CANTON, Ohio, April 2, 2013 /PRNewswire/ -- The Timken
Company (NYSE: TKR; www.timken.com) today announced that it
sent a letter urging shareholders to support the company's proven
strategy of creating shareholder value and to vote AGAINST
Item No. 6 of its proxy statement, the shareholder proposal to
spin-off the Steel business. Timken also announced that
members of its board and management team met with The California
State Teachers' Retirement System (CalSTRS) and Relational
Investors today to discuss the flaws in the analysis behind the
proposal and articulate the reasons why Timken believes its
comprehensive strategic plan is the best path to create long-term
value for shareholders.
(Logo: http://photos.prnewswire.com/prnh/20100210/TIMKENLOGO
)
"As we have in the past, we outlined for CalSTRS and Relational
Investors the benefits of our integrated platform and comprehensive
strategic plan to drive value for shareholders as well as the flaws
in the analysis of a spin-off of our Steel business," said
James W. Griffith, Timken president
and chief executive officer. "It is clear to us that our
proven business model and strategy to create shareholder value
represent the best path forward for all Timken shareholders."
Included below is the full text of the letter to Timken
shareholders, which can also be found at
www.TimkenDrivesValue.com:
April 2, 2013
Dear Fellow Timken Shareholder:
SUPPORT THE TIMKEN COMPANY'S
PROVEN STRATEGY TO CREATE SHAREHOLDER VALUE
DO NOT BE MISLED BY THE MISGUIDED
SHAREHOLDER PROPOSAL ADVOCATING A CHANGE IN COURSE
VOTE AGAINST THE
SHAREHOLDER PROPOSAL TO SPIN-OFF THE STEEL BUSINESS
Your Board and management team are successfully executing a
carefully considered plan to deliver long-term value to Timken
shareholders. Over the last several years, we have
transformed Timken into a global industrial technology leader with
products designed to improve the efficiency and reliability of the
machinery that keeps industry in motion. Our product portfolio
features mechanical components and engineered steel products used
in some of the world's most demanding applications.
The success of this effort leverages strengths across The Timken
Company's businesses, including shared research and technical
expertise and supply chain and operating efficiencies between our
Steel business and our Bearing and Power Transmission (B&PT)
business, to deliver solutions across common end markets and
customers. A separation of Timken Steel from the rest of the
enterprise would compromise the Company's competitive advantage and
our ability to leverage these benefits to deliver higher financial
returns.
The shareholder proposal by The California State Teachers'
Retirement System (CalSTRS) and Relational Investors that you are
being asked to vote on would derail our strategy and deprive
shareholders of the opportunity for long-term value — all in a
misguided attempt to create illusory short-term gains through
financial engineering. Your Board and management team have
carefully reviewed a separation of the businesses, with input from
outside advisors, in the past and have met with Relational
Investors multiple times, most recently on April 2, 2013, in a meeting that also included
CalSTRS. Based on its careful review, the Board has
determined that maintaining The Timken Company's current integrated
strategy is in the best interests of shareholders at this time.
OUR PROVEN STRATEGY IS WORKING TO DELIVER SUPERIOR VALUE FOR
YOU
The strength of our operating performance as an
integrated company has produced superior value for you — with total
shareholder returns of 111% over the last three
years[i]. This puts Timken at the top of our peer
group and well above the returns for the overall market.
DO NOT ALLOW SHAREHOLDERS WITH A MISGUIDED, SHORT-TERM FOCUS
TO DERAIL OUR TIMKEN PLAN
Timken is committed to continuing to deliver value by executing
our strategic plan, which includes:
- Strengthen Margins. The Timken transformation has
resulted in a leaner, more variable cost structure and the
increased ability to tightly control the supply chain in response
to market variability. These actions, together with the
expansion of the Timken portfolio to include complementary products
and services across the Steel and B&PT businesses, have
resulted in stronger margins.
- Improve Cash Flow and Pension Funding. The Company
projects that its defined benefit pension plans will be
substantially fully funded in 2013. In addition, we expect
improved working capital management and lower projected capital
spending beyond 2013 to result in increased cash flow.
- Leverage Growth Opportunities. Timken expects to
generate annual sales growth of 6% to 11% through 2015, driven by
new products and geographic expansion as well as targeted
acquisitions.
- Return Capital. Timken has paid a dividend to
shareholders in every quarter since the Company became public in
1922. In addition, your Board has authorized the repurchase
of up to 10 million shares. Returning capital to shareholders
through ongoing dividends and the continued execution of the share
repurchase program is an integral part of the Company's plan for
delivering value.
SYNERGIES BETWEEN STEEL AND B&PT BUSINESSES CREATE
VALUE
The Timken Steel and B&PT businesses are tightly
integrated and synergies related to the supply chain, shared
research and technical expertise yield important benefits for
customers and shareholders. Over the past five years, on
average 58% of B&PT's steel requirements were sourced from
Timken-produced steel. These supply chain efficiencies make
possible lower costs, faster lead times and higher customer
satisfaction levels as our B&PT business goes to market.
Additionally, by combining shared R&D with 100 years of
metallurgy and application knowledge across our businesses, we are
able to provide customers the highest quality bearings and steel
products for some of the toughest mechanical power transmission
applications, an advantage that none of our competitors have.
These capabilities translate into benefits for Timken shareholders
in the form of higher margins driven by value-based pricing and
enhanced market competitiveness and responsiveness due to our
greater insights into customers and our targeted end
markets.
DON'T BE MISLED BY RELATIONAL'S FLAWED SPIN-OFF
ANALYSIS
The shareholder proposal to spin-off the Steel
business is based on a flawed analysis that suggests the combined
value of separate Steel and B&PT companies would be
substantially higher than the value of Timken today — simply as a
result of separating the two businesses. Relational Investors
asks you to believe that the market would give a separate B&PT
business a price/earnings ratio 33% higher than the median
price/earnings ratio of Timken B&PT's
peers[ii]. Does that make sense to you?
In addition, Relational assumes Timken would lose only
$25 million in annual pre-tax
earnings from a separation of the businesses — while our analysis
shows we would expect to lose $60-80
million in annual pre-tax earnings from duplicative costs
and loss of synergies. Moreover, Relational ignores the fact
that a standalone Steel business would be one of the smallest
publicly traded steel companies. Given its small size and
scale, the rating agencies would likely assign non-investment grade
credit ratings to the company. This would increase its cost of
capital and reduce its financial flexibility to take on important,
high-return projects like the Faircrest expansion, which we are
currently implementing to improve profitability across industry
cycles through reduced costs while expanding the market
capabilities of the Steel business.
In summary, once the flaws in Relational's analysis are
corrected, it is clear that the Company's proven business model and
strategy to create shareholder value represent the best path
forward for all of the Company's shareholders.
VOTE AGAINST THE MISGUIDED PROPOSAL TO SPIN-OFF THE STEEL
BUSINESS
Your Board and management team have carefully
reviewed the shareholder proposal and have concluded it is not in
the best interests of shareholders at this time. It amounts to a
self-interested attempt to generate illusory short-term profits at
the expense of long-term value creation. Support the
Timken strategy to achieve long-term value through the continued
successful execution of our strategic plan. Please
cast your vote today AGAINST this shareholder proposal.
For more information, please visit www.TimkenDrivesValue.com.
Thank you for your continued support of The Timken Company.
On behalf of the Board of Directors of The Timken Company,
Joseph W. Ralston
Lead Independent Director
Your
Vote Is Important, No Matter How Many Shares You Own. If you
have questions about how to vote your shares,
or need additional assistance, please contact the firm assisting us
in the solicitation of proxy votes:
|
GEORGESON Stockholders Call Toll-Free:
888-666-2594
Banks and Brokers Call: 800-223-2064
|
IMPORTANT We urge you to vote
AGAINST Item No. 6.
|
About The Timken Company
The Timken Company (NYSE:
TKR; www.timken.com), a global industrial technology leader,
applies its deep knowledge of materials, friction management and
power transmission to improve the reliability and efficiency of
machinery and equipment all around the world. The company
engineers, manufactures and markets mechanical components and
high-performance steel. Timken® bearings,
engineered steel bars and tubes—as well as transmissions,
gearboxes, chain, related products and services—support diversified
markets worldwide. With sales of $5.0 billion in 2012 and approximately
20,000 people operating from 30 countries, Timken makes the world
more productive and keeps industry in motion.
FORWARD-LOOKING STATEMENTS SAFE HARBOR
Certain
statements in this news release (including statements regarding the
company's forecasts, beliefs, 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 The Timken Company's
plans, outlook, future financial performance, targets, projected
sales, cash flows and liquidity 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 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; weakness in global or
regional economic conditions and financial markets; changes in the
expected costs associated with product warranty claims; the ability
to integrate acquired companies to achieve satisfactory operating
results; the impact on operations of general economic conditions;
higher or lower raw-material and energy costs; fluctuations in
customer demand; the company's ability to achieve the benefits of
its ongoing programs, initiatives & capital investments; the
timing and amount of common share repurchases; and retention of
CDSOA distributions. Additional factors are discussed in the
company's filings with the Securities and Exchange Commission,
including the company's annual report on Form 10-K for the year
ended Dec. 31, 2012, quarterly
reports on Form 10-Q and current reports on Form 8-K. The company
undertakes no obligation to update or revise any forward-looking
statement.
Important Additional Information
The Timken Company,
its directors, and certain of its officers are participants in the
solicitation of proxies from Timken shareholders in connection with
the Company's 2013 Annual Meeting of Shareholders. Important
information concerning the identity and interests of these persons
is available in the definitive proxy statement that Timken filed
with the SEC on March 21, 2013.
The definitive proxy statement, any other relevant documents and
other materials filed with the SEC concerning Timken are available
free of charge at www.sec.gov and www.timken.com/investors.
Shareholders should carefully read the definitive proxy statement
before making any voting decision.
Media
Contact:
|
Investor Contact:
|
Pat
Carlson
|
Steve
Tschiegg
|
Global
Media Manager
|
Director –
Capital Markets & Investor Relations
|
1835
Dueber Avenue, S.W.
|
1835
Dueber Avenue, S.W.
|
Canton, OH
44706-0927 U.S.A.
|
Canton, OH
44706-0927 U.S.A.
|
Telephone:
(330) 471-3514
|
Telephone:
(330) 471-7446
|
pat.carlson@timken.com
|
steve.tschiegg@timken.com
|
[i] Source: Factset as of December 31, 2012.
[ii] Comparison based on the median price / earnings
ratio of B&PT peers which include Kennametal, Altra Holdings,
SKF, NSK and JTEKT as of February 26,
2013.
SOURCE The Timken Company