CANTON, Ohio, Jan. 30, 2014 /PRNewswire-FirstCall/ -- The
Timken Company (NYSE: TKR; www.timken.com) today reported sales of
$4.3 billion for 2013, a
decrease of 13 percent from the prior year. The decline
reflects lower demand across most of the company's broad end
markets. In addition, a $117 million decline in Steel
segment raw material surcharges from the prior-year period further
decreased revenues. The reduction in sales was partially
offset by the benefit of acquisitions of $86
million in the company's Mobile Industries and Process
Industries segments and from strength in the Steel segment's
automotive end-market sector.
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)
In 2013, the company generated net income of $262.7 million, or $2.74 per diluted share, compared with
$495.5 million, or $5.07 per diluted share, a year ago.
Results for 2013 included $32.8
million of after-tax expense, or $0.35 per diluted share (reference Table 1)
related to (a) tax expense incurred on the repatriation of overseas
cash, (b) tax benefits associated with the reversal of certain
income tax reserves from prior years, (c) separation costs
associated with the proposed spinoff of the steel business, (d)
costs related to previously announced plant closures, and (e) other
unusual items. Excluding these items, 2013 net income was
$295.5 million, or $3.09 per diluted share. This compares with
2012 net income of $464.6 million, or
$4.76 per diluted share, excluding
costs related to previously announced plant closures and Continued
Dumping and Subsidy Offset Act (CDSOA) receipts. The decrease
in earnings primarily reflects lower volume and manufacturing
utilization as well as unfavorable sales mix, which was partially
offset by lower raw material and selling and administrative
expenses as well as favorable pricing.
Table 1: Net
Income and Diluted Earnings Per Share (EPS)
|
|
|
|
|
2013
|
2012
|
|
|
|
|
|
|
($ in
Mils.)
|
EPS
|
($ in
Mils.)
|
EPS
|
|
|
|
|
|
Net Income
attributable to The Timken Company
|
$ 262.7
|
$ 2.74
|
$ 495.5
|
$ 5.07
|
Adjustments:
|
|
|
|
|
Tax expense on cash
repatriation
|
26.2
|
0.28
|
|
|
Reversal of income
tax reserves
|
(12.3)
|
(0.13)
|
|
|
Steel
separation-related costs
|
10.3
|
0.11
|
|
|
Severance due to
cost-reduction initiatives
|
3.9
|
0.04
|
|
|
Gain on sale of real
estate in Brazil
|
(5.4)
|
(0.06)
|
|
|
Charges due to plant
closures
|
8.3
|
0.09
|
37.1
|
0.38
|
CDSOA expense
(receipts)
|
1.8
|
0.02
|
(68.0)
|
(0.69)
|
Net Income, after
adjustments
|
$ 295.5
|
$ 3.09
|
$ 464.6
|
$ 4.76
|
"Although demand from many of our targeted market segments has
been sluggish, we performed well despite low operating levels,"
said James W. Griffith, Timken president and chief
executive officer. "Over the past few months, we have
completed a number of initiatives to match our cost structure to
the current demand and to improve our ability to grow. The company
is well positioned as key markets begin to recover in both
businesses even as we prepare for an anticipated mid-year
separation of our steel business."
During 2013, Timken:
Invested for Growth and Productivity
- Acquired Smith Services, Interlube Systems, Standard Machine
and rail bearing reconditioning assets from The Greenbrier
Companies;
- Completed four previously announced capital investment projects
that will increase manufacturing effectiveness and capacity in its
Steel segment;
- Announced the opening of its new industrial service center in
Raipur, India, which will provide
gear drive and bearing repair and upgrade services to meet growing
customer demand for Timken industrial services outside the U.S.;
and
- Expanded its product portfolio, launching new
Timken® SNT plummer blocks and seals, adding new
Timken® encoders and designing two new high-performance
Timken® alloy steels to meet specific needs of the oil
and gas industry.
Returned Capital to Shareholders
- Through dividends and the repurchase of 3.4 million
shares, returned a total of $277 million in capital to
shareholders. The company has 4.1 million shares
remaining under its current board-approved share repurchase
program.
Implemented Cash Repatriation Strategy
- In the fourth quarter, implemented a strategy to repatriate
approximately $365 million of cash, incurring tax expense of
approximately $26 million. The company repatriated
$123 million of cash in January 2014; the rest will be
repatriated in future periods.
Launched Cost-Reduction Initiative / Continued
Rationalization
- Began a cost-reduction initiative in the fourth quarter to
address lower market demand within its bearings and power
transmission business. The company expects pre-tax costs of
approximately $20 million to achieve targeted annual pre-tax
savings of approximately $25 million; and
- Continued to further align its operations during the year with
market needs, which includes supply chain improvements, work force
reductions and plant capacity rationalizations.
Began Steel Separation Initiative
- On September 5, 2013, announced
intent to pursue a separation of the company's steel business
through a tax-free spinoff, creating a new independent publicly
traded steel company mid-year 2014. At that time, the new
company—TimkenSteel Corporation—is expected to trade on the New
York Stock Exchange under the ticker TMST; and
- In anticipation of the spinoff, the company expects to incur
one-time separation costs of approximately $105 million.
Included in these costs are $15 million related to another
specific cost-reduction initiative to generate an additional
$20 million of annualized savings, which are intended to
mitigate the incremental enterprise costs associated with operating
TimkenSteel Corporation as an independent public company.
Fourth-Quarter Results
Timken posted sales of $1.1 billion in the fourth quarter of 2013,
down 2 percent from the same period in 2012. The sales
decrease primarily reflects lower demand from the industrial,
mining, heavy-truck and light-vehicle end-market sectors.
This decrease was partially offset by demand in the energy,
rail, Aerospace-related defense and Steel-related light-vehicle
end-market sectors as well as the benefit of acquisitions.
From a geographic perspective, the decline primarily reflects lower
demand in North America, partially
offset by growth in Asia.
For the fourth quarter, the company generated net income of
$52.6 million, or $0.55 per diluted share. That compares
with $75.3 million, or
$0.78 per diluted share, earned in
the same period last year. Results for 2013 included
$20.9 million of after-tax
expense, or $0.23 per diluted share
(reference Table 2) related to (a) tax expense incurred on the
repatriation of overseas cash, (b) tax benefits associated with the
reversal of certain income tax reserves from prior years, (c)
separation costs associated with the proposed spinoff of the steel
business, (d) costs related to previously announced plant closures,
and (e) other unusual items. Excluding these items,
fourth-quarter net income was $73.5 million or $0.78 per
diluted share. This compares with 2012 fourth quarter net
income of $77.9 million, or $0.80 per diluted share, excluding
costs related to the previously announced plant closures. The
decline in earnings primarily reflects lower volume and the impact
of LIFO, partially offset by lower selling and administrative
expenses and material costs.
Table 2: Net
Income and Diluted Earnings Per Share (EPS)
|
|
|
|
|
|
|
4th
Quarter 2013
|
4th
Quarter 2012
|
|
($ in
Mils.)
|
EPS
|
($ in
Mils.)
|
EPS
|
|
|
|
|
|
Net Income
attributable to The Timken Company
|
$
52.6
|
$ 0.55
|
$ 75.3
|
$ 0.78
|
Adjustments:
|
|
|
|
|
Tax expense on cash
repatriation
|
26.2
|
0.28
|
|
|
Reversal of income
tax reserves
|
(12.3)
|
(0.13)
|
|
|
Steel
separation-related costs
|
10.3
|
0.11
|
|
|
Severance due to
cost-reduction initiatives
|
3.9
|
0.04
|
|
|
Gain on sale of real
estate in Brazil
|
(5.4)
|
(0.06)
|
|
|
Charges due to plant
closures
|
(3.3)
|
(0.03)
|
2.2
|
0.02
|
CDSOA
expenses
|
1.5
|
0.02
|
0.4
|
- -
|
Net Income, after
adjustments
|
$
73.5
|
$ 0.78
|
$ 77.9
|
$ 0.80
|
Cash Flow and Balance Sheet
The company generated $432.4 million in cash from operating
activities in 2013, driven by earnings and working capital
management, partially offset by discretionary pension
contributions. Excluding discretionary pension contributions
of $66.3 million, net of tax,
and CDSOA expense of $1.8 million,
net of tax, free cash flow (operating cash after capital
expenditures and dividends) was $87.2 million. In addition, the
company repurchased 3.4 million shares for $189 million
and made three acquisitions totaling $65 million.
As of December 31, 2013, total debt was $475.9 million, or 15.2 percent of
capital, and cash was $384.6 million, resulting in net debt of
$91.3 million, compared with
total debt of $479.0 million and
a net cash position of $107.4 million at the end of 2012.
Available liquidity at December 31, 2013, was
$1.2 billion. Timken ended
the year with pensions funded at approximately 105 percent compared
with 89 percent a year ago.
Mobile Industries Segment Results
Mobile Industries' 2013 sales were $1.5 billion, down 12 percent from
$1.7 billion a year ago.
The decrease included approximately $95
million related to the company's market strategy, primarily
in the light-vehicle sector. The remaining decrease was
principally due to lower heavy truck and off-highway market demand,
partially offset by the benefits of the Interlube Systems
acquisition and rail bearing reconditioning investment, combined
with higher demand from the automotive aftermarket sector.
Mobile Industries achieved EBIT of $164.7 million, or 11.2 percent of
sales, for the year, down 21 percent from $208.1 million, or 12.4 percent of
sales, earned in 2012. The decrease in EBIT was primarily
driven by lower volume and plant utilization, partially offset by
lower costs related to plant closures, raw materials and selling
and administrative expenses.
In the fourth quarter, Mobile Industries' sales were
$337.1 million, down
7 percent relative to the same period a year ago. The
$24 million decrease included
approximately $30 million related to
the company's market strategy primarily in the light-vehicle
sector. The remaining growth was mainly due to improved
international rail demand and the benefit of acquisitions.
EBIT for the quarter was $32 million, or
9.5 percent of sales, compared with $34.7 million, or 9.6 percent of sales,
for the same period a year ago. EBIT was impacted by lower
volume and plant utilization, partially offset by lower selling and
administrative expenses and the benefit of acquisitions. In
addition, the company had a net benefit of approximately
$8 million from unusual items,
including the gain on the sale of land in Brazil and lower restructuring costs compared
to a year ago, partially offset by severance costs related to the
company's cost-reduction initiative.
Process Industries Segment Results
Sales for the Process Industries segment were $1.2 billion in 2013, a decrease of
8 percent from $1.3 billion
a year ago. The decrease was driven by lower demand and inventory
destocking in the industrial distribution market sectors, led by
mining, oil and gas, as well as lower demand in the original
equipment industrial sectors including metals, gear drives and
wind. The decrease was partially offset by the benefit of the
industrial services acquisitions as well as pricing.
Process Industries generated EBIT of $201.9 million, or 16.3 percent of
sales, down 27 percent from the prior year's EBIT of $274.9 million, or 20.5 percent of
sales. The decrease reflects lower volume and plant
utilization partially offset by pricing and lower selling and
administrative expenses.
Process Industries' fourth-quarter sales were $324.7 million, down 4 percent from the
same period a year ago. The decrease reflects lower
industrial distribution market sector demand, primarily in the
U.S., as well as lower industrial original equipment demand across
most end-market sectors. The decrease was partially offset by
the benefit of the industrial services acquisitions. EBIT for
the quarter was $53.9 million,
or 16.6 percent of sales, compared with the prior year's
fourth quarter EBIT of $61.2 million, or 18.1 percent of
sales. The decrease in EBIT resulted from lower volume,
partially offset by lower manufacturing and material costs and
selling and administrative expenses. In addition, Process
Industries had approximately $3
million of expense from unusual items, primarily consisting
of severance costs related to the company's cost-reduction
initiative.
Aerospace Segment Results
For the full year 2013, Aerospace recorded sales of $329.5 million, down 5 percent from
$346.9 million in 2012. The
decrease reflects lower shipments to the defense and critical
motion market sectors.
Aerospace EBIT was $26.6 million, or 8.1 percent of sales,
down 27 percent from $36.3 million, or 10.5 percent of
sales, for the same period a year ago. The decrease in EBIT
was driven primarily by lower volume and higher manufacturing
costs, partially offset by pricing and lower selling and
administrative expenses.
Sales for the fourth quarter were $88.7 million, up 5 percent from the
same period a year ago. The increase reflects higher volume,
led by the defense sector. EBIT for the fourth quarter was
$5.2 million, or
5.9 percent of sales, compared with EBIT of $10.0 million, or 11.8 percent of
sales, in the same period a year ago. The decrease in EBIT
resulted from higher manufacturing costs as the segment reduced
inventory levels, and restructuring charges of $2 million, which were partially offset by
improved market demand.
Steel Segment Results
Sales for Steel, including inter-segment sales, were
$1.4 billion in 2013, down
20 percent from $1.7 billion last year. The results
reflect reduced shipments to the industrial and oil and gas market
sectors, partially offset by improved demand in the mobile
on-highway end-market sector. Raw-material surcharges decreased
approximately $117 million from 2012. Steel segment EBIT
for the year was $140.2 million,
or 10.2 percent of sales, down 44 percent compared to
$251.8 million, or
14.6 percent of sales, in the prior year. EBIT was
impacted by lower volume, mix, surcharges and LIFO income,
partially offset by lower material, manufacturing and selling and
administrative expenses.
For the quarter, Steel segment sales were $330.1 million, up 4 percent from the
same period last year driven by demand in the mobile on-highway and
oil and gas end-market sectors. Raw-material surcharges
increased approximately $7 million
from the fourth quarter in 2012.
EBIT for the fourth quarter of 2013 was $32.9 million, or 10 percent of sales,
compared with $25.2 million, or
8 percent of sales, for the same period a year ago. The
increase in EBIT was driven by higher volume and lower
manufacturing costs, net material costs and selling and
administrative expenses, partially offset by the impact of
LIFO.
Outlook
The company's outlook reflects its current business structure
with all four operating segments in place for the full 12 months of
2014. Timken expects 2014 sales to be up approximately 6
percent compared to 2013, driven by higher demand in industrial,
off-highway, energy, defense and rail end-market sectors.
Operating performance is expected to benefit from higher demand and
cost-reduction initiatives, with all four segments achieving
double-digit operating margins.
For the full year 2014, The Timken Company expects:
- Mobile Industries' sales down 3 to 8 percent, primarily
driven by the impact of planned program exits in the light-vehicle
sector that concluded by the end of 2013. Partially
offsetting this decline is anticipated improvement in off-highway
and rail demand;
- Process Industries' sales to be up 7 to 12 percent, due to
recovery across most industrial end-market sectors;
- Aerospace and Defense sales up 5 to 10 percent, due to
increased demand across most end-market sectors, led by defense;
and
- Steel sales up 12 to 17 percent, driven by improved demand
in the oil and gas and industrial end-market sectors.
Timken projects 2014 annual earnings per diluted share to range
from $3.15 to $3.45, which includes
$0.35 per diluted share of the
following unusual items: separation costs related to the proposed
spinoff of the steel business of $0.55; costs associated with the company's
cost-reduction initiative of $0.10;
and a gain on the sale of land in Brazil of $0.30.
The company expects to generate cash from operations of
approximately $560 million in 2014. Free cash flow is
projected to be $165 million after making capital expenditures
of $310 million and paying about
$85 million in dividends.
Conference Call Information
Timken will host a conference call today at 11:00 a.m.
Eastern Time to review its financial results. The company
will make presentation materials available online in advance of the
call for interested investors and securities analysts.
Conference
Call:
|
Thursday, Jan. 30,
2014
|
|
11:00 a.m. Eastern
Time
|
|
|
All
Callers:
|
Live Dial-In:
888-277-7114 or 913-312-0716
|
|
(Call 10 minutes
prior to be included.)
|
|
|
|
Conference ID: Timken
Earnings Call
|
|
|
|
Replay Dial-In
available through Feb. 13, 2014:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
4234817
|
|
|
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 $4.3 billion in 2013
and approximately 19,000 people operating from 28 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 fourth quarter and full year
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 spinoff; and the company's ability to successfully complete
the spinoff. 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
December 31,
|
|
Twelve Months
Ended
December
31,
|
|
2013
|
2012
|
|
2013
|
2012
|
Net sales
|
$
1,063.3
|
$
1,080.3
|
|
$
4,341.2
|
$
4,987.0
|
Cost of products
sold
|
799.6
|
801.8
|
|
3,249.2
|
3,620.7
|
Gross
Profit
|
$
263.7
|
$
278.5
|
|
$
1,092.0
|
$
1,366.3
|
Selling, general
& administrative expenses (SG&A)
|
154.4
|
163.5
|
|
626.6
|
643.9
|
Impairment and
restructuring
|
4.8
|
0.7
|
|
16.4
|
29.5
|
Separation
costs
|
13.0
|
—
|
|
13.0
|
—
|
Operating
Income
|
$
91.5
|
$
114.3
|
|
$
436.0
|
$
692.9
|
Other income
(expense), net
|
4.5
|
(3.6)
|
|
3.6
|
101.3
|
Earnings Before
Interest and Taxes (EBIT) (1)
|
$
96.0
|
$
110.7
|
|
$
439.6
|
$
794.2
|
Interest expense,
net
|
(6.5)
|
(6.2)
|
|
(22.5)
|
(28.2)
|
Income Before
Income Taxes
|
$
89.5
|
$
104.5
|
|
$
417.1
|
$
766.0
|
Provision for income
taxes
|
36.8
|
29.1
|
|
154.1
|
270.1
|
Net
Income
|
$
52.7
|
$
75.4
|
|
$
263.0
|
$
495.9
|
Less: Net Income
Attributable to Noncontrolling Interest
|
0.1
|
0.1
|
|
0.3
|
0.4
|
Net Income
Attributable to The Timken Company
|
$
52.6
|
$
75.3
|
|
$
262.7
|
$
495.5
|
|
|
|
|
|
|
Net Income per
Common Share Attributable to The Timken Company Common
Shareholders
|
Basic Earnings Per
Share
|
$
0.56
|
$
0.79
|
|
$
2.76
|
$
5.11
|
Diluted Earnings
Per Share
|
$
0.55
|
$
0.78
|
|
$
2.74
|
$
5.07
|
|
|
|
|
|
|
Average Shares
Outstanding
|
93,868,899
|
95,631,452
|
|
94,989,561
|
96,671,613
|
Average Shares
Outstanding - assuming dilution
|
94,636,017
|
96,553,289
|
|
95,823,728
|
97,602,481
|
|
|
|
|
|
|
(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
December 31,
|
Twelve Months
Ended
December 31,
|
|
|
2013
|
2012
|
2013
|
2012
|
|
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
|
Net sales to external
customers
|
$
336.8
|
$
361.0
|
$
1,474.3
|
$
1,675.0
|
|
Intersegment
sales
|
0.3
|
0.1
|
1.1
|
0.5
|
|
Total net
sales
|
$
337.1
|
$
361.1
|
$
1,475.4
|
$
1,675.5
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
32.0
|
$
34.7
|
$
164.7
|
$
208.1
|
|
EBIT Margin
(1)
|
9.5
%
|
9.6 %
|
11.2
%
|
12.4 %
|
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
Net sales to external
customers
|
$
323.9
|
$
337.1
|
$
1,231.7
|
$
1,337.6
|
|
Intersegment
sales
|
0.8
|
1.8
|
3.9
|
5.7
|
|
Total net
sales
|
$
324.7
|
$
338.9
|
$
1,235.6
|
$
1,343.3
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
53.9
|
$
61.2
|
$
201.9
|
$
274.9
|
|
EBIT Margin
(1)
|
16.6
%
|
18.1 %
|
16.3
%
|
20.5 %
|
|
|
|
|
|
|
|
Aerospace
|
|
|
|
|
|
Net sales to external
customers
|
$
88.7
|
$
84.4
|
$
329.5
|
$
346.9
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
5.2
|
$
10.0
|
$
26.6
|
$
36.3
|
|
EBIT Margin
(1)
|
5.9
%
|
11.8 %
|
8.1
%
|
10.5 %
|
|
|
|
|
|
|
|
Steel
|
|
|
|
|
|
Net sales to external
customers
|
$
313.9
|
$
297.8
|
$
1,305.7
|
$
1,627.5
|
|
Intersegment
sales
|
16.2
|
18.6
|
75.1
|
101.2
|
|
Total net
sales
|
$
330.1
|
$
316.4
|
$
1,380.8
|
$
1,728.7
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
32.9
|
$
25.2
|
$
140.2
|
$
251.8
|
|
EBIT Margin
(1)
|
10.0
%
|
8.0 %
|
10.2
%
|
14.6 %
|
|
|
|
|
|
|
|
Unallocated corporate
expense
|
$
(15.5)
|
$
(20.6)
|
$
(82.5)
|
$
(84.4)
|
|
Separation
costs
|
$
(13.0)
|
$
-
|
$
(13.0)
|
$
-
|
|
Receipt of CDSOA
distributions (2)
|
$
-
|
$
(0.6)
|
$
-
|
$
108.0
|
|
Intersegment
eliminations income (expense) (3)
|
$
0.5
|
$
0.8
|
$
1.7
|
$
(0.5)
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
Net sales to external
customers
|
$
1,063.3
|
$
1,080.3
|
$
4,341.2
|
$
4,987.0
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
96.0
|
$
110.7
|
$
439.6
|
$
794.2
|
|
EBIT Margin
(1)
|
9.0
%
|
10.2 %
|
10.1
%
|
15.9 %
|
|
|
|
|
|
|
|
(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 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
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2013
|
2012
|
|
2013
|
2012
|
Net Income
|
$
52.7
|
$
75.4
|
|
$
263.0
|
$
495.9
|
|
|
|
|
|
|
Provision for income
taxes
|
36.8
|
29.1
|
|
154.1
|
270.1
|
Interest
expense
|
6.9
|
7.1
|
|
24.4
|
31.1
|
Interest
income
|
(0.4)
|
(0.9)
|
|
(1.9)
|
(2.9)
|
Consolidated earnings
before interest and taxes (EBIT)
|
$
96.0
|
$
110.7
|
|
$
439.6
|
$
794.2
|
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: (a) tax expense on cash repatriation; (b) reversal of
income tax reserves; (c) Steel separation-related costs; (d)
severance due to cost-reduction initiatives; (e) gain on sale of
real estate in Brazil; (f) charges due to plant closures; and (g)
CDSOA expense (receipt) are representative of the Company's
performance and therefore useful to
investors.
|
|
Three Months
Ended
|
Twelve Months
Ended
|
(Dollars in
millions, except share data) (Unaudited)
|
December
31,
|
December
31,
|
|
2013
|
EPS
|
2012
|
EPS
|
2013
|
EPS
|
2012
|
EPS
|
Net Income
Attributable to The Timken Company
|
$
52.6
|
$
0.55
|
$
75.3
|
$
0.78
|
$
262.7
|
$
2.74
|
$
495.5
|
$
5.07
|
Adjustments:
|
|
|
|
|
|
|
|
|
Tax expense on
cash repatriation (1)
|
26.2
|
0.28
|
-
|
-
|
26.2
|
0.28
|
-
|
-
|
Reversal of
income tax reserves (2)
|
(12.3)
|
(0.13)
|
-
|
-
|
(12.3)
|
(0.13)
|
-
|
-
|
Steel
separation-related costs (3)
|
10.3
|
0.11
|
-
|
-
|
10.3
|
0.11
|
-
|
-
|
Severance due
to cost-reduction initiatives (4)
|
3.9
|
0.04
|
-
|
-
|
3.9
|
0.04
|
-
|
-
|
Gain on sale
of real estate in Brazil (5)
|
(5.4)
|
(0.06)
|
-
|
-
|
(5.4)
|
(0.06)
|
-
|
-
|
Charges due to
plant closures (6)
|
(3.3)
|
(0.03)
|
2.2
|
0.02
|
8.3
|
0.09
|
37.1
|
0.38
|
CDSOA expense
(receipts) (7)
|
1.5
|
0.02
|
0.4
|
-
|
1.8
|
0.02
|
(68.0)
|
(0.69)
|
Net Income
Attributable to The Timken Company, after
adjustments
|
$
73.5
|
$
0.78
|
$
77.9
|
$
0.80
|
$
295.5
|
$
3.09
|
$
464.6
|
$
4.76
|
|
|
|
|
|
|
|
|
|
(1)
Includes the impact from a one-time non-cash tax charge on the
repatriation of overseas cash related to a global cash planning
initiative.
|
|
|
|
|
|
|
|
|
|
(2)
Includes the impact of tax benefits associated with the reversal of
certain income tax reserves from prior
years.
|
|
|
|
|
|
|
|
|
|
(3)
Steel separation-related costs include severance costs and
professional costs associated with the Company's proposed spinoff
of the steel business, net of
tax.
|
|
|
|
|
|
|
|
|
|
(4)
Severance due to cost-reduction initiatives relate to reductions in
headcount in the bearings and power transmission business, net of
tax.
|
|
|
|
|
|
|
|
|
|
(5)
Gain on the sale of real estate relates to the sale of the former
manufacturing facility in Sao Paulo, Brazil.
|
|
|
|
|
|
|
|
|
|
(6)
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.
|
|
|
|
|
|
|
|
|
|
(7)
CDSOA receipts for the year ended December 31, 2012 were $108.0
million, net of tax expense of $40.0
million.
|
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
|
Twelve Months
Ended
|
(Dollars in
millions, except share data) (Unaudited)
|
December
31,
|
December
31,
|
|
2013
|
Percentage to
Net Sales
|
2012
|
Percentage to
Net Sales
|
2013
|
Percentage to
Net Sales
|
2012
|
Percentage to
Net Sales
|
Net Income
|
$
52.7
|
5.0
%
|
$
75.4
|
7.0 %
|
$
263.0
|
6.1
%
|
$
495.9
|
9.9 %
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
36.8
|
3.5
%
|
29.1
|
2.7 %
|
154.1
|
3.5
%
|
270.1
|
5.4 %
|
Interest
expense
|
6.9
|
0.6
%
|
7.1
|
0.7 %
|
24.4
|
0.6
%
|
31.1
|
0.6 %
|
Interest
income
|
(0.4)
|
—%
|
(0.9)
|
(0.1)%
|
(1.9)
|
—%
|
(2.9)
|
(0.1)%
|
Consolidated earnings
before interest and taxes (EBIT)
|
$
96.0
|
9.0
%
|
$
110.7
|
10.2 %
|
$
439.6
|
10.1
%
|
$
794.2
|
15.9 %
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Steel
separation-related costs (1)
|
13.0
|
1.2
%
|
—
|
—%
|
13.0
|
0.3
%
|
—
|
—%
|
Severance due
to cost-reduction initiatives (2)
|
5.9
|
0.6
%
|
—
|
—%
|
5.9
|
0.1
%
|
—
|
—%
|
Gain on sale
of real estate in Brazil (3)
|
(5.4)
|
(0.5)%
|
—
|
—%
|
(5.4)
|
(0.1)%
|
—
|
—%
|
Charges due to
plant closures (4)
|
(3.2)
|
(0.3)%
|
2.6
|
0.2 %
|
10.6
|
0.2
%
|
37.8
|
0.8 %
|
CDSOA expense
(receipts) (5)
|
2.3
|
0.2
%
|
0.6
|
0.1 %
|
2.8
|
0.1
%
|
(108.0)
|
(2.2)%
|
Consolidated earnings
before interest and taxes (EBIT), after
adjustments
|
$
108.6
|
10.2
%
|
$
113.9
|
10.5 %
|
$
466.5
|
10.7
%
|
$
724.0
|
14.5 %
|
|
|
|
|
|
|
|
|
|
(1)
Steel separation-related costs include severance costs and
professional costs associated with the Company's proposed spinoff
of the steel business.
|
|
|
|
|
|
|
|
|
|
(2)
Severance due to cost-reduction initiatives relate to reductions in
headcount in the bearing and power transmission
business.
|
|
|
|
|
|
|
|
|
|
(3)
Gain on the sale of real estate relates to the sale of the former
manufacturing facility in Sao Paulo, Brazil.
|
|
|
|
|
|
|
|
|
|
(4)
Charges due to plant closures relate to the Company's former
manufacturing facilities in Sao Paulo, Brazil and St. Thomas,
Ontario, Canada.
|
|
|
|
|
|
|
|
|
|
(5)
CDSOA receipts for the year ended December 31, 2012 were $108.0
million.
|
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 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 Company's financial position,
due to the amount of cash and cash
equivalents.
|
(Dollars in
millions) (Unaudited)
|
|
|
|
|
|
December 31,
2013
|
December 31,
2012
|
Short-term
debt
|
|
|
$
269.3
|
$
23.9
|
Long-term
debt
|
|
|
206.6
|
455.1
|
Total Debt
|
|
|
$
475.9
|
$
479.0
|
Less: Cash and cash
equivalents
|
|
|
(384.6)
|
(586.4)
|
Net Debt (Cash)
|
|
|
$
91.3
|
$
(107.4)
|
|
|
|
|
|
Total
equity
|
|
|
$
2,648.6
|
$
2,246.6
|
|
|
|
|
|
Ratio of Total Debt
to Capital
|
|
|
15.2
%
|
17.6 %
|
Ratio of Net Debt
(Cash) to Capital
|
|
|
3.3
%
|
(5.0)%
|
|
|
|
|
|
|
|
|
|
|
Reconciliations of
Free Cash Flow and Free Cash Flow, After Adjustments, 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
|
Twelve Months
Ended
|
|
December
31,
|
December
31,
|
|
2013
|
2012
|
2013
|
2012
|
Net cash provided by
operating activities
|
$
180.6
|
$
259.6
|
$
432.4
|
$
626.1
|
Less: capital
expenditures
|
(115.4)
|
(109.9)
|
(325.8)
|
(297.2)
|
Less: cash dividends
paid to shareholders
|
(21.5)
|
(22.2)
|
(87.5)
|
(89.0)
|
Free cash flow
|
43.7
|
127.5
|
19.1
|
239.9
|
Plus: discretionary
pension and postretirement benefit contributions, net of the tax
benefit (1)
|
—
|
—
|
66.3
|
245.0
|
Plus: CDSOA
expense (receipts), net of tax (2)
|
1.5
|
0.4
|
1.8
|
(68.0)
|
Free cash flow adjusted for
discretionary pension contributions and CDSOA
|
$
45.2
|
$
127.9
|
$
87.2
|
$
416.9
|
|
|
|
|
|
(1) There were no
discretionary pension and postretirement benefit contributions
during the fourth quarter of 2013. The discretionary pension
and postretirement benefit contributions for the year ended
December 31, 2013 were $105.0 million, net of a tax benefit of
$38.7 million. There were no discretionary pension and
postretirement benefit contributions during the fourth quarter of
2012. The discretionary pension and postretirement benefit
contributions for the year ended December 31, 2012 were $364.1
million, net of a tax benefit of $119.1
million.
|
|
|
|
|
|
(2) CDSOA receipts
for the year ended December 31, 2012 were $108.0 million, net of
tax expense of $40.0 million.
|
CONDENSED
CONSOLIDATED BALANCE SHEET
|
(Dollars in
millions) (Unaudited)
|
|
December 31,
2013
|
December 31,
2012
|
ASSETS
|
|
|
Cash and cash
equivalents
|
$
384.6
|
$
586.4
|
Accounts
receivable
|
566.7
|
546.7
|
Inventories,
net
|
809.9
|
862.1
|
Other current
assets
|
188.2
|
178.9
|
Total Current
Assets
|
1,949.4
|
2,174.1
|
Property, Plant and
Equipment, net
|
1,558.1
|
1,405.3
|
Goodwill
|
358.7
|
338.9
|
Non-current pension
assets
|
342.6
|
0.3
|
Other
assets
|
280.5
|
326.1
|
Total
Assets
|
$
4,489.3
|
$
4,244.7
|
|
|
|
LIABILITIES
|
|
|
Accounts
payable
|
$
222.5
|
$
216.2
|
Short-term
debt
|
269.3
|
23.9
|
Income
taxes
|
114.7
|
36.4
|
Accrued
expenses
|
373.6
|
391.4
|
Total Current
Liabilities
|
980.1
|
667.9
|
|
|
|
Long-term
debt
|
206.6
|
455.1
|
Accrued pension
cost
|
179.0
|
391.4
|
Accrued
postretirement benefits cost
|
233.9
|
371.8
|
Other non-current
liabilities
|
241.1
|
111.9
|
Total
Liabilities
|
1,840.7
|
1,998.1
|
|
|
|
EQUITY
|
|
|
The Timken Company
shareholders' equity
|
2,636.6
|
2,232.2
|
Noncontrolling
Interest
|
12.0
|
14.4
|
Total
Equity
|
2,648.6
|
2,246.6
|
Total Liabilities and
Equity
|
$
4,489.3
|
$
4,244.7
|
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
|
(Dollars in
millions) (Unaudited)
|
|
Three Months
Ended
December 31,
|
Twelve Months
Ended
December 31,
|
|
2013
|
2012
|
2013
|
2012
|
Cash Provided
(Used)
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net income
attributable to The Timken Company
|
$
52.6
|
$
75.3
|
$
262.7
|
$
495.5
|
Net income
attributable to noncontrolling interest
|
0.1
|
0.1
|
0.3
|
0.4
|
Adjustments to
reconcile net income to net cash provided (used)
by operating activities:
|
|
|
|
|
Depreciation and
amortization
|
49.9
|
49.2
|
194.6
|
198.0
|
Impairment
Charges
|
0.7
|
0.2
|
0.7
|
6.6
|
Pension and other
postretirement expense
|
20.5
|
21.4
|
85.3
|
91.5
|
Pension and other
postretirement benefit contributions and
payments
|
(17.6)
|
(12.9)
|
(158.0)
|
(412.7)
|
Changes in operating assets
and liabilities:
|
|
|
|
|
Accounts
receivable
|
27.0
|
89.2
|
(13.3)
|
103.0
|
Inventories
|
50.6
|
67.3
|
63.4
|
102.5
|
Accounts payable
|
(27.6)
|
(56.2)
|
2.7
|
(73.2)
|
Accrued expenses
|
21.1
|
20.7
|
(38.4)
|
(53.8)
|
Income taxes
|
(2.4)
|
0.9
|
34.8
|
144.8
|
Other, net
|
5.7
|
4.4
|
(2.4)
|
23.5
|
Net Cash Provided By
Operating Activities
|
$
180.6
|
$
259.6
|
$
432.4
|
$
626.1
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Capital
expenditures
|
$
(115.4)
|
$
(109.9)
|
$
(325.8)
|
$
(297.2)
|
Acquisitions
|
—
|
(20.5)
|
(64.5)
|
(20.7)
|
Investments, net
|
(0.1)
|
(2.9)
|
5.5
|
14.3
|
Divestitures
|
—
|
1.2
|
—
|
1.2
|
Other
|
5.8
|
(0.6)
|
8.5
|
4.7
|
Net Cash Used by
Investing Activities
|
$
(109.7)
|
$
(132.7)
|
$
(376.3)
|
$
(297.7)
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Cash dividends paid to
shareholders
|
$
(21.5)
|
$
(22.2)
|
$
(87.5)
|
$
(89.0)
|
Purchase of treasury shares,
net
|
(81.8)
|
—
|
(189.2)
|
(112.3)
|
Net proceeds from common
share activity
|
0.6
|
1.4
|
22.0
|
21.6
|
Net payments from credit
facilities
|
(1.0)
|
(8.0)
|
(3.2)
|
(34.5)
|
Other
|
(1.8)
|
—
|
6.6
|
3.6
|
Net Cash Used by
Financing Activities
|
$
(105.5)
|
$
(28.8)
|
$
(251.3)
|
$
(210.6)
|
Effect of exchange
rate changes on cash
|
1.1
|
2.8
|
(6.6)
|
3.8
|
(Decrease) Increase
In Cash and Cash Equivalents
|
$
(33.5)
|
$
100.9
|
$
(201.8)
|
$
121.6
|
Cash and cash
equivalents at beginning of period
|
418.1
|
485.5
|
586.4
|
464.8
|
Cash and Cash
Equivalents at End of Period
|
$
384.6
|
$
586.4
|
$
384.6
|
$
586.4
|
SOURCE The Timken Company