CANTON, Ohio, Oct. 24, 2013 /PRNewswire-FirstCall/ -- The
Timken Company (NYSE: TKR) today reported third-quarter 2013 sales
of $1.1 billion. Sales
decreased 7 percent when compared with the same period a year ago,
primarily due to weaker demand from the company's broad end
markets, partially offset by acquisitions.
(Logo:
http://photos.prnewswire.com/prnh/20100210/TIMKENLOGO )
Timken generated third-quarter net income of $52.2 million, or $0.54 per diluted share. Compared with net
income of $80.9 million or
$0.83 per diluted share during the
same period a year ago, third-quarter earnings primarily reflect
lower volume and manufacturing utilization as well as unfavorable
sales mix. The decrease was partially offset by lower raw
material and plant closure costs as well as favorable pricing.
"On a macro basis, economic growth across the world has been
much slower than we and our customers envisioned, and our
third-quarter results were below our expectations," said
James W. Griffith, Timken president and chief executive
officer. "As a result, we've implemented and are continuing
to take additional actions to allow us to enhance margins despite
the lower demand levels. These include leveraging our
strategic investments as well as implementing tactics to
rationalize capacity levels and taking further actions to reduce
costs, with a focus on SG&A."
Among recent developments, the company:
- 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 tax-free
spinoff, creating a new independent publicly traded steel company
in 2014;
- Expanded its product portfolio, launching new
Timken® SNT plummer blocks and seals; introducing new
Timken® encoders that utilize the latest magnetic
encoder technology; and designing two new high-performance
Timken® alloy steels to meet the specific needs of the
oil and gas industry;
- Further aligned its operations with market needs, which
includes capacity rationalizations, supply chain improvements and
workforce reductions; and
- Returned $47 million in capital
to shareholders through dividends and repurchases of company shares
in the quarter, bringing the total capital returned through
September 2013 to approximately
$175 million. The company has
approximately 5.6 million shares remaining under its board-approved
share repurchase program.
Nine Months' Results
Timken posted sales of
$3.3 billion in the first nine
months of 2013, down 16 percent from the same period in 2012.
The change reflects lower demand across most of the company's broad
end markets. In addition, a $124 million decline in raw
material surcharges from the prior-year period negatively impacted
revenues. The decrease was partially offset by the benefit of
acquisitions.
In the first nine months of 2013, the company generated net
income of $210.1 million, or
$2.18 per diluted share. That
compares with $420.2 million, or
$4.28 per diluted share, in the same
period last year, which included CDSOA receipts of
$68 million, or $0.70 per share.
Lower volume and manufacturing utilization, as well as sales
mix, drove earnings during the first nine months of 2013. The
decrease was partially offset by lower raw material costs, lower
selling and administrative expenses, favorable pricing and lower
costs related to previously announced plant closures (reference
Table 1).
Table 1:
Year-to-Date Net Income and Diluted Earnings Per Share
(EPS)
|
|
2013
|
|
2012
|
|
($ in
Mils.)
|
EPS
|
|
($ in
Mils.)
|
EPS
|
Net Income
attributable to The Timken Company
|
$ 210.1
|
$2.18
|
|
$420.2
|
$4.28
|
Less: CDSOA receipts,
net of tax
|
$
(0.3)
|
$ -
-
|
|
$
68.4
|
$0.70
|
Add: Charges due to
plant closure, net of tax
|
$
11.6
|
$0.12
|
|
$
26.1
|
$0.27
|
Net Income, after
adjustments
|
$ 222.0
|
$2.30
|
|
$377.9
|
$3.85
|
As of September 30, 2013, total
debt was $476.6 million, or
16.8 percent of capital. The company had cash of
$418.1 million, resulting in
$58.5 million of net debt,
compared with a net cash position of $107.4 million at the end of 2012.
In the first nine months of 2013, the company generated
$251.8 million in cash from
operating activities. Excluding discretionary pension contributions
of $66.0 million, net of tax,
free cash flow (operating cash after capital expenditures and
dividends) was $42.0 million.
In addition, the company repurchased 1.9 million shares
for an aggregate of $107 million and
made three acquisitions totaling $65 million.
Mobile Industries Segment Results
In the third
quarter, Mobile Industries' sales of $348.1 million decreased 12 percent
compared with last year's third-quarter sales of $396.9 million. The $49 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 non-automotive markets,
led by mining, agriculture and heavy truck, partially offset by the
Interlube Systems acquisition.
EBIT for the segment was $29.1 million for the third quarter, or
8.4 percent of sales, down 23 percent from $37.9 million, or 9.5 percent of sales
for the same period a year ago. The decrease was driven
primarily by lower volume, partially offset by lower plant closure
and raw material costs.
For the nine months of 2013, Mobile Industries' sales were
$1.1 billion, a decrease of
13 percent relative to the same period a year ago. EBIT
for the first nine months of 2013 was $132.7 million, or 11.7 percent of
sales, down 23 percent from $173.4 million, or 13.2 percent of
sales, in the prior-year period. The decrease in EBIT was
driven primarily by lower volume and manufacturing utilization,
partially offset by lower plant closure, raw material and selling
and administrative expenses.
Process Industries Segment Results
Process
Industries' third-quarter sales were $308.3 million, down 1 percent from
$311.1 million for the same
period a year ago. The change reflects lower demand in both the
industrial original equipment and distribution market sectors,
partially offset by the previously announced industrial services
acquisitions as well as pricing.
Process Industries' third-quarter EBIT was $50.8 million, or 16.5 percent of
sales, a 15.5 percent decrease compared with $60.1 million, or 19.3 percent of
sales, for the same period a year ago. The decrease reflects
lower volume partially offset by pricing and lower selling and
administrative expenses.
For the first nine months of 2013, Process Industries' sales
were $910.9 million, a decrease
of 9 percent compared with the same period a year ago.
EBIT for the first nine months of 2013 was $148 million, or
16.2 percent of sales, a decrease of 31 percent compared
with $213.7 million, or
21.3 percent of sales, in the prior-year period.
Aerospace Segment Results
Aerospace had
third-quarter sales of $76.3 million, down 9 percent from
$84 million for the same period last year. The decrease
reflects weakness in commercial aviation and critical motion
markets and a slower-than-expected ramp-up of shipping to defense
customers, partially offset by strength in general aviation.
Third-quarter EBIT was $4.9 million, or 6.4 percent of sales,
a decrease of 36 percent compared with $7.7 million, or 9.2 percent of sales,
for the same period a year ago. The decrease reflects lower
volume.
For the first nine months of 2013, Aerospace sales were
$240.8 million, 8 percent
lower than the same period a year ago. EBIT for the first
nine months was $21.4 million,
or 8.9 percent of sales, a decrease of 19 percent compared
with $26.3 million, or
10 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 expenses.
Steel Segment Results
Sales for Steel,
including inter-segment sales, were $350.5 million in the third quarter, a
decrease of 7 percent from $377 million for the same
period last year. The results reflect reduced shipments to
industrial sectors, partially offset by improved sales to the
mobile on-highway sector. Raw-material surcharges decreased
$4 million from the third quarter last year.
Third-quarter EBIT was $29.2 million, or 8.3 percent of sales,
down 41 percent from $49.7 million, or 13.2 percent of
sales, for the same period a year ago. The decline in EBIT
was primarily due to unfavorable sales mix, lower volume and higher
manufacturing costs including approximately $8 million incurred for scheduled maintenance.
The decrease was partially offset by lower raw material
costs.
For the first nine months of 2013, Steel sales were $1.1 billion, a 26 percent decrease
compared with the same period a year ago. EBIT for the first
nine months of 2013 was $107.3 million, or 10.2 percent of
sales, down 53 percent from $226.6 million, or 16 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.
The Timken Company expects 2013 sales to be approximately
13 percent lower year-over-year with:
- Mobile Industries sales down 11 to 13 percent for the year due
to the impact of lower customer demand and the company's market
strategy;
- Process Industries sales to be down 7 to 9 percent, due to
broad-based weakness in industrial markets, partially offset by the
benefit of acquisitions;
- Aerospace sales down 3 to 5 percent, due to decreased demand in
critical motion, civil aviation and defense; and
- Steel sales down 20 to 22 percent, driven by lower industrial
and oil and gas end-market demand and lower surcharges, partially
offset by growth in mobile on-highway.
Timken projects 2013 annual earnings per diluted share to range
from $2.70 to $2.90, which includes
approximately $0.13 per share for
previously announced plant closure costs and $0.07 associated with one-time implementation
costs related to its planned separation of the steel business.
The company expects to generate cash from operations of
approximately $415 million in 2013. Free cash flow is
projected to be $5 million after
making capital expenditures of about $320 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 $70 million in 2013. In addition, the
company has repurchased $107 million
of its shares and expects to continue to repurchase shares under
its current board-authorized program.
Excluding one-time implementation costs for the separation, the
company expects sales and earnings in 2014 to improve as a result
of cost reductions and the company's strategic initiatives as well
as a gradual economic recovery.
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, Oct. 24,
2013
|
|
11:00 a.m. Eastern
Time
|
|
|
All
Callers:
|
Live Dial-In:
888-668-1637 or 913-312-1501
|
|
(Call 10 minutes
prior to be included.)
|
|
|
|
Conference ID: Timken
Earnings Call
|
|
|
|
Replay Dial-In
available through Nov. 7, 2013:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
6110843
|
|
|
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 third 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 complete and achieve the benefits of announced
plans, programs, initiatives, and capital investments; retention of
CDSOA distributions; the taxable nature of the spin-off; and the
company's ability to successfully complete 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:
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
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2013
|
2012
|
|
2013
|
2012
|
Net sales
|
$
1,061.5
|
$
1,142.5
|
|
$
3,277.9
|
$
3,906.7
|
Cost of products
sold
|
809.8
|
843.6
|
|
2,449.6
|
2,818.9
|
Gross
Profit
|
$
251.7
|
$
298.9
|
|
$
828.3
|
$
1,087.8
|
Selling, general
& administrative expenses (SG&A)
|
159.0
|
152.7
|
|
472.2
|
480.4
|
Impairment and
restructuring
|
3.7
|
11.9
|
|
11.6
|
28.8
|
Operating
Income
|
$
89.0
|
$
134.3
|
|
$
344.5
|
$
578.6
|
Other income
(expense), net
|
0.3
|
0.5
|
|
(0.9)
|
104.9
|
Earnings
Before Interest and Taxes (EBIT) (1)
|
$
89.3
|
$
134.8
|
|
$
343.6
|
$
683.5
|
Interest expense,
net
|
(4.4)
|
(6.7)
|
|
(16.0)
|
(22.0)
|
Income
Before Income Taxes
|
$
84.9
|
$
128.1
|
|
$
327.6
|
$
661.5
|
Provision for income
taxes
|
32.4
|
47.0
|
|
117.3
|
241.0
|
Net
Income
|
$
52.5
|
$
81.1
|
|
$
210.3
|
$
420.5
|
Less: Net
Income Attributable to Noncontrolling Interest
|
0.3
|
0.2
|
|
0.2
|
0.3
|
Net Income
Attributable to The Timken Company
|
$
52.2
|
$
80.9
|
|
$
210.1
|
$
420.2
|
|
|
|
|
|
|
Net Income per
Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
|
|
|
Basic Earnings Per
Share
|
$
0.55
|
$
0.84
|
|
$
2.20
|
$
4.32
|
Diluted Earnings
Per Share
|
$
0.54
|
$
0.83
|
|
$
2.18
|
$
4.28
|
|
|
|
|
|
|
Average Shares
Outstanding
|
94,667,659
|
96,356,772
|
|
95,391,695
|
96,981,922
|
Average Shares
Outstanding - assuming dilution
|
95,408,069
|
97,123,173
|
|
96,248,211
|
97,915,800
|
|
|
|
|
|
|
(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
September 30,
|
Nine Months
Ended
September 30,
|
|
2013
|
2012
|
2013
|
2012
|
Mobile
Industries
|
|
|
|
|
Net sales to external
customers
|
$
348.0
|
$
396.7
|
$
1,137.5
|
$ 1,314.0
|
Intersegment
sales
|
0.1
|
0.2
|
0.8
|
0.4
|
Total net
sales
|
$
348.1
|
$
396.9
|
$
1,138.3
|
$ 1,314.4
|
Earnings before
interest and taxes (EBIT) (1)
|
$
29.1
|
$
37.9
|
$
132.7
|
$
173.4
|
EBIT Margin
(1)
|
8.4
%
|
9.5 %
|
11.7
%
|
13.2 %
|
Process
Industries
|
|
|
|
|
Net sales to external
customers
|
$
307.2
|
$
309.8
|
$
907.8
|
$ 1,000.5
|
Intersegment
sales
|
1.1
|
1.3
|
3.1
|
3.9
|
Total net
sales
|
$
308.3
|
$
311.1
|
$
910.9
|
$ 1,004.4
|
Earnings before
interest and taxes (EBIT) (1)
|
$
50.8
|
$
60.1
|
$
148.0
|
$
213.7
|
EBIT Margin
(1)
|
16.5
%
|
19.3 %
|
16.2
%
|
21.3 %
|
Aerospace
|
|
|
|
|
Net sales to external
customers
|
$
76.3
|
$
84.0
|
$
240.8
|
$
262.5
|
Earnings before
interest and taxes (EBIT) (1)
|
$
4.9
|
$
7.7
|
$
21.4
|
$
26.3
|
EBIT Margin
(1)
|
6.4
%
|
9.2 %
|
8.9
%
|
10.0 %
|
Steel
|
|
|
|
|
Net sales to external
customers
|
$
330.0
|
$
352.0
|
$
991.8
|
$ 1,329.7
|
Intersegment
sales
|
20.5
|
25.0
|
58.9
|
82.6
|
Total net
sales
|
$
350.5
|
$
377.0
|
$
1,050.7
|
$ 1,412.3
|
Earnings before
interest and taxes (EBIT) (1)
|
$
29.2
|
$
49.7
|
$
107.3
|
$
226.6
|
EBIT Margin
(1)
|
8.3
%
|
13.2 %
|
10.2
%
|
16.0 %
|
Unallocated corporate
expense
|
$
(24.3)
|
$
(20.1)
|
$
(67.0)
|
$
(63.8)
|
Receipt of CDSOA
distributions (2)
|
$
-
|
$
(0.9)
|
$
-
|
$
108.6
|
Intersegment
eliminations income (expense) (3)
|
$
(0.4)
|
$
0.4
|
$
1.2
|
$
(1.3)
|
|
|
|
|
|
Consolidated
|
|
|
|
|
Net sales to external
customers
|
$
1,061.5
|
$ 1,142.5
|
$
3,277.9
|
$ 3,906.7
|
Earnings before
interest and taxes (EBIT) (1)
|
$
89.3
|
$
134.8
|
$
343.6
|
$
683.5
|
EBIT Margin
(1)
|
8.4
%
|
11.8 %
|
10.5
%
|
17.5 %
|
|
|
|
|
|
(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 is 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
receipts), 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
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2013
|
2012
|
|
2013
|
2012
|
Net Income
|
$
52.5
|
$ 81.1
|
|
$
210.3
|
$ 420.5
|
|
|
|
|
|
|
Provision for income
taxes
|
32.4
|
47.0
|
|
117.3
|
241.0
|
Interest
expense
|
4.9
|
7.3
|
|
17.5
|
24.0
|
Interest
income
|
(0.5)
|
(0.6)
|
|
(1.5)
|
(2.0)
|
Consolidated earnings
before interest and taxes (EBIT)
|
$
89.3
|
$ 134.8
|
|
$
343.6
|
$ 683.5
|
|
|
|
|
|
|
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.
|
|
|
|
|
(Dollars in
millions, except share data) (Unaudited)
|
Three Months
Ended
September
30,
|
|
Nine Months Ended
September 30,
|
|
2013
|
EPS
|
2012
|
EPS
|
2013
|
EPS
|
2012
|
EPS
|
Net Income
Attributable to The Timken Company
|
$
52.2
|
$
0.54
|
$ 80.9
|
$ 0.83
|
$
210.1
|
$
2.18
|
$ 420.2
|
$ 4.28
|
Adjustments:
|
|
|
|
|
|
|
|
|
CDSOA
receipts, net of tax expense (1)
|
-
|
-
|
0.6
|
-
|
0.3
|
-
|
(68.4)
|
(0.70)
|
Charges due to
plant closure (2)
|
2.1
|
0.02
|
8.4
|
0.09
|
11.6
|
0.12
|
26.1
|
0.27
|
Net Income
Attributable to The Timken Company, after adjustments
|
$
54.3
|
$
0.56
|
$ 89.9
|
$ 0.92
|
$
222.0
|
$
2.30
|
$ 377.9
|
$ 3.85
|
|
|
|
|
|
|
|
|
|
(1)
CDSOA receipts for the first nine months of 2012 were $108.6
million, net of tax expense of $40.2
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.
|
|
|
|
(Dollars in
millions, except share data) (Unaudited)
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
2013
|
Percentage to
Net Sales
|
2012
|
Percentage to
Net Sales
|
2013
|
Percentage
to
Net Sales
|
2012
|
Percentage to
Net Sales
|
Net Income
|
$
52.5
|
4.9
%
|
$ 81.1
|
7.1 %
|
$
210.3
|
6.4
%
|
$ 420.5
|
10.8 %
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
32.4
|
3.1
%
|
47.0
|
4.1 %
|
117.3
|
3.6
%
|
241.0
|
6.2 %
|
Interest
expense
|
4.9
|
0.5
%
|
7.3
|
0.6 %
|
17.5
|
0.5
%
|
24.0
|
0.6 %
|
Interest
income
|
(0.5)
|
(0.1)%
|
(0.6)
|
(0.1)%
|
(1.5)
|
—%
|
(2.0)
|
(0.1)%
|
Consolidated earnings
before interest and taxes (EBIT)
|
$
89.3
|
8.4
%
|
$ 134.8
|
11.8 %
|
$
343.6
|
10.5
%
|
$ 683.5
|
17.5 %
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
CDSOA receipts
(1)
|
0.1
|
—%
|
0.9
|
0.1 %
|
0.5
|
—%
|
(108.6)
|
(2.8)%
|
Charges due to
plant closure (2)
|
2.1
|
0.2
%
|
8.4
|
0.7 %
|
13.9
|
0.4
%
|
26.1
|
0.7 %
|
Consolidated earnings
before interest and taxes (EBIT), after adjustments
|
$
91.5
|
8.6
%
|
$ 144.1
|
12.6 %
|
$
358.0
|
10.9
%
|
$ 601.0
|
15.4 %
|
|
|
|
|
|
|
|
|
|
(1)
CDSOA receipts for the first nine months of 2012 were $108.6
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)
|
|
|
|
|
|
September 30,
2013
|
December 31,
2012
|
Short-term
debt
|
|
|
$
271.2
|
$
23.9
|
Long-term
debt
|
|
|
205.4
|
455.1
|
Total Debt
|
|
|
$
476.6
|
$
479.0
|
Less: Cash and cash
equivalents
|
|
|
(418.1)
|
(586.4)
|
Net Debt (Cash)
|
|
|
$
58.5
|
$
(107.4)
|
|
|
|
|
|
Total
equity
|
|
|
$
2,367.1
|
$ 2,246.6
|
|
|
|
|
|
Ratio of Total Debt
to Capital
|
|
|
16.8
%
|
17.6 %
|
Ratio of Net Debt
(Cash) to Capital
|
|
|
2.4
%
|
(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 benefit contributions and CDSOA receipts 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
|
Nine Months
Ended
|
|
September
30,
|
September
30,
|
|
2013
|
2012
|
2013
|
2012
|
Net cash provided by
operating activities
|
$
112.3
|
$
130.1
|
$
251.8
|
$
366.5
|
Less: capital
expenditures
|
(65.2)
|
(72.0)
|
(210.4)
|
(187.3)
|
Less: cash dividends
paid to shareholders
|
(21.8)
|
(21.9)
|
(66.0)
|
(66.8)
|
Free cash flow
|
25.3
|
36.2
|
(24.6)
|
112.4
|
Plus: discretionary
pension and postretirement benefit contributions, net of the tax
benefit (1)
|
—
|
113.0
|
66.3
|
245.0
|
Less: CDSOA
receipts, net of tax expense (2)
|
—
|
0.6
|
0.3
|
(68.4)
|
Free cash flow adjusted for
discretionary pension contributions
and CDSOA
|
$
25.3
|
$
149.8
|
$
42.0
|
$
289.0
|
|
|
|
|
|
(1) There were no
discretionary pension and postretirement benefit contributions
during the third quarter of 2013. The discretionary pension
and postretirement benefit contributions for the first nine months
of 2013 were $105.0 million, net of a tax benefit of $38.7
million. The discretionary pension and postretirement benefit
contributions for the third quarter of 2012 were $160.3 million,
net of a tax benefit of $47.3 million. The discretionary
pension and postretirement benefit contributions for the first nine
months of 2012 were $364.1 million, net of a tax benefit of $119.1
million.
|
|
|
|
|
|
(2) CDSOA receipts
for the first nine months of 2012 were $108.6 million, net of tax
expense of $40.2 million.
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEET
|
(Dollars in
millions) (Unaudited)
|
|
September 30,
2013
|
December 31,
2012
|
ASSETS
|
|
|
Cash and cash
equivalents
|
$
418.1
|
$
586.4
|
Accounts
receivable
|
593.7
|
546.7
|
Inventories,
net
|
856.1
|
862.1
|
Other current
assets
|
182.1
|
178.9
|
Total Current
Assets
|
2,050.0
|
2,174.1
|
Property, Plant and
Equipment, net
|
1,498.3
|
1,405.3
|
Goodwill
|
359.7
|
338.9
|
Other
assets
|
284.9
|
326.4
|
Total
Assets
|
$
4,192.9
|
$
4,244.7
|
|
|
|
LIABILITIES
|
|
|
Accounts
payable
|
$
252.5
|
$
216.2
|
Short-term
debt
|
271.2
|
23.9
|
Income
taxes
|
116.7
|
36.4
|
Accrued
expenses
|
338.0
|
391.4
|
Total Current
Liabilities
|
978.4
|
667.9
|
|
|
|
Long-term
debt
|
205.4
|
455.1
|
Accrued pension
cost
|
230.7
|
391.4
|
Accrued
postretirement benefits cost
|
354.9
|
371.8
|
Other non-current
liabilities
|
56.4
|
111.9
|
Total
Liabilities
|
1,825.8
|
1,998.1
|
|
|
|
EQUITY
|
|
|
The Timken Company
shareholders' equity
|
2,353.3
|
2,232.2
|
Noncontrolling
Interest
|
13.8
|
14.4
|
Total
Equity
|
2,367.1
|
2,246.6
|
Total Liabilities and
Equity
|
$
4,192.9
|
$
4,244.7
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
|
(Dollars in
millions) (Unaudited)
|
|
|
|
|
|
Three Months
Ended
September 30,
|
Nine Months
Ended
September 30,
|
|
2013
|
2012
|
2013
|
2012
|
Cash Provided
(Used)
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net income
attributable to The Timken Company
|
$
52.2
|
$
80.9
|
$
210.1
|
$
420.2
|
Net income
attributable to noncontrolling interest
|
0.3
|
0.2
|
0.2
|
0.3
|
Adjustments to
reconcile net income to net cash provided (used)
by operating activities:
|
|
|
|
|
Depreciation and
amortization
|
47.6
|
49.0
|
144.7
|
148.8
|
Impairment
Charges
|
—
|
6.4
|
—
|
6.4
|
Pension and other
postretirement expense
|
21.0
|
19.7
|
64.8
|
70.1
|
Pension and other
postretirement benefit contributions and payments
|
(12.6)
|
(173.9)
|
(140.4)
|
(399.8)
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
33.6
|
88.3
|
(40.3)
|
13.8
|
Inventories
|
(33.1)
|
20.1
|
12.8
|
35.2
|
Accounts
payable
|
5.1
|
(14.9)
|
30.3
|
(17.0)
|
Accrued
expenses
|
19.2
|
2.7
|
(59.5)
|
(74.5)
|
Income
taxes
|
(15.5)
|
36.8
|
37.2
|
143.9
|
Other -
net
|
(5.5)
|
14.8
|
(8.1)
|
19.1
|
Net Cash Provided By
Operating Activities
|
$
112.3
|
$
130.1
|
$
251.8
|
$
366.5
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Capital
expenditures
|
$
(65.2)
|
$
(72.0)
|
$
(210.4)
|
$
(187.3)
|
Acquisitions
|
2.8
|
—
|
(64.5)
|
(0.2)
|
Investments -
net
|
(1.4)
|
(1.0)
|
5.6
|
17.2
|
Other
|
0.8
|
1.3
|
2.7
|
5.3
|
Net Cash Used by
Investing Activities
|
$
(63.0)
|
$
(71.7)
|
$
(266.6)
|
$
(165.0)
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Cash dividends paid
to shareholders
|
$
(21.8)
|
$
(21.9)
|
$
(66.0)
|
$
(66.8)
|
Purchase of treasury
shares, net
|
(25.6)
|
(60.6)
|
(107.4)
|
(112.3)
|
Net proceeds from
common share activity
|
2.8
|
0.4
|
21.4
|
20.2
|
Net proceeds
(payments) from credit facilities
|
14.4
|
(5.9)
|
(2.2)
|
(26.5)
|
Other
|
(0.5)
|
—
|
8.4
|
3.6
|
Net Cash Used by
Financing Activities
|
$
(30.7)
|
$
(88.0)
|
$
(145.8)
|
$
(181.8)
|
Effect of exchange
rate changes on cash
|
2.7
|
5.2
|
(7.7)
|
1.0
|
(Decrease) Increase
In Cash and Cash Equivalents
|
$
21.3
|
$
(24.4)
|
$
(168.3)
|
$
20.7
|
Cash and cash
equivalents at beginning of period
|
396.8
|
509.9
|
586.4
|
464.8
|
Cash and Cash
Equivalents at End of Period
|
$
418.1
|
$
485.5
|
$
418.1
|
$
485.5
|
|
|
|
|
|
SOURCE The Timken Company