CANTON, Ohio, July 25, 2013 /PRNewswire-FirstCall/ -- The
Timken Company (NYSE: TKR; www.timken.com) today reported sales of
$1.1 billion for the second
quarter of 2013, a decrease of 16 percent from the prior year.
The decline primarily reflects lower off-highway, industrial
distribution, and oil and gas demand as well as the impact of the
company's market strategy in the light-vehicle sector, partially
offset by the benefit of acquisitions. In addition, sales reflect a
$49 million decline in raw material surcharges from the
prior-year quarter.
(Logo: http://photos.prnewswire.com/prnh/20100210/TIMKENLOGO
)
Timken generated net income in the second quarter of
$82.8 million, or $0.86 per diluted share. This compared
with $183.6 million, or
$1.86 per diluted share, during the
same period a year ago, which included income of $69 million,
or $0.70 per share, from Continued
Dumping and Subsidy Offset Act (CDSOA) receipts. The decrease
in second-quarter earnings also reflects lower demand as well as
unfavorable sales mix. The decrease was partially offset by
lower raw material costs (net of surcharges) and selling and
administrative expenses as well as lower costs related to
previously announced plant closures (reference Table 1 for
comparison of results).
Table 1:
Second-Quarter Net Income and Diluted Earnings Per Share
(EPS)
|
|
2013
|
2012
|
|
($ in
Mils.)
|
EPS
|
($ in
Mils.)
|
EPS
|
Net Income
attributable to The Timken Company
|
$
82.8
|
$
0.86
|
$
183.6
|
$
1.86
|
Less: CDSOA receipts,
net of tax
|
$
- -
|
$
- -
|
$
69.0
|
$
0.70
|
Add: Charges due to
plant closure, net of tax
|
$
6.3
|
$
0.07
|
$
18.6
|
$
0.19
|
Net Income, after
adjustments
|
$
89.1
|
$
0.93
|
$
133.2
|
$
1.35
|
"We continue to perform very well, maintaining double-digit
operating margins despite weak demand lingering in many global
markets," said James W. Griffith, Timken president and
chief executive officer. "Although our outlook for the year
now reflects a more modest market recovery in the second half, we
continue to expect strong financial performance for the remainder
of the year."
Among recent developments, the company:
- Expanded its industrial services capabilities through the
acquisition of the Standard Machine business, which provides new
gearboxes, gearbox service and repair, and field technical services
in Canada and the western
United States;
- Started up a second ladle refining station at the Faircrest
Steel Plant, the third major system to come on line this year in
the Steel business. Part of a plan that includes installing a
new vertical continuous caster, the investments are designed to
bring greater operating efficiencies and new market opportunities
to the company;
- Returned $104 million in capital to shareholders in the
quarter through the repurchase of 1.4 million shares and
dividends; and
- Announced that the Timken Board of Directors formed a Strategy
Committee to evaluate a potential separation of the company's Steel
business from its other businesses and to review the company's
corporate governance and capital allocation strategy.
Six Months' Results
Timken posted sales of
$2.2 billion in the first half
of 2013, down 20 percent from the same period in 2012. The
decrease reflects lower off-highway, industrial distribution and
oil and gas demand as well as the impact of the company's market
strategy in the light-vehicle sector, partially offset by
acquisitions. In addition, a $121 million decline in raw
material surcharges from the prior-year period negatively impacted
first-half revenues.
In the first half of 2013, the company generated net income of
$157.9 million, or $1.63 per diluted share. That compares with
$339.3 million, or $3.44 per diluted share, in the same period last
year, which included CDSOA receipts of $69 million, or
$0.70 per share. The decrease
in earnings during the first half of 2013 was driven by lower
demand, sales mix and higher manufacturing costs, partially offset
by improved pricing and lower selling and administrative expenses
as well as lower costs related to previously announced plant
closures (reference Table 2 for comparison of results).
Table 2:
Year-to-Date Net Income and Diluted Earnings Per Share
(EPS)
|
|
2013
|
2012
|
|
($ in
Mils.)
|
EPS
|
($ in
Mils.)
|
EPS
|
Net Income
attributable to The Timken Company
|
$
157.9
|
$
1.63
|
$
339.3
|
$
3.44
|
Less: CDSOA receipts,
net of tax
|
$
(0.3)
|
$
- -
|
$
69.0
|
$
0.70
|
Add: Charges due to
plant closure, net of tax
|
$
9.5
|
$
0.10
|
$
22.3
|
$
0.23
|
Net Income, after
adjustments
|
$
167.7
|
$
1.73
|
$
292.6
|
$
2.97
|
As of June 30, 2013, total debt
was $462.5 million, or
16.6 percent of capital. The company had cash of
$396.8 million, resulting in
$65.7 million of net debt,
compared with a net cash position of $107.4 million as of
December 31, 2012.
In the first half of 2013, the company generated $139.5 million in cash from operating activities.
Excluding discretionary pension contributions of $66.3 million, net of tax, free cash flow
(operating cash after capital expenditures and dividends) was
$16.7 million. In addition, the
company repurchased 1.4 million shares totaling $82 million and made three acquisitions totaling
$67 million. The company ended
the quarter with $1.3 billion of
liquidity.
Mobile Industries Segment Results
In the second
quarter, Mobile Industries' sales of $393.1 million decreased 12 percent
compared with last year's second-quarter sales of $448.4 million. The $55 million
decrease included $30 million related to the company's market
strategy primarily in the light-vehicle sector. The remaining
decrease was driven by lower volume in most markets led by lower
off-highway and rail demand, partially offset by the Interlube
Systems acquisition.
EBIT for the segment was $52.4 million for the second quarter, or
13.3 percent of sales, up 7 percent from $48.8 million, or 10.9 percent of
sales, in the same period a year ago. The increase was driven
primarily by lower manufacturing costs, reduced selling and
administrative expense and reduced plant closure costs, partially
offset by lower volume.
For the first half of 2013, Mobile Industries' sales were
$790.2 million, a decrease of
14 percent from the same period a year ago. First-half
2013 EBIT was $103.6 million, or
13.1 percent of sales, down from $135.5 million, or 14.8 percent of
sales, in the prior-year period. The decrease in EBIT was
driven primarily by lower volume and the impact of exited business,
partially offset by lower selling and administrative expense and
lower plant closure costs.
Process Industries Segment Results
Process
Industries' second-quarter sales were $317.4 million, down 6 percent from
$337.7 million for the same
period a year ago. The decrease reflects lower demand in both the
industrial distribution and original equipment market sectors,
partially offset by pricing and the favorable impact of the
previously announced industrial services acquisitions.
Process Industries' second-quarter EBIT was $54.6 million, or 17.2 percent of
sales, a 23 percent decrease compared with $71.3 million, or 21.1 percent of
sales, for the same period a year ago. The decrease reflects
lower volume partially offset by pricing, lower selling and
administrative expenses, and the benefit of acquisitions.
For the first half of 2013, Process Industries' sales were
$602.6 million, a decrease of
13 percent compared with the same period a year ago.
First-half 2013 EBIT was $97.2 million, or 16.1 percent of
sales, a decrease compared with $153.6 million, or 22.2 percent of
sales, in the prior-year period.
Aerospace Segment Results
Aerospace posted
second-quarter sales of $82.0 million, down 6 percent from
$87.2 million for the same
period last year. The decrease reflects lower volume
primarily in the motion control sector, partially offset by
pricing.
Second-quarter EBIT was $7.9 million, or 9.6 percent of sales,
compared with $7.9 million, or
9.1 percent of sales, for the same period a year ago.
EBIT benefitted from favorable selling and administrative
expense, offset by lower volume.
For the first half of 2013, Aerospace sales were $164.5 million, 8 percent lower than
the same period a year ago. First half 2013 EBIT was
$16.5 million, or
10 percent of sales, compared with $18.6 million, or 10.4 percent of
sales, in the prior-year period. The decline in EBIT was
driven primarily by lower volume and higher manufacturing costs,
partially offset by pricing and lower selling and administrative
expense.
Steel Segment Results
Sales for Steel,
including inter-segment sales, were $354.1 million in the second quarter, a
decrease of 29 percent from $499.8 million for the same period last
year. The results reflect reduced shipments to the industrial
and oil and gas market sectors, partially offset by improved sales
to the mobile on-highway sector. Raw-material surcharges
decreased $49 million from the second quarter last year.
Second-quarter EBIT was $42.3 million, or 11.9 percent of
sales, down 52 percent from $88.9 million, or 17.8 percent of
sales, for the same period a year ago. The decline in EBIT
was primarily due to lower volume and unfavorable sales mix.
For the first half of 2013, Steel sales were $700.2 million, a 32 percent decrease
compared with the same period a year ago. First-half 2013
EBIT was $78.1 million, or
11.2 percent of sales, down from $176.9 million, or 17.1 percent of
sales, in the prior-year period.
Outlook
The company revised its outlook for
the full year based on a slower-than-expected economic recovery in
the second half of 2013.
The Timken Company now expects 2013 sales to be 10 percent
lower year-over-year with:
- Mobile Industries sales down 7 to 12 percent for the year due
to the impact of lower customer demand and the company's market
strategy;
- Process Industries sales to be down 2 to 7 percent, due to
weaker industrial markets, partially offset by the benefit of
acquisitions;
- Aerospace sales up 3 to 8 percent, due to increased demand in
civil and defense markets; and
- Steel sales down 15 to 20 percent, driven by lower industrial
and oil and gas end-market demand and surcharges.
Timken projects 2013 annual earnings per diluted share to range
from $3.30 to $3.60, which includes
approximately $0.15 per share for
previously announced plant closure costs.
The company expects to generate cash from operations of
approximately $475 million in 2013. Free cash flow is
projected to be $25 million after making capital expenditures
of about $360 million and paying about $90 million in
dividends. The company does not anticipate making further
discretionary pension contributions this year beyond the
$66 million, net of tax, made in the
first quarter, as it expects its pension plans to be essentially
fully funded by year end given the recent increase in interest
rates. Excluding discretionary pension contributions, the
company forecasts free cash flow of approximately $90 million
in 2013.
Conference Call Information
Timken will host a
conference call today at 11:00 a.m. Eastern Time to review its
financial results. Presentation materials will be available
online in advance of the call for interested investors and
securities analysts.
Conference
Call:
|
Thursday, July 25,
2013
|
|
11:00 a.m. Eastern
Time
|
|
|
All
Callers:
|
Live Dial-In:
888-791-4305 or 913-312-0648
|
|
(Call 10 minutes
prior to be included.)
|
|
|
|
Conference ID: Timken
Earnings Call
|
|
|
|
Replay Dial-In
available through August 8, 2013:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
2945733
|
|
|
Live
Webcast:
|
www.timken.com/investors
|
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
industrial 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.
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 2013; 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 achieve
satisfactory operating results in the integration of acquired
companies; the impact on operations of general economic conditions;
higher or lower raw material and energy costs; fluctuations in
customer demand; the impact on the company's pension obligations
due to changes in interest rates or investment performance; the
company's ability to achieve the benefits of announced programs,
initiatives, and capital investments; 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. Except as required by
the federal securities laws, the company undertakes no obligation
to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise.
Media Contact:
Pat
Carlson
Global Media Relations
1835 Dueber Avenue, S.W.
Canton, OH 44706-0927 U.S.A.
Telephone: (330)471-3514
pat.carlson@timken.com
Investor Contact:
Steve
Tschiegg
Director – Capital Markets & Investor Relations
1835 Dueber Avenue, S.W.
Canton, OH 44706-0927 U.S.A.
Telephone: (330)471-7446
steve.tschiegg@timken.com
The Timken
Company
|
CONDENSED
CONSOLIDATED STATEMENT OF INCOME
|
(Dollars in
millions, except share data) (Unaudited)
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2013
|
2012
|
|
2013
|
2012
|
Net sales
|
$
1,126.5
|
$
1,343.2
|
|
$
2,216.4
|
$
2,764.2
|
Cost of products
sold
|
824.4
|
965.9
|
|
1,639.8
|
1,975.3
|
Gross
Profit
|
$
302.1
|
$
377.3
|
|
$
576.6
|
$
788.9
|
Selling, general
& administrative expenses (SG&A)
|
159.6
|
163.0
|
|
313.2
|
327.7
|
Impairment and
restructuring
|
6.7
|
16.7
|
|
7.9
|
16.9
|
Operating
Income
|
$
135.8
|
$
197.6
|
|
$
255.5
|
$
444.3
|
Other (expense)
income, net
|
(1.2)
|
105.7
|
|
(1.2)
|
104.4
|
Earnings
Before Interest and Taxes (EBIT) (1)
|
$
134.6
|
$
303.3
|
|
$
254.3
|
$
548.7
|
Interest expense,
net
|
(5.7)
|
(7.4)
|
|
(11.6)
|
(15.3)
|
Income
Before Income Taxes
|
$
128.9
|
$
295.9
|
|
$
242.7
|
$
533.4
|
Provision for income
taxes
|
46.1
|
112.5
|
|
84.9
|
194.0
|
Net
Income
|
$
82.8
|
$
183.4
|
|
$
157.8
|
$
339.4
|
Less: Net
(Loss) Income Attributable to Noncontrolling Interest
|
—
|
(0.2)
|
|
(0.1)
|
0.1
|
Net Income
Attributable to The Timken Company
|
$
82.8
|
$
183.6
|
|
$
157.9
|
$
339.3
|
|
|
|
|
|
|
Net Income per
Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
|
|
|
Basic Earnings Per
Share
|
$
0.86
|
$
1.88
|
|
$
1.64
|
$
3.47
|
Diluted Earnings
Per Share
|
$
0.86
|
$
1.86
|
|
$
1.63
|
$
3.44
|
|
|
|
|
|
|
Average Shares
Outstanding
|
95,695,015
|
97,265,627
|
|
95,732,984
|
97,355,740
|
Average Shares
Outstanding - assuming dilution
|
96,549,121
|
98,204,205
|
|
96,647,554
|
98,373,357
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) EBIT is defined
as operating income plus other income (expense). EBIT is an
important financial measure used in the management of the business,
including decisions concerning the allocation of resources and
assessment of performance. Management believes that reporting
EBIT is useful to investors as this measure is representative of
the Company's performance and cash
generation.
|
BUSINESS
SEGMENTS
|
|
|
(Dollars in
millions) (Unaudited)
|
|
|
|
Three Months
Ended
June 30,
|
Six Months
Ended
June 30,
|
|
|
2013
|
2012
|
2013
|
2012
|
|
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
|
Net sales to external
customers
|
$
392.5
|
$
448.2
|
$
789.5
|
$
917.3
|
|
Intersegment
sales
|
0.6
|
0.2
|
0.7
|
0.2
|
|
Total net
sales
|
$
393.1
|
$
448.4
|
$
790.2
|
$
917.5
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
52.4
|
$
48.8
|
$
103.6
|
$
135.5
|
|
EBIT Margin
(1)
|
13.3
%
|
10.9 %
|
13.1
%
|
14.8 %
|
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
Net sales to external
customers
|
$
316.7
|
$
336.6
|
$
600.6
|
$
690.7
|
|
Intersegment
sales
|
0.7
|
1.1
|
2.0
|
2.6
|
|
Total net
sales
|
$
317.4
|
$
337.7
|
$
602.6
|
$
693.3
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
54.6
|
$
71.3
|
$
97.2
|
$
153.6
|
|
EBIT Margin
(1)
|
17.2
%
|
21.1 %
|
16.1
%
|
22.2 %
|
|
|
|
|
|
|
|
Aerospace
|
|
|
|
|
|
Net sales to external
customers
|
$
82.0
|
$
87.2
|
$
164.5
|
$
178.5
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
7.9
|
$
7.9
|
$
16.5
|
$
18.6
|
|
EBIT Margin
(1)
|
9.6
%
|
9.1 %
|
10.0
%
|
10.4 %
|
|
|
|
|
|
|
|
Steel
|
|
|
|
|
|
Net sales to external
customers
|
$
335.3
|
$
471.2
|
$
661.8
|
$
977.7
|
|
Intersegment
sales
|
18.8
|
28.6
|
38.4
|
57.6
|
|
Total net
sales
|
$
354.1
|
$
499.8
|
$
700.2
|
$
1,035.3
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
42.3
|
$
88.9
|
$
78.1
|
$
176.9
|
|
EBIT Margin
(1)
|
11.9
%
|
17.8 %
|
11.2
%
|
17.1 %
|
|
|
|
|
|
|
|
Unallocated corporate
expense
|
$
(22.8)
|
$
(23.0)
|
$
(42.7)
|
$
(43.7)
|
|
Receipt of CDSOA
distributions (2)
|
$
-
|
$
109.5
|
$
-
|
$
109.5
|
|
Intersegment
eliminations income (expense) (3)
|
$
0.2
|
$
(0.1)
|
$
1.6
|
$
(1.7)
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
Net sales to external
customers
|
$
1,126.5
|
$
1,343.2
|
$
2,216.4
|
$
2,764.2
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
134.6
|
$
303.3
|
$
254.3
|
$
548.7
|
|
EBIT Margin
(1)
|
11.9
%
|
22.6 %
|
11.5
%
|
19.9 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) EBIT is defined
as operating income plus other income (expense). EBIT Margin is
EBIT as a percentage of net sales. 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 are useful to investors as these
measures are representative of the Company's performance and cash
generation.
|
(2) U.S. Continued
Dumping and Subsidy Offset Act receipts, net of expenses (CDSOA),
represent the amount of funds received by the Company from
distribution of monies collected by U.S. Customs from antidumping
cases to qualifying domestic
producers.
|
(3) Intersegment
eliminations represent profit or loss between the Steel segment and
the Mobile Industries, Process Industries and Aerospace
segments.
|
Reconciliation of
EBIT to GAAP Net Income:
|
This reconciliation
is provided as additional relevant information about the Company's
performance. Management believes consolidated earnings before
interest and taxes (EBIT) are representative of the Company's
performance and therefore useful to investors. Management
also believes that it is appropriate to compare GAAP net income to
consolidated EBIT.
|
|
|
|
|
|
|
(Dollars in
millions) (Unaudited)
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2013
|
2012
|
|
2013
|
2012
|
Net Income
|
$
82.8
|
$
183.4
|
|
$
157.8
|
$
339.4
|
|
|
|
|
|
|
Provision for income
taxes
|
46.1
|
112.5
|
|
84.9
|
194.0
|
Interest
expense
|
6.2
|
8.1
|
|
12.6
|
16.7
|
Interest
income
|
(0.5)
|
(0.7)
|
|
(1.0)
|
(1.4)
|
Consolidated earnings
before interest and taxes (EBIT)
|
$
134.6
|
$
303.3
|
|
$
254.3
|
$
548.7
|
Reconciliation of
Net Income Attributable to The Timken Company, After Adjustments,
to GAAP Net Income Attributable to The Timken Company and Adjusted
Earnings Per Share to GAAP Earnings Per Share:
|
This reconciliation
is provided as additional relevant information about the Company's
performance. Management believes that net income attributable
to the Timken Company and diluted earnings per share, adjusted to
remove charges due to plant closures and CDSOA receipts are
representative of the Company's performance and therefore useful to
investors.
|
|
Three Months
Ended
|
|
Six Months
Ended
|
(Dollars in
millions, except share data) (Unaudited)
|
June
30,
|
|
June
30,
|
|
2013
|
EPS
|
2012
|
EPS
|
2013
|
EPS
|
2012
|
EPS
|
Net Income
Attributable to The Timken Company
|
$
82.8
|
$
0.86
|
$
183.6
|
$
1.86
|
$
157.9
|
$
1.63
|
339.3
|
$
3.44
|
Adjustments:
|
|
|
|
|
|
|
|
|
CDSOA
receipts, net of tax expense (1)
|
—
|
—
|
(69.0)
|
(0.70)
|
0.3
|
—
|
(69.0)
|
(0.70)
|
Charges due to
plant closure (2)
|
6.3
|
0.07
|
18.6
|
0.19
|
9.5
|
0.10
|
22.3
|
0.23
|
Net Income
Attributable to The Timken Company, after adjustments
|
$
89.1
|
$
0.93
|
$
133.2
|
$
1.35
|
$
167.7
|
$
1.73
|
$
292.6
|
$
2.97
|
|
|
|
|
|
|
|
|
|
(1)
CDSOA for the second quarter of 2012 was $109.5 million, net of tax
expense of $40.5 million.
|
|
(2)
Charges due to plant closures relate to the Company's former
manufacturing facilities in Sao Paulo, Brazil and St. Thomas,
Ontario, Canada, net of tax.
|
Reconciliation of
EBIT Margin, After Adjustments, to Net Income as a Percentage of
Sales and EBIT, After Adjustments, to Net Income:
|
The following
reconciliation is provided as additional relevant information about
the Company's performance. Management believes that EBIT and
EBIT margin, after adjustments, are representative of the Company's
core operations and therefore useful to investors.
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Six Months
Ended
|
(Dollars in
millions, except share data) (Unaudited)
|
June
30,
|
June
30,
|
|
2013
|
Percentage
to
Net Sales
|
2012
|
Percentage
to
Net Sales
|
2013
|
Percentage
to
Net Sales
|
2012
|
Percentage
to
Net Sales
|
Net Income
|
$
82.8
|
7.4
%
|
$
183.4
|
13.7 %
|
$
157.8
|
7.1
%
|
$
339.4
|
12.3 %
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
46.1
|
4.1
%
|
112.5
|
8.4 %
|
84.9
|
3.8
%
|
194.0
|
7.0 %
|
Interest
expense
|
6.2
|
0.6
%
|
8.1
|
0.6 %
|
12.6
|
0.6
%
|
16.7
|
0.6 %
|
Interest
income
|
(0.5)
|
—%
|
(0.7)
|
(0.1)%
|
(1.0)
|
—%
|
(1.4)
|
(0.1)%
|
Consolidated earnings
before interest and taxes (EBIT)
|
$
134.6
|
11.9
%
|
$
303.3
|
22.6 %
|
$
254.3
|
11.5
%
|
$
548.7
|
19.9 %
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
CDSOA receipts
(1)
|
—
|
—%
|
(109.5)
|
(8.2)%
|
0.4
|
0.0
%
|
(109.5)
|
(4.0)%
|
Charges due to
plant closure (2)
|
7.5
|
0.7
%
|
18.6
|
1.4 %
|
11.7
|
0.5
%
|
22.3
|
0.8 %
|
Consolidated earnings
before interest and taxes (EBIT), after adjustments
|
$
142.1
|
12.6
%
|
$
212.4
|
15.8 %
|
$
266.4
|
12.0
%
|
$
461.5
|
16.7 %
|
|
|
|
|
|
|
|
|
|
(1)
CDSOA for the second quarter of 2012 was $109.5 million.
|
|
(2)
Charges due to plant closures relate to the Company's former
manufacturing facilities in Sao Paulo, Brazil and St. Thomas,
Ontario, Canada.
|
Reconciliation of
Total Debt to Net Debt and the Ratio of Net Debt to
Capital:
|
This reconciliation
is provided as additional relevant information about The Timken
Company's financial position. Capital, used for the ratio of
total debt to capital, is defined as total debt plus total
shareholders' equity. Capital, used for the ratio of net debt
(cash) to capital, is defined as total debt less cash and cash
equivalents plus total shareholders' equity. Management
believes Net Debt (Cash) is an important measure of The Timken
Company's financial position, due to the amount of cash and cash
equivalents.
|
(Dollars in
millions) (Unaudited)
|
|
|
|
|
|
June 30,
2013
|
December 31,
2012
|
Short-term
debt
|
|
|
$
7.2
|
$
23.9
|
Long-term
debt
|
|
|
455.3
|
455.1
|
Total
Debt
|
|
|
$
462.5
|
$
479.0
|
Less: Cash, cash
equivalents
|
|
|
(396.8)
|
(586.4)
|
Net Debt
(Cash)
|
|
|
$
65.7
|
$
(107.4)
|
|
|
|
|
|
Total
equity
|
|
|
$
2,327.8
|
$
2,246.6
|
|
|
|
|
|
Ratio of Total Debt
to Capital
|
|
|
16.6
%
|
17.6 %
|
Ratio of Net Debt
(Cash) to Capital
|
|
|
2.7
%
|
(5.0)%
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Free Cash Flow to GAAP Net Cash Provided by Operating
Activities:
|
Management believes
that free cash flow and free cash flow less discretionary pension
and postretirement contributions are useful to investors because
they are meaningful indicators of cash generated from operating
activities available for the execution of its business
strategy.
|
(Dollars in
millions) (Unaudited)
|
|
|
|
Three Months
Ended
|
Six Months
Ended
|
|
June
30,
|
June
30,
|
|
2013
|
2012
|
2013
|
2012
|
Net cash provided by
operating activities
|
$
175.4
|
$
275.1
|
$
139.5
|
$
236.4
|
Less: capital
expenditures
|
(81.8)
|
(69.3)
|
(145.2)
|
(115.3)
|
Less: cash dividends
paid to shareholders
|
(22.1)
|
(22.4)
|
(44.2)
|
(44.9)
|
Free cash
flow
|
71.5
|
183.4
|
(49.9)
|
76.2
|
Plus: discretionary
pension contributions, net of the tax benefit (1)
|
—
|
69.5
|
66.3
|
132.0
|
Less: CDSOA
receipts, net of tax expense (2)
|
-
|
(69.0)
|
0.3
|
(69.0)
|
Free
cash flow adjusted for discretionary pension contributions and
CDSOA
|
$
71.5
|
$
183.9
|
$
16.7
|
$
139.2
|
|
|
|
|
|
(1) The discretionary
pension benefit contributions for the first six months of 2013 were
$105.0 million, net of a tax benefit of $38.7 million. The
discretionary pension benefit contributions for the second quarter
of 2012 were $110.0 million, net of a tax benefit of $40.5
million. The discretionary pension contributions for the
first six months of 2012 were $203.8 million, net of a tax benefit
of $71.8 million.
|
|
|
|
|
|
(2) CDSOA receipts
for the year ended December 31, 2012 was $109.5 million, net of tax
expense of $40.5 million.
|
|
|
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEET
|
(Dollars in
millions) (Unaudited)
|
|
June 30,
2013
|
December 31,
2012
|
ASSETS
|
|
|
Cash and cash
equivalents
|
$
396.8
|
$
586.4
|
Accounts
receivable
|
624.2
|
546.7
|
Inventories,
net
|
818.6
|
862.1
|
Other current
assets
|
163.5
|
178.9
|
Total Current
Assets
|
$
2,003.1
|
$
2,174.1
|
Property, Plant and
Equipment, net
|
1,469.1
|
1,405.3
|
Goodwill
|
362.5
|
338.9
|
Other
assets
|
271.6
|
326.4
|
Total
Assets
|
$
4,106.3
|
$
4,244.7
|
|
|
|
LIABILITIES
|
|
|
Accounts
payable
|
241.9
|
216.2
|
Short-term
debt
|
7.2
|
23.9
|
Income
taxes
|
91.5
|
36.4
|
Accrued
expenses
|
322.3
|
391.4
|
Total Current
Liabilities
|
$
662.9
|
$
667.9
|
|
|
|
Long-term
debt
|
455.3
|
455.1
|
Accrued pension
cost
|
245.9
|
391.4
|
Accrued
postretirement benefits cost
|
360.6
|
371.8
|
Other non-current
liabilities
|
53.8
|
111.9
|
Total
Liabilities
|
$
1,778.5
|
$
1,998.1
|
|
|
|
EQUITY
|
|
|
The Timken Company
shareholders' equity
|
2,311.6
|
2,232.2
|
Noncontrolling
Interest
|
16.2
|
14.4
|
Total
Equity
|
2,327.8
|
2,246.6
|
Total Liabilities and
Equity
|
$
4,106.3
|
$
4,244.7
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
|
|
|
(Dollars in
millions) (Unaudited)
|
|
|
|
|
|
Three Months
Ended
June 30,
|
Six Months
Ended
June 30,
|
|
2013
|
2012
|
2013
|
2012
|
Cash Provided
(Used)
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net income
attributable to The Timken Company
|
$
82.8
|
$
183.6
|
$
157.9
|
$
339.3
|
Net income
attributable to noncontrolling interest
|
—
|
(0.2)
|
(0.1)
|
0.1
|
Adjustments to
reconcile net income to net cash provided (used) by operating
activities:
|
|
|
|
|
Depreciation and amortization
|
48.7
|
50.0
|
97.1
|
99.8
|
Pension and other postretirement expense
|
21.3
|
29.4
|
43.8
|
50.4
|
Pension and other postretirement benefit contributions and
payments
|
(10.7)
|
(121.2)
|
(127.8)
|
(225.9)
|
Changes in operating assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
(12.1)
|
37.5
|
(73.9)
|
(74.5)
|
Inventories
|
18.6
|
36.5
|
45.9
|
15.1
|
Accounts
payable
|
12.8
|
(24.2)
|
25.2
|
(2.1)
|
Accrued
expenses
|
(3.8)
|
26.2
|
(78.7)
|
(77.2)
|
Income
taxes
|
21.5
|
49.3
|
52.7
|
107.1
|
Other - net
|
(3.7)
|
8.2
|
(2.6)
|
4.3
|
Net Cash
Provided By Operating Activities
|
$
175.4
|
$
275.1
|
$
139.5
|
$
236.4
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Capital
expenditures
|
$
(81.8)
|
$
(69.3)
|
$
(145.2)
|
$
(115.3)
|
Acquisitions
|
(52.9)
|
—
|
(67.3)
|
(0.2)
|
Investments -
net
|
(1.0)
|
0.7
|
7.0
|
18.2
|
Other
|
1.2
|
4.5
|
1.9
|
4.0
|
Net Cash Used by
Investing Activities
|
$
(134.5)
|
$
(64.1)
|
$
(203.6)
|
$
(93.3)
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Cash dividends
paid to shareholders
|
$
(22.1)
|
$
(22.4)
|
$
(44.2)
|
$
(44.9)
|
Purchase of
treasury shares, net
|
(81.8)
|
(25.5)
|
(81.8)
|
(51.7)
|
Net proceeds
from common share activity
|
9.5
|
7.2
|
18.6
|
19.8
|
Net proceeds
from credit facilities
|
(9.6)
|
(9.2)
|
(16.6)
|
(20.6)
|
Other
|
8.9
|
3.6
|
8.9
|
3.6
|
Net Cash Used by
Financing Activities
|
$
(95.1)
|
$
(46.3)
|
$
(115.1)
|
$
(93.8)
|
Effect of exchange
rate changes on cash
|
(6.9)
|
(10.1)
|
(10.4)
|
(4.2)
|
(Decrease)
Increase In Cash and Cash Equivalents
|
$
(61.1)
|
$
154.6
|
$
(189.6)
|
$
45.1
|
Cash and cash
equivalents at beginning of period
|
457.9
|
355.3
|
586.4
|
464.8
|
Cash and Cash
Equivalents at End of Period
|
$
396.8
|
$
509.9
|
$
396.8
|
$
509.9
|
|
|
|
|
|
SOURCE The Timken Company