CANTON, Ohio, Sept. 5, 2013 /PRNewswire/ -- The Timken Company
(NYSE: TKR; www.timken.com) today announced that its board of
directors has approved a plan to pursue a separation of the
company's steel business from its bearings and power transmission
business through a spinoff, creating two publicly traded
companies.
(Logo:
http://photos.prnewswire.com/prnh/20100210/TIMKENLOGO)
Under this plan, the new engineered steel company will operate
as an independent publicly held company with estimated annual
revenue of approximately $1.7 billion*. The bearings and power
transmission (B&PT) business will continue to operate as The
Timken Company with estimated annual revenue of approximately
$3.4 billion*. The transaction
is expected to be tax-free to shareholders and should be completed
within 12 months.
"Timken has a long and successful history of creating value for
its shareholders," said James W. Griffith, president and
chief executive officer. "Over the past several years, we
have transformed the business and delivered superior financial
performance by diversifying and expanding customer markets and
product lines, making strategic, accretive acquisitions, and
introducing new capabilities around the world. We see this
initiative—to build out two strong, focused companies—as further
evidence of our commitment to drive value for our shareholders and
our customers."
Griffith noted that the two stand-alone companies will continue
to advance their distinct growth strategies within their respective
core markets, which is expected to further improve competitiveness.
"The bearings and steel businesses are well-run and
well-positioned in their markets to perform well through economic
cycles and have successfully implemented the Timken business
model," Griffith added. "We have talented, capable and
dedicated employees who we believe will drive these businesses to
new levels of success as separate entities."
Strategy Committee Evaluation
The board's decision to split Timken into two companies resulted
from a thorough evaluation by a strategy committee composed of
independent directors and established by the board in response to
shareholder input. With the help of financial and strategic
advisors, the strategy committee carefully evaluated the financial
and operational implications of separating the company's
businesses, along with potential changes to the company's corporate
governance and capital allocation strategy.
Joseph W. Ralston, the board's
lead independent director, said, "The strategy committee and board
concluded that even with the company's success in improving
performance in recent years and an impressive track record of
accomplishments, the company's share price has not appropriately
reflected our significant progress. With our shares trading
at a discount to our peers, we recognized the need to examine
opportunities to better drive value in the market.
"Through the course of our work, it became clear that creating
two focused companies would allow investors to more fully
appreciate and value the unique strategic and financial strengths
of each business, including operating performance, margins,
earnings and cash flow," Ralston added.
"The process that the strategy committee completed convinced us
of the value-creation opportunities that can come from separating
the company's businesses," said
Ward J. "Tim" Timken, Jr., board chairman.
"Today's decision is the appropriate 'next step' to build on the
momentum created by our improvement in the performance and
underlying fundamentals of each of our core businesses. These
are two winning businesses and we are confident that both can
sustain the market-leading performance they have achieved over the
past few years."
The board recognizes the benefits shared between the businesses
and will work to maintain them through a mutually beneficial
business relationship between the two independent companies.
Company leaders will also work to minimize the impact of
incremental stand-alone costs that will be incurred as a result of
the separation as well as leverage the opportunities that come from
operating as two focused companies.
Creating Two Great Stand-Alone Companies
The New Stand-Alone Engineered Steel Company
The new publicly traded engineered steel company would have
estimated annual revenue of $1.7 billion* and is expected to have strong
prospects for growth and margin improvement. Over the past
decade, the engineered steel business has implemented changes that
increased margins, dramatically lowered its breakeven point and
streamlined its supply chain. Headquartered in Canton, Ohio, the engineered steel company
will include approximately 3,000 associates, seven manufacturing
plants, four warehouses and five sales offices. The steel
business is North America's
leading manufacturer of SBQ large bars for industrial markets and
its largest producer of seamless mechanical tubing.
The engineered steel company will continue to drive value
through a business model that provides differentiated solutions to
meet customer demands in industries where performance matters. The
premium steelmaker manufactures carbon, micro-alloy and alloy
steels with annual melt capacity of more than 1.8 million
tons. Recent investments are expected to significantly
strengthen the engineered steel company's position as a leader in
providing differentiated solutions for the energy, industrial and
automotive markets, and enhance its operational performance.
The Timken Company
Post separation, The Timken Company would have estimated annual
revenue of $3.4 billion*
consisting of the Process Industries, Aerospace and Mobile
Industries segments. The company will continue to focus on
numerous fast-growing attractive markets, supported by both organic
expansion and acquisitions. The business leverages its
technology and engineering capabilities to offer more reliable
customer solutions and enhanced products and services with
particular emphasis in emerging markets where infrastructure is
fueling geographic growth. Its focus on applying its know-how
and providing superior customer service differentiates the business
in the areas of product performance, on-time delivery and service
support.
The Timken Company's product portfolio includes a broad range of
bearings and related mechanical power transmission components and
services. Employing nearly 17,000 associates, the company
will have 35 manufacturing plants, 25 service and repair
facilities, four technology centers, and an extensive network of
sales offices and warehouses around the globe. Company headquarters
will remain in Stark County.
Experienced Executives to Lead Both Companies
Griffith, 59, will continue as president and chief executive
officer of The Timken Company until the separation is complete, at
which time he plans to retire after 30 years of service. The
board plans to name Richard G. Kyle,
47, as The Timken Company's new president and chief executive
officer, succeeding Griffith. Until then, Kyle has been named
chief operating officer of the B&PT business. Kyle joined
the company in 2006 with extensive industry experience and has held
executive positions at Timken that include vice president of
manufacturing, president of Aerospace and Mobile Industries, and,
most recently, group president.
The board also plans to name Ward J. "Tim" Timken, Jr., 46, to
lead the new engineered steel company as its chairman and chief
executive officer. Timken's career at the company began in
1992 in the steel business as senior steel business analyst.
In 2004, he was named president of the steel business, and he was
elected chairman of the board in 2005. Timken will continue
to serve as chairman as well as oversee the steel business until
the separation.
"We have had sound succession plans in place for some time,"
said Ralston in making the leadership announcements.
"Rich Kyle and Tim Timken have substantial experience and are
well-equipped to lead these two companies. The board
unanimously supports them, and I am confident they will continue
building momentum to maximize value for the employees, investors
and customers of both companies."
Following the separation, the board plans to name John M. Timken, Jr., 62, non-executive chairman
of The Timken Company. In that role, he assumes leadership
responsibility for board activities and will oversee related board
matters. Timken has been an active member of The Timken
Company's board since 1986.
"John Timken has been
involved in some of the biggest changes in The Timken Company's
history, including acquisitions, divestures and major expansions,"
said Ralston. "His deep understanding of the company will be
invaluable to the next group of Timken Company
directors."
Planned Capital Structure and Governance Actions
In addition to its strategic evaluation, the board also has
completed a review of The Timken Company's capital allocation
process and objectives and corporate governance. With respect
to capital allocation, the company will continue to target net
debt-to-capital in the range of 30 to 35 percent, emphasizing
a combination of capital return initiatives in the form of share
repurchases and dividends as well as strategic investments for the
business including capital expenditures and acquisitions.
- The company currently has in place an active share buyback
program and has already purchased 1.8 million shares this
year. Currently, 5.7 million shares remain under the
existing board-authorized 10 million share buy-back
program. "We expect to remain active in seeking opportunities
to repurchase shares and will utilize our balance sheet
accordingly," Griffith noted.
- Timken has a track record of paying dividends for 365
successive quarters since it became a publicly traded company in
1922 and will continue to evaluate its dividend at regular
quarterly intervals.
- The company has actively funded its pension plans, which it
expects to be substantially fully funded by the end of the
year. The company does not anticipate making further
discretionary contributions.
- Timken will complete its current capital investment program for
both businesses, which includes a new continuous caster for the
steel business to come on-line in the second half of 2014, and
expects investment levels to return to more normal levels
thereafter.
"Plans call for both companies to be capitalized in a manner
that provides the financial flexibility needed to pursue future
growth opportunities," Griffith said. At separation, both
companies are expected to have strong balance sheets and their
respective pension plans substantially fully funded.
Regarding corporate governance, the board noted that following
the 2013 Annual Meeting of Shareholders, John M. Timken,
Jr., withdrew his name from consideration for the audit
committee. The board also announced that
Ward J. Timken, 71, expects to retire from the board in
May 2014 at the end of his current
term, in accordance with the director retirement policy.
At a later date, The Timken Company and the new stand-alone
engineered steel company will name new separate boards of
directors, which are expected to include a strong base of directors
drawn from The Timken Company's current board membership along with
new board members.
Transaction Details
The company notes that there can be no assurances regarding the
ultimate timing of the transaction or that the transaction will be
completed. Any transaction of this type is dependent on numerous
factors that include the macroeconomic environment, credit markets
and equity markets. Although the separation of the B&PT
and steel businesses will not require a shareholder vote, the plan
will be subject to customary regulatory approvals, the receipt of a
legal opinion regarding the tax-free nature of the transaction, the
execution of intercompany agreements, final approval of the Timken
board and other customary matters. One-time transaction costs
are expected to be approximately $125 million.
Conference Call Tomorrow (Friday,
Sept. 6)
Timken senior management will host a conference call tomorrow at
10:00 a.m. Eastern Time to review the planned separation and
answer questions. Presentation materials will be available
online in advance of the call for interested investors and
securities analysts.
Conference
Call:
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Friday, Sept.
6, 2013
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10:00 a.m.
Eastern Time
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All
Callers:
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Live Dial-In:
888-282-4019 or 913-312-1491
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(Call 10
minutes prior to be included.)
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Conference ID:
Timken Investor Call
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Replay Dial-In
available through September 20, 2013:
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888-203-1112 or
719-457-0820
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Replay
Passcode: 5278063
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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; 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.
Additional biographical information:
W. J. Timken, Jr.
http://www.timken.com/en-us/about/leadership/Pages/WardJTimkenJr.aspx
James W. Griffith
http://www.timken.com/en-us/about/leadership/Pages/JamesWGriffith.aspx
Richard G. Kyle
http://www.timken.com/en-us/about/leadership/Pages/Richard_G_Kyle.aspx
John M. Timken, Jr.
http://www.timken.com/en-us/investors/directors/Pages/JohnMTimkenJr.aspx
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 each company's future financial performance, plans for
executing the spin-off, the taxable nature of the spin-off, future
prospects of the companies as independent companies, revenue and
market growth and similar statements 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: each 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 each company;
changes in the financial health of each company's customers, which
may have an impact on each company's revenues, earnings and
impairment charges; fluctuations in raw material and energy costs
and their impact on the operation of each company's surcharge
mechanisms; the impact of each 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 each company's pension obligations due to
changes in interest rates or investment performance; each company's
ability to achieve the benefits of announced programs, initiatives,
and capital investments; each company's ability to fund its pension
plans; the timing and amount of any additional repurchases of the
company's common shares; the timing and amount of dividends on the
company's common shares; uncertainties that may delay or negatively
impact the spin-off or cause the spin-off to not occur; changes to
the actual amount of one-time transaction costs compared to the
company's estimate; the inability to establish or maintain certain
business relationships between both companies; and disruptions to
operations as a result of effecting the spin-off. 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:
|
Investor
Contact:
|
Pat
Carlson
|
Steve
Tschiegg
|
Global Media
Relations
|
Director –
Capital Markets & Investor Relations
|
1835 Dueber Avenue,
S.W.
|
1835 Dueber
Avenue, S.W.
|
Canton, OH 44706-0927
U.S.A.
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Canton, OH
44706-0927 U.S.A.
|
Telephone:
(330)471-3514
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Telephone:
(330)471-7446
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pat.carlson@timken.com
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steve.tschiegg@timken.com
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*Based on 2012 segment sales, including intersegment sales for
the steel business.
*Based on 2012 segment sales, including intersegment sales for
the steel business.
*Based on 2012 segment sales.
Image with caption: "Timken is a leading global
manufacturer of carbon and alloy bar, producing ingot-cast and
continuous-cast steel bars for the automotive, bearing, energy and
industrial market segments." Image available at:
http://photos.prnewswire.com/prnh/20130905/CL75023-a
Image with caption: "Timken associate Patrick Garner inspects a spherical roller
bearing." Image available at:
http://photos.prnewswire.com/prnh/20130905/CL75023-b
Image with caption: "Richard G.
Kyle." Image available at:
http://photos.prnewswire.com/prnh/20130905/CL75023-c
Image with caption: "Ward J. Timken,
Jr." Image available at:
http://photos.prnewswire.com/prnh/20130905/CL75023-d
Image with caption: "James W.
Griffith." Image available at:
http://photos.prnewswire.com/prnh/20130905/CL75023-e
Image with caption: "John M. Timken,
Jr." Image available at:
http://photos.prnewswire.com/prnh/20130905/CL75023-f
SOURCE The Timken Company