CANTON, Ohio, April 24, 2014 /PRNewswire/ -- The Timken
Company (NYSE: TKR; www.timken.com) today reported first-quarter
2014 sales of $1.1 billion, up 1
percent from the prior-year quarter. Stronger demand in the
company's Steel and Process Industries segments, higher raw
material surcharges and the benefit of acquisitions drove the
increase, which was offset largely by lower shipments in the Mobile
Industries segment and the impact of currency.
For the first quarter, the company generated net income of
$83.5 million, or $0.90 per diluted share, compared with
$75.1 million, or $0.77 per diluted share, during the same period a
year ago.
Adjusted net income was $82.2
million, or $0.88 per diluted
share, which compares with adjusted net income of $77.2 million, or $0.80 per diluted share, a year ago (reference
Table 1). Strong manufacturing performance and higher
raw material surcharges drove the increase, which more than offset
the impact of higher material costs and higher selling and
administrative expenses.
Table 1: Adjusted Net Income and Diluted Earnings Per Share
(EPS)
|
2014 –
1Q
|
2013 –
1Q
|
|
($ in
Mils.)
|
EPS
|
($ in
Mils.)
|
EPS
|
Net Income
attributable to The Timken Company
|
$ 83.5
|
$ 0.90
|
$ 75.1
|
$ 0.77
|
Adjustments:
|
|
|
|
|
Gain on sale of land
in Brazil
|
(22.6)
|
|
- -
|
|
Spinoff-related
costs
|
11.5
|
|
- -
|
|
Charges for
cost-reduction initiatives and plant rationalizations
|
5.0
|
|
4.7
|
|
Provision for income
taxes
|
4.8
|
|
(2.6)
|
|
Total
adjustments
|
(1.3)
|
(0.02)
|
2.1
|
0.03
|
Net Income, after
adjustments
|
$ 82.2
|
$ 0.88
|
$ 77.2
|
$ 0.80
|
"Our results reflect a solid start to the year," said
James W. Griffith, Timken president and chief executive
officer. "We are encouraged by the rebound in our steel
bookings, which historically have been a positive early indicator
for the rest of the business.
"With the benefit of recent investments, manufacturing execution
and our more robust portfolio of products and services, we are
well-positioned to capitalize on the opportunities developing in
our target markets," Griffith added. "We remain on pace to
achieve our performance objectives for 2014."
As of March 31, 2014, total debt
was $479.3 million, or 15.5 percent
of capital. Including $263.4
million of cash on hand, net debt was $215.9 million, or 7.6 percent of capital,
compared with net debt of $76.2
million, or 2.8 percent of capital as of December 31, 2013. Share repurchases in the
quarter largely drove the increase in net debt.
Among recent developments, The Timken Company:
- Returned a total of $141 million
in capital to shareholders through dividends and the repurchase of
approximately 2 million common shares. In February, the company
increased its dividend by 9 percent to 25
cents per share;
- Was awarded $55 million in new
business from the U.S. Department of Defense for additional main
reduction gear propulsion ship sets for the Arleigh Burke
DDG 51 class ships;
- Filed TimkenSteel Corporation's initial Form 10 Registration
Statement for the planned separation from Timken in a tax-free
spinoff, which is expected to be completed June 30, 2014;
- Announced two strategic joint ventures to pursue growth
opportunities in emerging markets, including an agreement with
United Wagon Company (UWC) to manufacture rail bearings and an
agreement with European Bearing Corporation (EPK) to design and
manufacture bearings aimed at serving industrial markets; and
- Earned recognition for the fourth time as one of the World's
Most Ethical Companies by Ethisphere, an international organization
focused on the advancement of best practices in corporate
governance, risk, sustainability, compliance and ethics.
Mobile Industries Segment Results
In the first
quarter, Mobile Industries' sales of $344.7
million decreased 13 percent compared to last year's
first-quarter sales of $397.1
million. The decrease was driven primarily by $45 million in lower volume due to program exits
in the light vehicle sector, which concluded at the end of 2013. In
addition, improved demand from the rail and automotive aftermarket
sectors and acquisitions was more than offset by lower demand in
the mining and heavy truck market sectors and the impact of
currency.
EBIT for the segment was $56.1
million for the first quarter, or 16.3 percent of sales,
compared to $51.2 million, or
12.9 percent of sales, for the same period a year
ago.
When adjusted to eliminate the gain on the sale of land in
Brazil and charges related to
cost-reduction initiatives and plant rationalizations, EBIT was
$36.7 million, or 10.6 percent of
sales for the first quarter, compared to adjusted EBIT of
$55.8 million, or 14.1 percent
of sales, for the same period a year ago. The decrease was driven
primarily by lower light vehicle volume.
Process Industries Segment Results
Process
Industries' first-quarter sales were $310.2
million, up 9 percent from $285.2
million for the same period a year ago. The increase
reflects higher industrial original equipment demand, primarily in
the wind energy market sector, and the benefit of acquisitions.
Process Industries' first-quarter EBIT was $51.8 million, or 16.7 percent of sales, compared
to $42.6 million, or 14.9 percent of
sales, for the same period a year ago.
When adjusted to eliminate charges related to cost-reduction
initiatives and plant rationalizations, EBIT was $52.9 million, or 17.1 percent of sales,
compared to adjusted EBIT of $42.7 million, or 15.0 percent of sales, for
the same period a year ago. The increase reflects improved demand
and lower manufacturing and material costs, partially offset by
higher selling and administrative expenses and the impact of
currency.
Aerospace Segment Results
Aerospace posted
first-quarter sales of $82.7 million,
essentially unchanged from $82.5
million for the same period last year. Improved demand from
the defense rotorcraft market sector largely offset a decline from
the general aviation and commercial market sectors compared to a
year ago.
First-quarter EBIT was $6.5
million, or 7.9 percent of sales, compared to $8.6 million, or 10.4 percent of sales, for
the same period a year ago. When adjusted to eliminate charges
related to cost-reduction initiatives and plant rationalizations in
the current quarter, EBIT was $7.0
million, or 8.5 percent of sales. The decline in EBIT
reflects unfavorable mix, partially offset by lower manufacturing
costs.
Steel Segment Results
Sales for Steel,
including inter-segment sales, were $390.1
million in the first quarter, 13 percent higher than the
$346.1 million posted in the first
quarter last year. The results reflect improved shipments to the
oil and gas and industrial market sectors along with increased
raw-material surcharges of approximately $15
million.
First-quarter EBIT was $54.4
million, or 13.9 percent of sales, up from $35.8 million, or 10.3 percent of sales, for
the same period a year ago. The increase in EBIT was driven
by higher volume, favorable mix, surcharges and improved
manufacturing performance, partially offset by higher material
costs and 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 now expects 2014
sales to be up approximately 7 percent compared to 2013, driven by
higher demand in industrial, off-highway, energy, defense and rail
end-market sectors.
For the full year 2014, The Timken Company expects:
- Mobile Industries' sales to be down 3 to 8 percent,
primarily driven by $110 million in reduced revenue resulting
from planned program exits in the light vehicle sector, which
concluded at the end of 2013. Offsetting this decline is
anticipated improvement in rail and off-highway demand;
- Process Industries' sales to be up 7 to 12 percent, driven by
economic recovery across most industrial end markets, the impact of
acquisitions and improved penetration in targeted original
equipment sectors;
- Aerospace sales to be up 5 to 10 percent, due to increased
demand across most end markets, led by defense; and
- Steel sales up 15 to 20 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
$0.45 per diluted share of net
expense related to costs of approximately $0.50 per share for the proposed spinoff of
TimkenSteel; approximately $0.15 per
share of costs associated with the company's cost-reduction
initiatives and plant rationalizations; and a $0.20 per share gain on the sale of land in
Brazil. Excluding these items, adjusted earnings per diluted
share would range from $3.60 to
$3.90.
The company expects to generate cash from operations of
approximately $500 million in 2014. Free cash flow is
projected to be $110 million after making capital expenditures
of $300 million and paying
$90 million in dividends.
Conference Call Information
Timken will host a
conference call today at 1:00 p.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, April 24,
2014
|
|
1:00 p.m. Eastern
Time
|
|
|
All
Callers:
|
Live Dial-In:
888-256-1007 or 913-312-1517
|
|
(Call 10 minutes
prior to be included.)
|
|
|
|
Conference ID: Timken
Earnings Call
|
|
|
|
Replay Dial-In
available through May 8, 2014:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
1629379
|
|
|
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 first quarter of 2014; 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; the taxable
nature of the spinoff; and the company's ability to successfully
complete the spinoff within the expected timeframe and at the
expected cost. 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, 2013, 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 Burnham
Global Media Relations
4500 Mount Pleasant Street, NW
North Canton, OH 44720 U.S.A.
Telephone: (330)471-3514
pat.carlson@timken.com
Investor Contact:
Steve Tschiegg
Director – Capital Markets & Investor Relations
4500 Mount Pleasant Street, NW
North Canton, OH 44720 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
March 31,
|
|
2014
|
2013
|
Net sales
|
$
1,104.5
|
$
1,089.9
|
Cost of products
sold
|
813.5
|
815.4
|
Gross
Profit
|
$
291.0
|
$
274.5
|
Selling, general
& administrative expenses (SG&A)
|
162.0
|
153.6
|
Impairment and
restructuring
|
3.9
|
1.2
|
Separation
costs
|
11.5
|
—
|
Operating
Income
|
$
113.6
|
$
119.7
|
Other income,
net
|
22.0
|
—
|
Earnings Before
Interest and Taxes (EBIT) (1)
|
$
135.6
|
$
119.7
|
Interest expense,
net
|
(4.5)
|
(5.9)
|
Income Before
Income Taxes
|
$
131.1
|
$
113.8
|
Provision for income
taxes
|
47.3
|
38.8
|
Net
Income
|
$
83.8
|
$
75.0
|
Less: Net Income
(Loss) Attributable to Noncontrolling Interest
|
0.3
|
(0.1)
|
Net Income
Attributable to The Timken Company
|
$
83.5
|
$
75.1
|
|
|
|
Net Income per
Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
Basic Earnings Per
Share
|
$
0.90
|
$
0.78
|
Diluted Earnings
Per Share
|
$
0.90
|
$
0.77
|
|
|
|
Average Shares
Outstanding
|
92,172,595
|
95,848,450
|
Average Shares
Outstanding - assuming dilution
|
93,088,111
|
96,823,483
|
|
(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
March 31,
|
|
2014
|
2013
|
|
|
|
Mobile
Industries
|
|
|
Net sales to external
customers
|
$
344.5
|
$
397.0
|
Intersegment
sales
|
0.2
|
0.1
|
Total net
sales
|
$
344.7
|
$
397.1
|
Earnings before
interest and taxes (EBIT) (1)
|
$
56.1
|
$
51.2
|
EBIT Margin
(1)
|
16.3
%
|
12.9 %
|
|
|
|
Process
Industries
|
|
|
Net sales to external
customers
|
$
309.8
|
$
283.9
|
Intersegment
sales
|
0.4
|
1.3
|
Total net
sales
|
$
310.2
|
$
285.2
|
Earnings before
interest and taxes (EBIT) (1)
|
$
51.8
|
$
42.6
|
EBIT Margin
(1)
|
16.7
%
|
14.9 %
|
|
|
|
Aerospace
|
|
|
Net sales to external
customers
|
$
82.7
|
$
82.5
|
Earnings before
interest and taxes (EBIT) (1)
|
$
6.5
|
$
8.6
|
EBIT Margin
(1)
|
7.9
%
|
10.4 %
|
|
|
|
Steel
|
|
|
Net sales to external
customers
|
$
367.5
|
$
326.5
|
Intersegment
sales
|
22.6
|
19.6
|
Total net
sales
|
$
390.1
|
$
346.1
|
Earnings before
interest and taxes (EBIT) (1)
|
$
54.4
|
$
35.8
|
EBIT Margin
(1)
|
13.9
%
|
10.3 %
|
Unallocated corporate
expense
|
$
(21.0)
|
$
(19.9)
|
Separation
costs
|
$
(11.5)
|
$
-
|
Intersegment
eliminations (expense) income(2)
|
$
(0.7)
|
$
1.4
|
|
|
|
Consolidated
|
|
|
Net sales to external
customers
|
$
1,104.5
|
$
1,089.9
|
Earnings before
interest and taxes (EBIT) (1)
|
$
135.6
|
$
119.7
|
EBIT Margin
(1)
|
12.3
%
|
11.0 %
|
|
|
|
(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) Intersegment
eliminations represent profit or loss between the Steel segment and
the Mobile Industries, Process Industries and Aerospace
segments.
|
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEET
|
|
(Dollars in
millions) (Unaudited)
|
|
|
|
March 31,
2014
|
December 31,
2013
|
ASSETS
|
|
|
Cash and cash
equivalents
|
$
248.3
|
$
384.6
|
Restricted
cash
|
15.1
|
15.1
|
Accounts
receivable
|
618.2
|
566.7
|
Inventories,
net
|
829.7
|
809.9
|
Other current
assets
|
158.3
|
161.2
|
Total Current
Assets
|
1,869.6
|
1,937.5
|
Property, Plant and
Equipment, net
|
1,559.9
|
1,558.1
|
Goodwill
|
358.4
|
358.7
|
Non-current pension
assets
|
352.0
|
342.6
|
Other
assets
|
278.1
|
281.0
|
Total
Assets
|
$
4,418.0
|
$
4,477.9
|
|
|
|
LIABILITIES
|
|
|
Accounts
payable
|
$
266.4
|
$
222.5
|
Short-term
debt
|
272.9
|
269.3
|
Income
taxes
|
131.2
|
114.7
|
Accrued
expenses
|
311.7
|
373.6
|
Total Current
Liabilities
|
982.2
|
980.1
|
|
|
|
Long-term
debt
|
206.4
|
206.6
|
Accrued pension
cost
|
167.9
|
179.0
|
Accrued
postretirement benefits cost
|
226.9
|
233.9
|
Other non-current
liabilities
|
220.2
|
229.7
|
Total
Liabilities
|
1,803.6
|
1,829.3
|
|
|
|
EQUITY
|
|
|
The Timken Company
shareholders' equity
|
2,601.6
|
2,636.6
|
Noncontrolling
Interest
|
12.8
|
12.0
|
Total
Equity
|
2,614.4
|
2,648.6
|
Total Liabilities and
Equity
|
$
4,418.0
|
$
4,477.9
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
|
(Dollars in
millions) (Unaudited)
|
|
|
|
Three Months
Ended
March 31,
|
|
2014
|
2013
|
Cash Provided
(Used)
|
|
|
OPERATING
ACTIVITIES
|
|
|
Net income
attributable to The Timken Company
|
$
83.5
|
$
75.1
|
Net income (loss)
attributable to noncontrolling interest
|
0.3
|
(0.1)
|
Adjustments to
reconcile net income to net cash provided (used) by operating
activities:
|
|
|
Depreciation and
amortization
|
49.1
|
48.4
|
(Gain) loss on sale of
assets
|
(23.2)
|
0.6
|
Pension and other
postretirement expense
|
15.6
|
22.5
|
Pension and other
postretirement benefit contributions and
payments
|
(22.9)
|
(117.1)
|
Changes in operating assets
and liabilities:
|
|
|
Accounts
receivable
|
(51.9)
|
(61.8)
|
Inventories
|
(20.8)
|
27.3
|
Accounts payable
|
45.9
|
12.4
|
Accrued expenses
|
(52.6)
|
(74.9)
|
Income taxes
|
11.2
|
31.2
|
Other, net
|
6.0
|
(1.4)
|
Net Cash Provided
(Used) By Operating Activities
|
$
40.2
|
$
(37.8)
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
Capital
expenditures
|
$
(53.8)
|
$
(63.4)
|
Acquisitions
|
—
|
(14.4)
|
Investments, net
|
2.7
|
8.0
|
Other
|
6.1
|
0.7
|
Net Cash Used by
Investing Activities
|
$
(45.0)
|
$
(69.1)
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
Cash dividends paid to
shareholders
|
$
(23.1)
|
$
(22.1)
|
Purchase of treasury
shares
|
(117.7)
|
—
|
Net proceeds from common
share activity
|
6.0
|
11.0
|
Net proceeds (payments) from
credit facilities
|
3.9
|
(7.0)
|
Other
|
—
|
—
|
Net Cash Used by
Financing Activities
|
$
(130.9)
|
$
(18.1)
|
Effect of exchange
rate changes on cash
|
(0.6)
|
(3.5)
|
Decrease In Cash and
Cash Equivalents
|
$
(136.3)
|
$
(128.5)
|
Cash and cash
equivalents at beginning of period
|
384.6
|
586.4
|
Cash and Cash
Equivalents at End of Period
|
$
248.3
|
$
457.9
|
|
|
|
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
March 31,
|
|
2014
|
2013
|
Net Income
|
$
83.8
|
$
75.0
|
|
|
|
Provision for income
taxes
|
47.3
|
38.8
|
Interest
expense
|
5.5
|
6.4
|
Interest
income
|
(1.0)
|
(0.5)
|
Consolidated earnings
before interest and taxes (EBIT)
|
$
135.6
|
$
119.7
|
|
|
|
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: (a) steel separation-related costs; (b) gain on the sale of
real estate in Brazil; and (c) cost-reduction initiatives and plant
rationalization costs are representative of the Company's
performance and therefore useful to
investors.
|
|
|
Three Months
Ended
|
(Dollars in
millions, except share data) (Unaudited)
|
March
31,
|
|
2014
|
EPS
|
2013
|
EPS
|
Net Income
Attributable to The Timken Company
|
$
83.5
|
$
0.90
|
$
75.1
|
$
0.77
|
Adjustments:
|
|
|
|
|
Steel
separation-related costs (1)
|
11.5
|
|
-
|
|
Gain on sale
of real estate in Brazil (2)
|
(22.6)
|
|
-
|
|
Cost-reduction
initiatives and plant rationalization costs
(3)
|
5.0
|
|
4.7
|
|
Provision for
income taxes (4)
|
4.8
|
|
(2.6)
|
|
Total Adjustments:
|
(1.3)
|
(0.02)
|
2.1
|
0.03
|
Net Income
Attributable to The Timken Company, after adjustments
|
$
82.2
|
$
0.88
|
$
77.2
|
$
0.80
|
|
|
|
|
|
|
|
|
|
|
(1)
Steel separation-related costs include severance costs and
professional costs associated with the Company's proposed spinoff
of the steel business, net of
tax.
|
(2)
Gain on the sale of real estate relates to the sale of the former
manufacturing facility in Sao Paulo, Brazil.
|
(3)
Cost-reduction initiatives and plant rationalization costs relate
to plant closures of the Company's manufacturing facilities in Sao
Paulo, Brazil and St. Thomas, Ontario, Canada, the rationalization
of certain plants, and severance related to cost reduction
initiatives.
|
(4)
Provision for income taxes includes the tax impact on pre-tax
special items, the impact of discrete tax items recorded during the
respective periods, as well as adjustments to reflect the use of
one overall effective tax rate on Adjusted pre-tax income in
interim periods.
|
|
|
|
|
|
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
|
(Dollars in
millions, except share data) (Unaudited)
|
March
31,
|
|
2014
|
Percentage to
Net Sales
|
2013
|
Percentage to
Net Sales
|
Net Income
|
$
83.8
|
7.6
%
|
$
75.0
|
6.9 %
|
|
|
|
|
|
Provision for income
taxes
|
47.3
|
4.3
%
|
38.8
|
3.5 %
|
Interest
expense
|
5.5
|
0.5
%
|
6.4
|
0.6 %
|
Interest
income
|
(1.0)
|
(0.1)%
|
(0.5)
|
—%
|
Consolidated earnings
before interest and taxes (EBIT)
|
$
135.6
|
12.3
%
|
$
119.7
|
11.0 %
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Steel
separation-related costs (1)
|
11.5
|
1.0
%
|
—
|
—%
|
Gain on sale
of real estate in Brazil (2)
|
(22.6)
|
(2.0)%
|
—
|
—%
|
Cost-reduction
initiatives and plant rationalization costs
(3)
|
5.0
|
0.5
%
|
4.7
|
0.4 %
|
Total Adjustments
|
(6.1)
|
(0.6)%
|
4.7
|
0.4 %
|
Consolidated earnings
before interest and taxes (EBIT), after adjustments
|
$
129.5
|
11.7
%
|
$
124.4
|
11.4 %
|
|
|
|
|
|
(1)
Steel separation-related costs include severance costs and
professional costs associated with the Company's proposed spinoff
of the steel business.
|
(2)
Gain on the sale of real estate relates to the sale of the former
manufacturing facility in Sao Paulo, Brazil.
|
(3)
Cost-reduction initiatives and plant rationalization costs relate
to plant closures of the Company's manufacturing facilities in Sao
Paulo, Brazil and St. Thomas, Ontario, Canada, the rationalization
of certain plants, and severance related to cost reduction
initiatives.
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
EBIT Margin, After Adjustments, to EBIT as a Percentage of Sales
and EBIT, After Adjustments, to EBIT:
|
|
The following
reconciliation is provided as additional relevant information about
the Company's Mobile Industries, Process Industries, and Aerospace
segment performance. Management believes that segment EBIT
and EBIT margin, after adjustments, are representative of the
segment's core operations and therefore useful to
investors.
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
Industries
|
(Dollars in
millions) (Unaudited)
|
Three Months
Ended
March 31, 2014
|
Percentage
to Net Sales
|
Three Months
Ended
March 31, 2013
|
Percentage
to Net Sales
|
Earnings before
interest and taxes (EBIT)
|
$
56.1
|
16.3%
|
$
51.2
|
12.9%
|
|
|
|
|
|
Gain on sale of real
estate in Brazil (1)
|
(22.6)
|
(6.6)%
|
-
|
—%
|
Cost-reduction
initiatives and plant rationalization
costs(2)
|
3.2
|
0.9%
|
4.6
|
1.2%
|
Earnings before
interest and taxes (EBIT), after adjustments
|
$
36.7
|
10.6%
|
$
55.8
|
14.1%
|
|
|
|
|
|
|
|
|
|
|
|
Process
Industries
|
(Dollars in
millions) (Unaudited)
|
Three Months
Ended
March 31, 2014
|
Percentage
to Net Sales
|
Three Months
Ended
March 31, 2013
|
Percentage
to Net Sales
|
Earnings before
interest and taxes (EBIT)
|
$
51.8
|
16.7%
|
$
42.6
|
14.9%
|
|
|
|
|
|
Cost-reduction
initiatives and plant rationalization
costs(2)
|
1.1
|
0.4%
|
0.1
|
0.1 %
|
Earnings before
interest and taxes (EBIT), after adjustments
|
$
52.9
|
17.1%
|
$
42.7
|
15.0%
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace
|
(Dollars in
millions) (Unaudited)
|
Three Months
Ended
March 31, 2014
|
Percentage
to Net Sales
|
Three Months
Ended
March 31, 2013
|
Percentage
to Net Sales
|
Earnings before
interest and taxes (EBIT)
|
$
6.5
|
7.9%
|
$
8.6
|
10.4%
|
|
|
|
|
|
Cost-reduction
initiatives and plant rationalization
costs(2)
|
0.5
|
0.6%
|
-
|
—%
|
Earnings before
interest and taxes (EBIT), after adjustments
|
$
7.0
|
8.5%
|
$
8.6
|
10.4%
|
|
|
|
|
|
(1)
Gain on the sale of real estate relates to the sale of the former
manufacturing facility in Sao Paulo, Brazil.
|
(2)
Cost-reduction initiatives and plant rationalization costs relate
to plant closures of the Company's manufacturing facilities in Sao
Paulo, Brazil and St. Thomas, Ontario, Canada, the rationalization
of certain plants, and severance related to cost reduction
initiatives.
|
|
|
|
|
|
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 to capital,
is defined as total debt less cash and cash equivalents plus total
shareholders' equity. Management believes Net Debt is an
important measure of the Company's financial position, due to the
amount of cash and cash equivalents.
|
|
(Dollars in
millions) (Unaudited)
|
|
|
|
|
March 31,
2014
|
December 31,
2013
|
Short-term
debt
|
|
$
272.9
|
$
269.3
|
Long-term
debt
|
|
206.4
|
206.6
|
Total Debt
|
|
$
479.3
|
$
475.9
|
Less: Cash, cash
equivalents and restricted cash
|
|
(263.4)
|
(399.7)
|
Net Debt
|
|
$
215.9
|
$
76.2
|
|
|
|
|
Total
equity
|
|
$
2,614.4
|
$
2,648.6
|
|
|
|
|
Ratio of Total Debt
to Capital
|
|
15.5
%
|
15.2 %
|
Ratio of Net Debt to
Capital
|
|
7.6
%
|
2.8 %
|
|
|
|
|
|
|
|
|
Reconciliations of
Free Cash Flow and Free Cash Flow, After Adjustments, to GAAP Net
Cash Provided (used) by Operating Activities:
|
|
Management believes
that free cash flow and free cash flow less discretionary pension
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
|
|
March
31,
|
|
2014
|
2013
|
Net cash provided
(used) by operating activities
|
$
40.2
|
$
(37.8)
|
Less: capital
expenditures
|
(53.8)
|
(63.4)
|
Less: cash dividends
paid to shareholders
|
(23.1)
|
(22.1)
|
Free cash flow
|
(36.7)
|
(123.3)
|
Plus: discretionary
pension contributions, net of the tax benefit
(1)
|
—
|
66.3
|
Free cash flow adjusted for
discretionary pension contributions
|
$
(36.7)
|
$
(57.0)
|
|
|
|
|
(1) The discretionary
pension contributions for the first quarter of 2013 were $105.0
million, net of a tax benefit of $38.7
million.
|
|
|
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SOURCE The Timken Company