CANTON, Ohio, July 29 /PRNewswire-FirstCall/ --
- Second-quarter sales up 37 percent over last year
- Higher volume and strong operating performance yield
improved profitability
The Timken Company (NYSE: TKR) today reported sales of
$1.0 billion in the second quarter of
2010, an increase of 37 percent over the same period a year ago.
The increase was driven by strong demand in the company's Mobile
Industries and Steel segments, as well as the favorable impact of
surcharges to recover material costs.
The company generated strong earnings from continuing
operations, net of non-controlling interest, in the second quarter
of $81.4 million, or $0.84 per diluted share, compared with last
year's second-quarter loss of $39.0 million, or $0.40 per share. Excluding special items,
the company posted $82.2 million
in income from continuing operations, net of non-controlling
interest, or $0.85 per diluted share,
compared with a loss of $6.9 million, or $0.07 per share, a year ago.
Special items for continuing operations, net of tax, in the
second quarter of 2010 totaled expense of $0.8 million
compared with $32.1 million in
the same period last year. These special items in the current year
include expense for severance and manufacturing rationalization,
while the expense in 2009 primarily related to a non-cash
impairment charge for a plant consolidation.
The increase in second-quarter earnings reflects the combined
effects of recovering demand and improvements in the company's cost
structure, manufacturing performance and pricing. Partially
offsetting these benefits were higher selling and administrative
costs across all of the company's segments related to
performance-based compensation plans.
"Our company has rebounded extremely well from the challenges
experienced during the recent recession," said
James W. Griffith, Timken president and chief executive
officer. "We are leveraging increased customer demand and growth in
attractive markets to deliver stronger earnings."
Among recent developments, the company:
- Raised the quarterly cash dividend in May by 44 percent to
13 cents per share;
- Announced it has agreed to acquire the business of QM Bearings
and Power Transmission, Incorporated, based in Ferndale, Washington, which has annual sales
of approximately $14 million and will expand Timken's offering
in industrial markets; and
- Continued to execute the company's wind energy strategy with a
variety of new-product introductions, and received a contract worth
$26 million to supply wind turbine products and services to
Xinjiang Goldwind Science & Technology Company, one of the
world's top five wind-power equipment manufacturers.
Total debt was $493 million as of June 30, 2010, or
22.9 percent of capital. As of June 30, 2010, the
company's cash position was $796 million, or $303 million
in excess of total debt. This compares with a net cash position of
$243 million as of Dec. 31, 2009. The favorable change in
net cash reflects strong cash flow from earnings, partially offset
by pension contributions, including a discretionary payment of
$100 million in the first quarter, and working-capital
requirements.
Six Months' Results
For the first half of 2010, sales were $1.9 billion, an increase of 20 percent
from the same period in 2009. Income from the company's continuing
operations, net of non-controlling interest, for the first six
months of 2010 was $109.7 million, or $1.13 per diluted share, compared with a loss of
$34.5 million, or $0.36 per share, a year ago. Special items, net
of tax, in the first half of 2010 totaled $27.7 million of expense compared with
$48.5 million of expense in the
prior-year period. Special items in 2010 primarily related to a
one-time non-cash charge of $21.6 million to record the deferred tax
impact of U.S. health care legislation enacted in the first quarter
and expense for severance and manufacturing rationalization.
Excluding special items, income from the company's continuing
operations, net of non-controlling interest, was $137.4 million, or $1.42 per diluted share, in the first half of
2010, versus income of $14.0 million, or $0.15 per diluted share, a year ago. During the
first six months of 2010, the company benefited from increased
demand, improved manufacturing performance and cost-reduction
initiatives. Partially offsetting these benefits were higher
selling and administrative costs across all of the company's
segments related to performance-based compensation plans.
Bearings and Power Transmission Group Results
The Bearings and Power Transmission Group had second-quarter
sales of $694.7 million, up
14 percent from $608.4 million
for the same period last year. Earnings before interest and taxes
(EBIT) for the second quarter were $104.6 million, up 150 percent from
$41.8 million in the second
quarter of 2009.
For the first half of 2010, Bearings and Power Transmission
Group sales were $1.4 billion,
up 9 percent from the same period a year ago. First-half 2010
EBIT was $186.7 million,
compared with EBIT of $101.1 million in the first half of
2009.
Mobile Industries Segment Results
In the second quarter, Mobile Industries' sales were
$400.4 million, a 37-percent
increase from last year's second-quarter sales of $292.2 million. The increase was driven by
stronger demand, led by the light-vehicle, off-highway and
heavy-truck market sectors.
EBIT was $68.5 million for
the second quarter, compared with an EBIT loss of $12.0 million for the same period a year
ago. The increase was driven by higher volume, better manufacturing
utilization, cost reductions and pricing initiatives.
For the first half of 2010, Mobile Industries' sales of
$767.9 million were up
30 percent from the same period a year ago. First-half 2010
EBIT was $110.9 million, compared
with an EBIT loss of $14.3 million in the first half of 2009.
Process Industries Segment Results
Process Industries had second-quarter sales of $211.6 million, up 2 percent from
$207.0 million for the same
period a year ago. The increase reflects higher sales in
Asia, partially offset by declines
in North America and Europe.
Second-quarter EBIT was $28.9 million, down 18 percent from
$35.1 million in the same period
a year ago. The benefit of cost-reduction initiatives was more than
offset by increased material costs and the ramp-up of new
wind-energy production, as well as higher selling and
administrative costs.
For the first half of 2010, Process Industries sales were
$418.2 million, down
3 percent from the same period a year ago. First-half 2010
EBIT was $55.8 million, compared
with EBIT of $78.6 million in
the first half of 2009.
Aerospace and Defense Segment Results
Aerospace and Defense had second-quarter sales of $82.7 million, down 24 percent from
$109.2 million for the same
period last year. The decline reflects further reductions in demand
from commercial and general aviation market sectors, while the
defense markets remain relatively flat.
Second-quarter EBIT was $7.2 million, down 62 percent from
$18.7 million a year ago. The
decline, which reflects lower demand and higher selling and
administrative costs, was partially offset by cost-reduction
initiatives.
For the first half of 2010, Aerospace and Defense sales were
$174.8 million, down
20 percent from the same period a year ago. First-half 2010
EBIT was $20.0 million, compared
with EBIT of $36.8 million in
the first half of 2009.
Steel Group Results
Sales for the Steel Group, including inter-group sales, were
$338.1 million in the second
quarter, an increase of 151 percent from $134.8 million for the same period last
year. The increase was driven by stronger demand across most end
markets and higher raw-material surcharges of $84 million.
Second-quarter EBIT was $43.0 million, compared with an EBIT loss of
$32.9 million for the same
period a year ago. EBIT performance benefited from improved volume,
manufacturing utilization and cost-reduction initiatives.
For the first six months of 2010, Steel Group sales were
$608.4 million, up
59 percent from the first half of last year. EBIT for the
first half of 2010 was $62.9 million, compared with an EBIT loss of
$40.2 million for the same
period a year ago.
Outlook
The company's outlook for 2010 reflects general improvement in
the global economy that varies by end-market and geographic region.
Timken anticipates an increase in sales of approximately 25 to
30 percent over 2009, driven primarily by stronger demand in
the Steel and Mobile Industries segments. Steel Group sales
are expected to increase 70 to 80 percent from 2009, due to
improved demand across all market sectors as well as surcharges.
Mobile Industries segment sales are expected to be up approximately
20 to 25 percent, driven by the light-vehicle, off-highway and
heavy-truck sectors. Sales in the Process Industries segment are
expected to be up slightly, as growth initiatives in energy and
Asia and new product introductions
offset declines in other industrial market sectors. Aerospace and
Defense segment sales are expected to decline 5 to 10 percent due
to decreases in commercial and general aviation, which are expected
to improve in the second half of the year.
The company is raising its 2010 full-year earnings estimate,
excluding special items, to a range of $2.40
to $2.60 per diluted share, compared with its prior estimate
of $1.60 to $1.80 per diluted share.
The company expects to generate cash from operating activities in
excess of $380 million, and free cash
flow (after capital expenditures and dividends) in excess of
$200 million for the full year 2010.
Conference Call
Information
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The company will host a
conference call for investors and analysts today to discuss
financial results.
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Conference Call:
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Thursday, July 29,
2010
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11 a.m. Eastern Time
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Live Dial-In:
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800-344-0593 or
706-634-0975
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(Call in 10 minutes prior to be
included.)
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Conference ID:
68506185
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Replay Dial-In through August 6,
2010:
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800-642-1687 or
706-645-9291
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Live Webcast:
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www.timken.com/investors
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About The Timken Company
The Timken Company (NYSE: TKR, http://www.timken.com) 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
$3.1 billion in 2009, operations in
26 countries/territories and approximately 17,000 employees, 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, 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 second quarter of 2010; 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, 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 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 ongoing programs and
initiatives. 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, 2009, page 50, and in
the Quarterly Report on Form 10-Q for the quarter ended
March 31, 2010. The company undertakes no obligation to update
or revise any forward-looking statement.
Media contact: Lorrie Paul
Crum
Manager -- Global Media and Strategic Communications
Office: (330) 471-3514
Mobile: (330) 224-5021
lorrie.crum@timken.com
Investor Contact: Steve
Tschiegg
Director -- Capital Markets and Investor Relations
Telephone: (330) 471-7446
Facsimile: (330) 471-2797
steve.tschiegg@timken.com
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(Unaudited)
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CONDENSED CONSOLIDATED STATEMENT
OF INCOME
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AS REPORTED
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ADJUSTED (1)
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(Dollars in millions, except
share data)
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Q2 2010
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Q2 2009
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Six Months
2010
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Six Months
2009
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Q2 2010
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Q2 2009
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Six Months
2010
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Six Months
2009
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Net sales
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$
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1,011.4
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$
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736.8
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$
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1,925.1
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$
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1,603.4
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$
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1,011.4
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$
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736.8
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$
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1,925.1
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$
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1,603.4
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Cost of products sold
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742.5
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610.0
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1,432.3
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1,320.8
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742.5
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610.0
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1,432.3
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1,320.8
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Manufacturing rationalization /
reorganization
expenses - cost of products
sold
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0.6
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1.4
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1.8
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2.6
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-
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-
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-
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-
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Gross Profit
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$
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268.3
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$
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125.4
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$
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491.0
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$
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280.0
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$
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268.9
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$
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126.8
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$
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492.8
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$
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282.6
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Selling, general &
administrative expenses (SG&A)
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140.6
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127.2
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273.4
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250.3
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140.6
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127.2
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273.4
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250.3
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Rationalization / reorganization
expenses - SG&A
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0.1
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0.8
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0.3
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1.1
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-
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-
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-
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-
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Impairment and
restructuring
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1.0
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50.7
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6.5
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64.5
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-
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-
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-
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-
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Operating Income
(Loss)
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$
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126.6
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$
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(53.3)
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$
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210.8
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$
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(35.9)
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$
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128.3
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$
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(0.4)
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$
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219.4
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$
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32.3
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Other income
(expense)
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2.6
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(0.9)
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2.2
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5.9
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2.6
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(0.9)
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2.2
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5.9
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Special items - other income
(expense)
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0.1
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0.8
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(0.1)
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2.0
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-
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-
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-
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-
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Earnings (Loss) Before Interest
and Taxes (EBIT)(2)
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$
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129.3
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$
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(53.4)
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$
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212.9
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$
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(28.0)
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$
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130.9
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$
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(1.3)
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$
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221.6
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$
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38.2
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Interest expense, net
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(9.1)
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(8.0)
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(18.1)
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(16.0)
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(9.1)
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(8.0)
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(18.1)
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(16.0)
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Income (Loss) From Continuing
Operations Before Income Taxes
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120.2
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(61.4)
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194.8
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(44.0)
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121.8
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(9.3)
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203.5
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22.2
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Provision (benefit) for income
taxes
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38.2
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(23.0)
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84.1
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(4.2)
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39.0
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(3.1)
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65.1
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7.4
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Income (Loss) From Continuing
Operations
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$
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82.0
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$
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(38.4)
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$
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110.7
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$
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(39.8)
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$
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82.8
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$
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(6.2)
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$
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138.4
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$
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14.8
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Income (loss) from discontinued
operations
net of income taxes (3)
(6)
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4.2
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(25.5)
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4.5
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(29.1)
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-
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(13.8)
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-
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(27.4)
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Net Income (Loss)
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$
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86.2
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$
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(63.9)
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$
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115.2
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$
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(68.9)
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$
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82.8
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$
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(20.0)
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$
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138.4
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$
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(12.6)
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Less: Net Income (Loss)
Attributable to Noncontrolling Interest
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0.6
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0.6
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1.0
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(5.3)
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0.6
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0.7
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1.0
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0.8
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Net Income (Loss) Attributable
to The Timken Company
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$
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85.6
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$
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(64.5)
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$
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114.2
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$
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(63.6)
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$
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82.2
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$
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(20.7)
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$
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137.4
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$
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(13.4)
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Net Income (Loss) per Common
Share Attributable to The Timken
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Company Common
Shareholders:
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Basic Earnings (Loss) Per Share
- Continuing Operations
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$
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0.84
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$
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(0.40)
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$
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1.13
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$
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(0.36)
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$
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0.85
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$
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(0.07)
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$
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1.43
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$
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0.15
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Basic Earnings (Loss) Per Share
- Discontinued Operations
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0.04
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(0.27)
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0.05
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(0.30)
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-
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(0.15)
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-
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(0.29)
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Earnings (Loss) Per
Share
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$
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0.88
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$
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(0.67)
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$
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1.18
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$
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(0.66)
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$
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0.85
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$
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(0.22)
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$
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1.43
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$
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(0.14)
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Diluted Earnings (Loss) Per
Share - Continuing Operations
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$
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0.84
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$
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(0.40)
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$
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1.13
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$
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(0.36)
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$
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0.85
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$
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(0.07)
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$
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1.42
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$
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0.15
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Diluted Earnings (Loss) Per
Share - Discontinued Operations
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0.04
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(0.27)
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0.05
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(0.30)
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-
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(0.15)
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-
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(0.29)
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Earnings (Loss) Per
Share
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$
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0.88
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$
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(0.67)
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$
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1.18
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$
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(0.66)
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$
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0.85
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$
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(0.22)
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$
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1.42
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$
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(0.14)
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|
|
|
|
|
|
|
Average Shares
Outstanding
|
|
|
96,305,087
|
|
|
96,147,809
|
|
|
96,336,974
|
|
|
96,082,491
|
|
|
|
96,305,087
|
|
|
96,147,809
|
|
|
96,336,974
|
|
|
96,082,491
|
|
Average Shares Outstanding -
assuming dilution
|
|
|
96,876,677
|
|
|
96,147,809
|
|
|
96,792,829
|
|
|
96,082,491
|
|
|
|
96,876,677
|
|
|
96,147,809
|
|
|
96,792,829
|
|
|
96,082,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BUSINESS SEGMENTS
|
|
|
|
|
|
(Dollars in millions, except
share data)
|
|
|
|
|
|
Q2 2010
|
|
|
Q2 2009
|
|
|
Six Months
2010
|
|
|
Six Months
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile Industries
Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external
customers
|
|
|
|
|
$
|
400.4
|
|
$
|
292.2
|
|
$
|
767.9
|
|
$
|
592.8
|
|
|
|
Adjusted earnings (loss) before
interest and taxes (EBIT)(2)
|
|
|
|
|
$
|
68.5
|
|
$
|
(12.0)
|
|
$
|
110.9
|
|
$
|
(14.3)
|
|
|
|
Adjusted EBIT
Margin(2)
|
|
|
|
|
|
17.1%
|
|
|
-4.1%
|
|
|
14.4%
|
|
|
-2.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Process Industries
Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external
customers
|
|
|
|
|
$
|
211.0
|
|
$
|
206.4
|
|
$
|
416.9
|
|
$
|
430.5
|
|
|
|
Intergroup sales
|
|
|
|
|
|
0.6
|
|
|
0.6
|
|
|
1.3
|
|
|
1.6
|
|
|
|
Total net sales
|
|
|
|
|
$
|
211.6
|
|
$
|
207.0
|
|
$
|
418.2
|
|
$
|
432.1
|
|
|
|
Adjusted earnings before
interest and taxes (EBIT)(2)
|
|
|
|
|
$
|
28.9
|
|
$
|
35.1
|
|
$
|
55.8
|
|
$
|
78.6
|
|
|
|
Adjusted EBIT
Margin(2)
|
|
|
|
|
|
13.7%
|
|
|
17.0%
|
|
|
13.3%
|
|
|
18.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace and Defense
Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external
customers
|
|
|
|
|
$
|
82.7
|
|
$
|
109.2
|
|
$
|
174.8
|
|
$
|
218.5
|
|
|
|
Adjusted earnings before
interest and taxes (EBIT)(2)
|
|
|
|
|
$
|
7.2
|
|
$
|
18.7
|
|
$
|
20.0
|
|
$
|
36.8
|
|
|
|
Adjusted EBIT
Margin(2)
|
|
|
|
|
|
8.7%
|
|
|
17.1%
|
|
|
11.4%
|
|
|
16.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Bearings and Power
Transmission Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external
customers
|
|
|
|
|
$
|
694.1
|
|
$
|
607.8
|
|
$
|
1,359.6
|
|
$
|
1,241.8
|
|
|
|
Intergroup sales
|
|
|
|
|
|
0.6
|
|
|
0.6
|
|
|
1.3
|
|
|
1.6
|
|
|
|
Total net sales
|
|
|
|
|
$
|
694.7
|
|
$
|
608.4
|
|
$
|
1,360.9
|
|
$
|
1,243.4
|
|
|
|
Adjusted earnings before
interest and taxes (EBIT)(2)
|
|
|
|
|
$
|
104.6
|
|
$
|
41.8
|
|
$
|
186.7
|
|
$
|
101.1
|
|
|
|
Adjusted EBIT
Margin(2)
|
|
|
|
|
|
15.1%
|
|
|
6.9%
|
|
|
13.7%
|
|
|
8.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external
customers
|
|
|
|
|
$
|
317.3
|
|
$
|
129.0
|
|
$
|
565.5
|
|
$
|
361.6
|
|
|
|
Intergroup sales
|
|
|
|
|
|
20.8
|
|
|
5.8
|
|
|
42.9
|
|
|
21.8
|
|
|
|
Total net sales
|
|
|
|
|
$
|
338.1
|
|
$
|
134.8
|
|
$
|
608.4
|
|
$
|
383.4
|
|
|
|
Adjusted earnings (loss) before
interest and taxes (EBIT)(2)
|
|
|
|
|
$
|
43.0
|
|
$
|
(32.9)
|
|
$
|
62.9
|
|
$
|
(40.2)
|
|
|
|
Adjusted EBIT
Margin(2)
|
|
|
|
|
|
12.7%
|
|
|
-24.4%
|
|
|
10.3%
|
|
|
-10.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated corporate
expense
|
|
|
|
|
$
|
(17.8)
|
|
$
|
(13.2)
|
|
$
|
(31.6)
|
|
$
|
(25.5)
|
|
|
|
Intergroup eliminations income
(expense)(4)
|
|
|
|
|
$
|
1.1
|
|
$
|
3.0
|
|
$
|
3.6
|
|
$
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external
customers
|
|
|
|
|
$
|
1,011.4
|
|
$
|
736.8
|
|
$
|
1,925.1
|
|
$
|
1,603.4
|
|
|
|
Adjusted earnings (loss) before
interest and taxes (EBIT)(2)
|
|
|
|
|
$
|
130.9
|
|
$
|
(1.3)
|
|
$
|
221.6
|
|
$
|
38.2
|
|
|
|
Adjusted EBIT
Margin(2)
|
|
|
|
|
|
12.9%
|
|
|
-0.2%
|
|
|
11.5%
|
|
|
2.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) "Adjusted" statements
exclude the impact of impairment and restructuring, manufacturing
rationalization/reorganization and special charges
and credits for all periods
shown. Management believes that the Adjusted Consolidated
Statement of Income may be helpful in understanding
the company's performance and
therefore useful to investors.
|
|
(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 important financial measures used in the
management of the business,
including decisions concerning the allocation of resources and
assessment of performance. Management
believes that reporting EBIT and
EBIT Margin best reflect the performance of the company's business
segments and EBIT disclosures are
responsive to
investors.
|
|
(3) Discontinued
Operations relate to the sale of the Needle Roller Bearings (NRB)
operations to JTEKT Corporation on December 31, 2009.
|
|
(4) Intergroup
eliminations represent intergroup profit or loss between the Steel
Group and the Bearings and Power Transmission Group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net income
(loss) attributable to The Timken Company and EPS -
diluted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
This reconciliation is provided
as additional relevant information about the company's performance.
Management believes adjusted earnings per 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 continuing operations to adjusted
income from continuing operations
in light of special items
related to impairment and restructuring and manufacturing
rationalization/reorganization costs, Continued Dumping and Subsidy
Offset Act (CDSOA) receipts and gain/loss
on sale of non-strategic
assets.
|
|
|
|
|
|
Second Quarter
|
|
Six Months Ended
|
|
|
|
|
|
|
|
2010
|
2009
|
|
2010
|
2009
|
|
(Dollars in millions, except
share data)
|
|
|
$
|
|
|
EPS(5)
|
|
$
|
|
|
EPS(5)
|
|
|
$
|
|
|
EPS(5)
|
|
$
|
|
|
EPS(5)
|
|
Net income (loss) attributable
to The Timken Company
|
|
$
|
85.6
|
|
$
|
0.88
|
$
|
(64.5)
|
|
$
|
(0.67)
|
|
$
|
114.2
|
|
$
|
1.18
|
$
|
(63.6)
|
|
$
|
(0.66)
|
|
Less: loss from discontinued
operations, net of income taxes
|
|
|
4.2
|
|
|
0.04
|
|
(25.5)
|
|
|
(0.27)
|
|
|
4.5
|
|
|
0.05
|
|
(29.1)
|
|
|
(0.30)
|
|
Net income (loss) from
continuing operations attributable to The Timken
Company
|
|
$
|
81.4
|
|
$
|
0.84
|
$
|
(39.0)
|
|
$
|
(0.40)
|
|
$
|
109.7
|
|
$
|
1.13
|
$
|
(34.5)
|
|
$
|
(0.36)
|
|
Pre-tax special
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
rationalization/reorganization expenses - cost of products
sold
|
|
|
0.6
|
|
|
0.01
|
|
1.4
|
|
|
0.01
|
|
|
1.8
|
|
|
0.02
|
|
2.6
|
|
|
0.03
|
|
Rationalization/reorganization
expenses - SG&A
|
|
|
0.1
|
|
|
-
|
|
0.8
|
|
|
0.01
|
|
|
0.3
|
|
|
-
|
|
1.1
|
|
|
0.01
|
|
Impairment and
restructuring
|
|
|
1.0
|
|
|
0.01
|
|
50.7
|
|
|
0.53
|
|
|
6.5
|
|
|
0.07
|
|
64.5
|
|
|
0.67
|
|
Special items - other (income)
expense
|
|
|
(0.1)
|
|
|
-
|
|
(0.8)
|
|
|
(0.01)
|
|
|
0.1
|
|
|
-
|
|
(2.0)
|
|
|
(0.02)
|
|
Provision for income
taxes(6)
|
|
|
(0.8)
|
|
|
(0.01)
|
|
(19.9)
|
|
|
(0.21)
|
|
|
19.0
|
|
|
0.20
|
|
(11.6)
|
|
|
(0.12)
|
|
Special items attributable to
noncontrolling interests
|
|
|
-
|
|
|
-
|
|
(0.1)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
(6.1)
|
|
|
(0.06)
|
|
Adjusted net income (loss)
from continuing operations attributable to The Timken
Company
|
|
$
|
82.2
|
|
$
|
0.85
|
$
|
(6.9)
|
|
$
|
(0.07)
|
|
$
|
137.4
|
|
$
|
1.42
|
$
|
14.0
|
|
$
|
0.15
|
|
Add: adjusted (loss) from
discontinued operations
|
|
|
-
|
|
|
-
|
|
(13.8)
|
|
|
(0.14)
|
|
|
-
|
|
|
-
|
|
(27.4)
|
|
|
(0.29)
|
|
Adjusted net income attributable
to The Timken Company
|
|
$
|
82.2
|
|
$
|
0.85
|
$
|
(20.7)
|
|
$
|
(0.22)
|
|
$
|
137.4
|
|
$
|
1.42
|
$
|
(13.4)
|
|
$
|
(0.14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
$
|
82.0
|
|
$
|
0.84
|
$
|
(38.4)
|
|
$
|
(0.40)
|
|
$
|
110.7
|
|
$
|
1.14
|
$
|
(39.8)
|
|
$
|
(0.41)
|
|
Less: Net income (loss)
attributable to noncontrolling interest
|
|
|
0.6
|
|
|
-
|
|
0.6
|
|
|
-
|
|
|
1.0
|
|
|
0.01
|
|
(5.3)
|
|
|
(0.06)
|
|
Net income (loss) from
continuing operations attributable to The Timken
Company
|
|
$
|
81.4
|
|
$
|
0.84
|
$
|
(39.0)
|
|
$
|
(0.40)
|
|
$
|
109.7
|
|
$
|
1.13
|
$
|
(34.5)
|
|
$
|
(0.36)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued
operations, net of income taxes
|
|
$
|
4.2
|
|
$
|
0.04
|
$
|
(25.5)
|
|
$
|
(0.27)
|
|
$
|
4.5
|
|
$
|
0.05
|
$
|
(29.1)
|
|
$
|
(0.30)
|
|
Special items, discontinued
operations
|
|
|
(4.2)
|
|
|
(0.04)
|
|
11.7
|
|
|
0.12
|
|
|
(4.5)
|
|
|
(0.05)
|
|
1.7
|
|
|
0.02
|
|
Adjusted income (loss) from
discontinued operations, net of income taxes
|
|
$
|
-
|
|
$
|
-
|
$
|
(13.8)
|
|
$
|
(0.15)
|
|
$
|
-
|
|
$
|
-
|
$
|
(27.4)
|
|
$
|
(0.29)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)EPS amounts
may not sum due to rounding differences
|
|
|
|
(6)Provision
for income taxes includes the tax impact on pre-tax special items,
the impact of discrete tax items recorded during the respective
periods, as well as adjustments to reflect
the use of one overall effective
tax rate on Adjusted pre-tax income in interim periods.
|
|
|
|
Reconciliation of Outlook
Information: Expected earnings per diluted share for the
2010 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 of these special items. Management cannot
predict whether the company will receive any additional payments
under the CDSOA in 2010
and if so, in what amount. If
the company does receive any CDSOA payments, they will most likely
be received in the fourth quarter.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP income
from continuing operations before income taxes
|
|
This 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 adjusted EBIT
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 continuing operations before income taxes to
Consolidated adjusted EBIT in light
of special items related to
impairment and restructuring and manufacturing
rationalization/reorganization costs, Continued
Dumping and Subsidy Offset Act
(CDSOA) receipts and gain/loss on sale of non-strategic
assets.
|
|
|
|
|
|
Second Quarter
|
|
Six Months Ended
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
2009
|
|
(Dollars in millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations before income taxes
|
$
|
120.2
|
|
|
$
|
(61.4)
|
|
|
$
|
194.8
|
|
$
|
(44.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax reconciling
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
10.0
|
|
|
|
8.5
|
|
|
|
19.6
|
|
|
16.9
|
|
Interest income
|
|
(0.9)
|
|
|
|
(0.5)
|
|
|
|
(1.5)
|
|
|
(0.9)
|
|
Manufacturing
rationalization/reorganization expenses - cost of products
sold
|
|
0.6
|
|
|
|
1.4
|
|
|
|
1.8
|
|
|
2.6
|
|
Rationalization/reorganization
expenses - SG&A
|
|
0.1
|
|
|
|
0.8
|
|
|
|
0.3
|
|
|
1.1
|
|
Impairment and
restructuring
|
|
1.0
|
|
|
|
50.7
|
|
|
|
6.5
|
|
|
64.5
|
|
Special items - other expense
(income)
|
|
(0.1)
|
|
|
|
(0.8)
|
|
|
|
0.1
|
|
|
(2.0)
|
|
Consolidated adjusted earnings
before interest and taxes (EBIT)
|
$
|
130.9
|
|
|
$
|
(1.3)
|
|
|
$
|
221.6
|
|
$
|
38.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel Group adjusted (earnings)
loss before interest and taxes (EBIT)
|
$
|
(43.0)
|
|
|
$
|
32.9
|
|
|
$
|
(62.9)
|
|
$
|
40.2
|
|
Unallocated corporate
expense
|
|
17.8
|
|
|
|
13.2
|
|
|
|
31.6
|
|
|
25.5
|
|
Intergroup eliminations
expense
|
|
(1.1)
|
|
|
|
(3.0)
|
|
|
|
(3.6)
|
|
|
(2.8)
|
|
Total Bearings and Power
Transmission Group adjusted earnings before interest and taxes
(EBIT)
|
$
|
104.6
|
|
|
$
|
41.8
|
|
|
$
|
186.7
|
|
$
|
101.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Total Debt to
Net Debt and the Ratio of Net Debt to Capital:
|
|
(Dollars in millions)
(Unaudited)
|
|
|
|
June 30, 2010
|
|
|
December 31, 2009
|
|
Short-term debt
|
|
|
$
|
17.3
|
|
$
|
43.3
|
|
Long-term debt
|
|
|
|
476.1
|
|
|
469.2
|
|
Total Debt
|
|
|
|
493.4
|
|
|
512.5
|
|
Less: Cash and cash
equivalents
|
|
|
|
(796.2)
|
|
|
(755.5)
|
|
Net Debt
|
|
|
$
|
(302.8)
|
|
$
|
(243.0)
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
$
|
1,658.3
|
|
$
|
1,595.7
|
|
|
|
|
|
|
|
|
|
|
Ratio of Total Debt to
Capital
|
|
|
|
22.9
|
%
|
|
24.3%
|
|
Ratio of Net Debt to Capital
(Leverage)
|
|
|
|
(22.3)
|
%
|
|
(18.0)%
|
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter
Ended
|
|
Free cash flow:
|
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
(Dollars in millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
$
|
177.9
|
|
$
|
220.3
|
|
Less: capital
expenditures
|
|
|
|
(25.1)
|
|
|
(20.6)
|
|
Less: cash dividends paid to
shareholders
|
|
|
|
(12.5)
|
|
|
(8.7)
|
|
Free cash flow
|
|
|
$
|
140.3
|
|
$
|
191.0
|
|
|
|
|
|
|
|
|
|
|
Management believes that free
cash flow is useful to investors because it is a
meaningful
indicator of cash generated from
operating activities that is available for the execution of
its
business strategy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Outlook
Information: For the full year 2010, the company expects to
generate
net cash provided by operating
activities in excess of $380 million, spend approximately
$135
million on capital expenditures
and approximately $46 million on cash dividends paid to
shareholders. The net
effect of these items reflects the company's free cash flow outlook
of
greater than $200 million for
the full year 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE
SHEET
|
|
|
|
|
(Dollars in millions)
(Unaudited)
|
June 30,
|
December 31,
|
|
|
|
|
|
2010
|
2009
|
|
|
|
ASSETS
|
|
|
Cash and cash
equivalents
|
$
|
796.2
|
$
|
755.5
|
|
|
Accounts receivable
|
|
500.3
|
|
411.2
|
|
|
Inventories, net
|
|
699.5
|
|
671.2
|
|
|
Other current assets
|
|
118.3
|
|
184.6
|
|
|
Total Current
Assets
|
|
2,114.3
|
|
2,022.5
|
|
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment -
Net
|
1,263.5
|
|
1,335.2
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
218.3
|
|
221.7
|
|
|
Other assets
|
|
409.0
|
|
427.4
|
|
|
|
|
|
627.3
|
|
649.1
|
|
Total Assets
|
$
|
4,005.1
|
$
|
4,006.8
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
Accounts payable
|
$
|
220.5
|
$
|
156.0
|
|
|
Short-term debt
|
|
17.3
|
|
43.3
|
|
|
Income taxes
|
|
9.0
|
|
9.2
|
|
|
Accrued expenses
|
|
344.0
|
|
331.8
|
|
|
|
Total Current
Liabilities
|
|
590.8
|
|
540.3
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
476.1
|
|
469.2
|
|
|
Accrued pension cost
|
|
568.2
|
|
690.9
|
|
|
Accrued postretirement benefits
cost
|
|
597.6
|
|
604.2
|
|
|
Other non-current
liabilities
|
|
114.1
|
|
106.5
|
|
|
|
Total Liabilities
|
|
2,346.8
|
|
2,411.1
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
The Timken Company shareholders'
equity
|
|
1,639.7
|
|
1,577.7
|
|
|
Noncontrolling
Interest
|
|
18.6
|
|
18.0
|
|
|
|
Total Equity
|
|
1,658.3
|
|
1,595.7
|
|
Total Liabilities and
Equity
|
$
|
4,005.1
|
$
|
4,006.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENT
OF CASH FLOWS
(Dollars in millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended
|
|
For the six months
ended
|
|
|
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
|
|
|
2010
|
2009
|
|
2010
|
2009
|
|
Cash Provided
(Used)
|
|
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to The Timken Company
|
$
|
85.6
|
$
|
(64.5)
|
|
$
|
114.2
|
$
|
(63.6)
|
|
|
(Earnings) loss from
discontinued operations
|
|
(4.2)
|
|
25.5
|
|
|
(4.5)
|
|
29.1
|
|
|
Net income (loss) attributable
to noncontrolling interest
|
|
0.6
|
|
0.6
|
|
|
1.0
|
|
(5.3)
|
|
|
Adjustments to reconcile net
income to net cash
|
|
|
|
|
|
|
|
|
|
|
|
|
provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
47.5
|
|
51.7
|
|
|
95.2
|
|
101.8
|
|
|
|
|
Impairment charges
|
|
-
|
|
31.1
|
|
|
-
|
|
34.9
|
|
|
|
|
Pension and other postretirement
expense
|
|
20.7
|
|
20.8
|
|
|
45.9
|
|
47.7
|
|
|
|
|
Pension and other postretirement
benefit payments
|
|
(14.9)
|
|
(20.0)
|
|
|
(133.6)
|
|
(34.7)
|
|
|
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(21.6)
|
|
87.6
|
|
|
(103.8)
|
|
143.1
|
|
|
|
|
|
Inventories
|
|
(23.2)
|
|
144.1
|
|
|
(45.7)
|
|
204.1
|
|
|
|
|
|
Accounts payable and accrued
expenses
|
|
24.2
|
|
(45.6)
|
|
|
82.9
|
|
(186.3)
|
|
|
|
|
|
Income taxes
|
|
43.5
|
|
(28.9)
|
|
|
66.1
|
|
(22.1)
|
|
|
|
|
|
Other - net
|
|
15.5
|
|
20.6
|
|
|
41.8
|
|
4.0
|
|
|
Net Cash Provided by Operating
Activities - Continuing Operations
|
|
173.7
|
|
223.0
|
|
|
159.5
|
|
252.7
|
|
|
Net Cash Provided (Used) by
Operating Activities - Discontinued Operations
|
|
4.2
|
|
(2.7)
|
|
|
4.5
|
|
0.7
|
|
|
|
Net Cash Provided By Operating
Activities
|
|
177.9
|
|
220.3
|
|
|
164.0
|
|
253.4
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
(25.1)
|
|
(20.6)
|
|
|
(39.0)
|
|
(53.3)
|
|
|
Other
|
|
2.7
|
|
1.5
|
|
|
1.6
|
|
5.1
|
|
|
Net Cash Used by Investing
Activities - Continuing Operations
|
|
(22.4)
|
|
(19.1)
|
|
|
(37.4)
|
|
(48.2)
|
|
|
Net Cash Used by Investing
Activities - Discontinued Operations
|
|
-
|
|
(0.5)
|
|
|
-
|
|
(1.0)
|
|
|
|
Net Cash Used by Investing
Activities
|
|
(22.4)
|
|
(19.6)
|
|
|
(37.4)
|
|
(49.2)
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid to
shareholders
|
|
(12.5)
|
|
(8.7)
|
|
|
(21.3)
|
|
(26.1)
|
|
|
Purchase of treasury shares,
net
|
|
(15.2)
|
|
-
|
|
|
(29.2)
|
|
-
|
|
|
Net Proceeds from common share
activity
|
|
11.1
|
|
(1.6)
|
|
|
19.4
|
|
-
|
|
|
Net payments on credit
facilities
|
|
(22.5)
|
|
(48.4)
|
|
|
(18.8)
|
|
(42.4)
|
|
|
|
Net Cash Used by Financing
Activities
|
|
(39.1)
|
|
(58.7)
|
|
|
(49.9)
|
|
(68.5)
|
|
Effect of exchange rate changes
on cash
|
|
(29.5)
|
|
11.0
|
|
|
(36.0)
|
|
8.0
|
|
|
|
Increase In Cash and Cash
Equivalents
|
|
86.9
|
|
153.0
|
|
|
40.7
|
|
143.7
|
|
Cash and cash equivalents at
beginning of period
|
|
709.3
|
|
124.1
|
|
|
755.5
|
|
133.4
|
|
|
|
Cash and Cash Equivalents at End
of Period
|
$
|
796.2
|
$
|
277.1
|
|
$
|
796.2
|
$
|
277.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE The Timken Company