3,942,848 Adjusted earnings before
interest and taxes (EBIT) (2)
$ 21,874 $ 205,556
$ 60,004 $ 455,743 Adjusted EBIT Margin (2)
2.9 % 15.4 %
2.5 % 11.6 % (1)
"Adjusted" statements exclude the impact of impairment and
restructuring, manufacturing rationalization/reorganizationand
special charges and credits for all periods shown. (2) EBIT
is defined as operating income plus other income (expense). EBIT
Margin is EBIT as a percentage of net sales.EBIT and EBIT margin on
a segment basis exclude certain special items set forth above. EBIT
and EBIT Margin are importantfinancial measures used in the
management of the business, including decisions concerning the
allocation of resourcesand assessment of performance. Management
believes that reporting EBIT and EBIT Margin best reflect the
performance of thecompany's business segments and EBIT disclosures
are responsive to investors. (3) Discontinued Operations
relate to the announced sale of the Needle Roller Bearings (NRB)
operations to JTEKT Corporation that is projected to close in
December 2009. (4) Intergroup eliminations represent
intergroup profit or loss between the Steel Group and the Bearings
and Power Transmission Group.
Reconciliation of GAAP net income
attributable to the Timken Co. and EPS - dilutedThis
reconciliation is provided as additional relevant information about
the company's performance. Management believes adjusted net income
and adjustedearnings per share are more representative of the
company's performance and therefore useful to investors. Management
also believes that it is appropriateto compare GAAP net income to
adjusted net income in light of special items related to impairment
and restructuring and manufacturingrationalization/reorganization
costs, Continued Dumping and Subsidy Offset Act (CDSOA) receipts,
and gain/loss on the sale of non-strategic assets.
Third
Quarter Nine Months 2009
2008
2009 2008
(Dollars in thousands,
except per share data) (Unaudited) $
EPS (5) $ EPS (5)
$ EPS
(5) $ EPS (5)
Net (loss) income attributable to The Timken Company
$ (50,128 ) $ (0.52 ) $
130,413 $ 1.35
$ (113,775 ) $
(1.18 ) $ 303,821 $ 3.14 Pre-tax special
items: Manufacturing rationalization/reorganization expenses -
cost of products sold
960 0.01 322 -
3,590 0.04 1,760 0.02
Manufacturing rationalization/reorganization expenses - SG&A
528 0.01 (370 ) -
1,638 0.02 1,687 0.02
Impairment and restructuring
19,613 0.20 2,379 0.02
84,074 0.87 7,442 0.08 Special items - other income
2,587 0.03 558 0.01
608 0.01 (19,987 )
(0.21 ) Provision for income taxes (6)
3,129 0.03
2,467 0.03
(8,513 ) (0.09 ) 12,146 0.13
Special items, loss from discontinued operations
net of income taxes (3)
28,553 0.30 56 -
30,282 0.32 226 -
Less: net loss attributable to noncontrolling interest
(1 ) - -
-
(6,149 )
(0.06 ) - -
Adjusted net (loss) income attributable to The Timken Company
$ 5,241 $ 0.05
$ 135,825 $ 1.40
$ (8,245
) $ (0.09 ) $ 307,095
$ 3.18 (5) EPS amounts may not sum due
to rounding differences. (6) Provision for income taxes
includes adjustments to remove the income taxes associated with
pre-tax special items and the impact of discrete tax items recorded
duringthe period(s), and to reflect one overall effective tax rate
on Adjusted pre-tax income.
Reconciliation of Outlook
InformationExpected earnings per diluted share for the 2009
full year excludes special items. Examples of such special items
include impairment and restructuring, manufacturing
rationalization/reorganization expenses, gain/loss on the sale of
non-strategic assets and payments under the CDSOA. It is not
possible at this time to identify the potential amount or
significance ofthese special items. Management cannot predict
whether the company will receive any additional payments under the
CDSOA in 2009 and if so, in what amount. If the company doesreceive
any CDSOA payments, they will most likely be received in the fourth
quarter.
Reconciliation of GAAP income from
continuing operations and EPS - diluted.This reconciliation is
provided as additional relevant information about the company's
performance. Management believes adjusted income from continuing
operations and adjusted earningsper share are more representative
of the company's performance and therefore useful to investors.
Management also believes that it is appropriate to compare GAAP
income from continuingoperations to adjusted income from continuing
operations in light of special items related to impairment and
restructuring and manufacturing rationalization/reorganization
costs, ContinuedDumping and Subsidy Offset Act (CDSOA) receipts,
and gain/loss on the sale of non-strategic assets.
Third
Quarter Nine Months 2009
2008
2009 2008
(Dollars in thousands, except
per share data) (Unaudited)
$
EPS (5)
$
EPS (5)
$
EPS (5)
$
EPS (5)
(Loss) Income from
continuing operations
$ (18,901 ) $
(0.20 ) $ 124,971 $ 1.30
$ (58,740
) $ (0.61 ) $ 280,682 $ 2.92
Pre-tax special items: Manufacturing rationalization/reorganization
expenses -
cost of products sold
960 0.01 322 -
3,590 0.04 1,760 0.02
Manufacturing rationalization/reorganization expenses - SG&A
528 0.01 (370 ) -
1,638 0.02 1,687 0.02
Impairment and restructuring
19,613 0.20 2,379 0.02
84,074 0.87 7,442 0.08 Special items - other expense
(income)
2,587 0.03 558 0.01
608 0.01
(19,987 ) (0.21 ) Provision for income taxes (7)
3,129 0.03
2,467 0.03
(8,513 )
(0.09 ) 12,146
0.13 Adjusted income from continuing
operations
$ 7,916 $ 0.08
$ 130,327 $ 1.36
$ 22,657
$ 0.24 $ 283,730
$ 2.96 (5) EPS amounts may not sum due
to rounding differences. (7) Provision for income taxes
includes the tax effect of pre-tax special items on our effective
tax rate, as well as the impact of discrete tax items recorded
during the respective periods.
Reconciliation of GAAP income
from continuing operations before income taxesThis
reconciliation is provided as additional relevant information about
the company's performance. Management believes Consolidated
adjusted earnings before interest and taxes (EBIT)and Total
Bearings and Power Transmission Group adjusted EBIT are more
representative of the company's performance and therefore useful to
investors. Management alsobelieves that it is appropriate to
compare GAAP Income from Continuing Operations before Income Taxes
to Consolidated adjusted EBIT in light of special items relatedto
impairment and restructuring and manufacturing
rationalization/reorganization costs, Continued Dumping and Subsidy
Offset Act (CDSOA) receipts, and gain/loss onthe sale of
non-strategic assets.
Third
Quarter Nine Months 2009
2008
2009 2008
(Thousands of U.S. dollars)
(Unaudited) $ $
$ $
(Loss) Income from continuing operations before income taxes
$ (11,785 ) $ 193,092
$ (55,840
) $ 435,760 Pre-tax reconciling items: Interest
expense
10,319 11,002
27,187 33,374 Interest income
(348 ) (1,427 )
(1,253 ) (4,293 )
Manufacturing rationalization/reorganization expenses -
cost of products sold
960 322
3,590 1,760 Manufacturing
rationalization/reorganization expenses - SG&A
528 (370
)
1,638 1,687 Impairment and restructuring
19,613
2,379
84,074 7,442 Special items - other income
2,587
558
608 (19,987 )
Consolidated adjusted earnings before interest and taxes (EBIT)
$ 21,874 $ 205,556
$
60,004 $ 455,743 Steel Group
adjusted earnings (loss) before interest and taxes (EBIT)
20,266 (133,802 )
60,435 (267,499 ) Unallocated
corporate expense
10,310 19,024
35,802 54,724
Intergroup eliminations expense
(3,510 ) 1,021
(6,261 ) 5,384 Total Bearings and Power
Transmission Group
adjusted earnings before interest and taxes (EBIT)
$
48,940 $ 91,799
$ 149,980
$ 248,352
Reconciliation of Total Debt to
Net Debt and the Ratio of Net Debt to Capital: (Dollars in
thousands) (Unaudited) Sept 30, 2009 Dec.
31, 2008 Short-term debt
$ 331,860 $
108,590 Long-term debt
469,057
515,250 Total Debt
800,917 623,840 Less: Cash and
cash equivalents (8)
(631,036 )
(133,383 ) Net Debt
$ 169,881 $ 490,457
Shareholders' equity
$ 1,590,973 $
1,663,038 Ratio of Total Debt to Capital
33.5
% 27.3 % Ratio of Net Debt to Capital (Leverage)
9.6 % 22.8 % This reconciliation is
provided as additional relevant information about The Timken
Company's
financial position. Capital is
defined as total debt plus shareholders' equity.
Management believes Net Debt is more indicative of Timken's
financial position, due to the amount of cash and cash equivalents.
(8) Cash and cash equivalents at September 30, 2009 includes
restricted cash of $248.2 million to be used to redeem $250.0
million in bonds maturing on February 15, 2010.
CONDENSED CONSOLIDATED BALANCE SHEET
Sept 30, Dec 31,
(Dollars in thousands)
(Unaudited) 2009 2008
ASSETS Cash
& cash equivalents
$ 382,878 $ 133,383 Restricted
cash
248,158 - Accounts receivable
458,393 575,915
Inventories
716,948 1,000,493 Current assets, discontinued
operations
364,494 182,861 Other current assets
145,826 140,813
Total Current
Assets 2,316,697 2,033,465 Property, plant &
equipment
1,425,960 1,516,972 Goodwill
222,225
221,435 Non-current assets, discontinued operations
-
269,625 Other assets
493,139
494,553
Total Assets $ 4,458,021
$ 4,536,050
LIABILITIES Accounts payable & other
liabilities
$ 352,558 $ 423,523 Short-term debt
331,860 108,590 Income taxes
5,060 27,598 Current
liabilities, discontinued operations
51,530 21,512 Accrued
expenses
147,848 217,090
Total Current Liabilities 888,856 798,313 Long-term
debt
469,057 515,250 Accrued pension cost
779,196
823,550 Accrued postretirement benefits cost
611,743 613,045
Non-current liabilities, discontinued operations
- 30,329
Other non-current liabilities
118,196
92,525
Total Liabilities 2,867,048 2,873,012
EQUITY Timken Company shareholders' equity
1,572,834 1,640,244 Noncontrolling interest
18,139 22,794
Total Equity
1,590,973 1,663,038
Total
Liabilities and Equity $ 4,458,021
$ 4,536,050
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the three months ended For the nine months ended
Sept
30, Sept 30,
Sept 30, Sept 30,
(Dollars
in thousands) (Unaudited) 2009 2008
2009 2008
Cash Provided (Used) OPERATING
ACTIVITIES Net (loss) income attributable to the Timken Company
$ (50,128 ) $ 130,413
$ (113,775
) $ 303,821 Net loss (income) from discontinued operations
30,803 (6,539 )
59,912 (26,099 ) Net (loss) income
attributable to noncontrolling interest
424 1,097
(4,877 ) 2,960 Adjustments to reconcile net
income to net cash provided by operating activities: Depreciation
and amortization
48,990 53,445
150,835 154,965
Pension and other postretirement expense
29,379 19,847
77,092 62,342 Pension and other postretirement benefit
payments
(54,519 ) (14,898 )
(89,216 )
(55,783 ) Accounts receivable
(14,716 ) 46,545
128,359 (81,248 ) Inventories
107,463 (110,497 )
311,517 (213,384 ) Accounts payable and accrued expenses
54,028 46,052
(169,367 ) 97,129 Other
(3,741 ) 4,271
35,291 6,064 Net Cash Provided
by Operating Activities - Continuing Operations
147,983
169,736
385,771 250,767 Net Cash Provided by Operating
Activities - Discontinued Operations
22,888
48,406
38,544
58,089
Net Cash Provided by Operating
Activities 170,871 218,142
424,315 308,856
INVESTING ACTIVITIES Capital expenditures
(27,663
) (55,868 )
(80,953 ) (176,250 ) Other
1,739 5,942
7,173 34,079 Acquisitions
-
(272 )
(353 )
(57,178 ) Net Cash Used by Investing Activities -
Continuing Operations
(25,924 ) (50,198 )
(74,133 ) (199,349 ) Net Cash Used by Investing
Activities - Discontinued Operations
(548 )
(2,996 )
(1,534 )
(10,063 )
Net Cash Used by Investing Activities
(26,472 ) (53,194 )
(75,667 ) (209,412
)
FINANCING ACTIVITIES Cash dividends paid to shareholders
(8,470 ) (17,374 )
(34,608 ) (50,083 )
Net proceeds from common share activity
654 1,171
654
16,879 Net borrowings (payments) on credit facilities
205,993 (106,678 )
163,634 20,462 Increase in
restricted cash
(248,158 ) -
(248,158 ) -
Net Cash Used by Financing Activities (49,981
) (122,881 )
(118,478 ) (12,742 )
Effect of exchange rate changes on cash
11,374
(20,405 )
19,325
(14,483 )
Increase in Cash and Cash Equivalents
105,792 21,662
249,495 72,219
Cash and Cash
Equivalents at Beginning of Period 277,086
93,441
133,383
42,884
Cash and Cash Equivalents at End of
Period $ 382,878 $ 115,103
$ 382,878 $ 115,103
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