SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported): July 31,
2014
THE TIMKEN COMPANY
(Exact Name of Registrant as Specified in its Charter)
Ohio
(State or Other Jurisdiction of Incorporation)
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| 1-1169 |
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34-0577130 |
| (Commission File Number) |
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(I.R.S. Employer Identification No.) |
4500 Mt. Pleasant St., N.W., North
Canton, Ohio 44720
(Address
of Principal Executive Offices) (Zip Code)
(330) 438-3000
(Registrant’s Telephone Number,
Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation
of the registrant under any of the following provisions.
[ ] Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR
240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR
240.13e-4(c))
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| Item |
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2.02 |
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Results of Operations and Financial Condition. |
The Timken Company issued a press release on July 31, 2014 announcing
results for the second quarter of 2014. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by this reference.
On July 31, 2014, The Timken Company hosted a conference call and posted conference call materials to its
website, www.timken.com. A copy of the conference call materials is attached as Exhibit 99.2 to this Current Report on Form 8-K and incorporated herein by this reference.
This information shall not be deemed to be “filed” for the purposes of Section 18 of the
Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933, or the Exchange Act, except as shall be
expressly set forth by specific reference in such a filing.
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| Item |
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9.01 |
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Financial Statements and Exhibits |
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99.1 |
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Press Release of The Timken Company dated July 31, 2014. |
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99.2 |
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Conference Call Materials dated July 31, 2014 |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
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| THE TIMKEN COMPANY |
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| By: |
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/s/ William R. Burkhart |
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William R. Burkhart
Senior Vice President and General Counsel |
Date: July 31, 2014
3
EXHIBIT INDEX
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| Ex. No. |
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Description |
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| 99.1 |
|
Press Release of The Timken Company dated July 31, 2014 |
| 99.2 |
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Conference Call Materials dated July 31, 2014 |
Exhibit 99.1
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NEWS RELEASE |
Timken Reports Second-Quarter Results;
Affirms 2014 Outlook
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• |
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Earns $0.61 per diluted share from continuing operations, or $0.65 on an adjusted basis, following TimkenSteel spinoff on June 30 |
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• |
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Affirms adjusted EPS estimate of $2.40 to $2.60 for 2014 |
NORTH CANTON,
Ohio: July 31, 2014 — The Timken Company (NYSE: TKR; www.timken.com) today reported sales of $789 million for the second quarter of 2014. Sales exclude revenue attributable to the steel business, which was spun off as TimkenSteel
Corporation (NYSE: TMST) at the end of June. Second-quarter sales were comparable to the previous year’s second quarter and reflect stronger demand in Process Industries, offset by lower shipments in Mobile Industries.
In the second quarter, Timken generated consolidated net income of $62.7 million, or $0.68 per diluted share. Net income from continuing operations
totaled $56.5 million, or $0.61 per diluted share, compared with net income from continuing operations of $55.3 million, or $0.57 per diluted share, during the same period a year ago. (Earnings from discontinued operations of $0.07 per
diluted share reflect steel business results of $0.31 per diluted share, partially offset by one-time separation costs of $0.24 per diluted share.)
Adjusted net income from continuing operations was $59.4 million, or $0.65 per diluted share in the second quarter, and compares to adjusted net income
from continuing operations of $61.2 million, or $0.63 per diluted share, during the same period a year ago (reference Table 1 for adjustments). Despite strong manufacturing performance and lower selling and administrative expenses, adjusted net
income was down slightly due to unfavorable mix, an inventory valuation adjustment and an accrual for value-added tax during the quarter. However, earnings per share increased due to the impact of share repurchases.
“The second quarter was in line with our expectations,” said Richard G. Kyle, Timken president and chief executive officer. “We
delivered sequential revenue growth of 7 percent and adjusted margins improved by 200 basis points. The sequential increase reflects our strategic efforts to gain penetration in a slow-growth market environment and our margin improvement
initiatives.
“During the quarter, we completed the spinoff of TimkenSteel on time and under budget and we’re now fully focused on
executing our strategy for the bearings and power transmission business,” Kyle said. “We’re winning new OE and aftermarket business in both our Mobile and Process Industries segments. We expect a stronger second half based on modest
market growth combined with penetration gains and continued cost improvement.”
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The Timken Company |
2
Table 1: 2Q Adjusted Net Income and Diluted Earnings Per Share (EPS)
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2014 – 2Q |
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2013 – 2Q |
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($ in Mils.) |
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EPS |
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($ in Mils.) |
|
EPS |
| Net Income from Continuing Operations |
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$ |
56.5 |
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$ |
0.61 |
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$ |
55.3 |
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$ |
0.57 |
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| Adjustments: |
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| Charges for cost-reduction initiatives and plant rationalizations |
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6.2 |
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7.6 |
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| Provision for income taxes |
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(3.3 |
) |
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(1.7 |
) |
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| Total adjustments |
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2.9 |
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0.04 |
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5.9 |
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0.06 |
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| Net Income, after adjustments |
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$ |
59.4 |
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$ |
0.65 |
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$ |
61.2 |
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$ |
0.63 |
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During the quarter, the company:
| • |
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Completed the spinoff of TimkenSteel Corporation in a tax-free distribution of TMST common shares to Timken shareholders; |
| • |
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Returned $56 million in capital to shareholders through the repurchase of 0.6 million shares and payment of dividends; |
| • |
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Received board authorization to repurchase an additional 10 million common shares, bringing the total number of shares authorized for repurchase to 11.5 million shares as of June 30; |
| • |
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Won new business on a large OEM platform within Mobile Industries. Combined with other penetration gains in 2014, the segment has already secured more than $100 million on an annualized basis, which will begin impacting
revenue in 2015 and be fully realized in 2016; |
| • |
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Acquired the assets of Schulz Group, based in New Haven, Conn., expanding capabilities within the Process Industries segment with additional electric motor and generator repairs and motor rewind; and |
| • |
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Launched DeltaX, a multi-year initiative to improve the company’s concept-to-commercialization efforts, redesigning and expanding its engineering, product management and business systems talent, technology and
tools. |
Other second-quarter business results, reflecting continuing operations, worth noting:
Mobile Industries sales decreased 5 percent compared to the same period a year ago; sales were up 2 percent excluding the impact of program exits that
concluded in 2013. Earnings before interest and taxes (EBIT) for the second quarter were $39.7 million. Adjusted EBIT was $43.7 million, and the segment attained a double-digit adjusted margin of 11.8 percent of sales, despite the negative
impact of a value-added tax accrual during the quarter. Revenue, adjusted EBIT and margin all improved sequentially.
Process Industries sales increased
6 percent compared to last year’s second quarter. EBIT for the quarter was $67.9 million, which compares to $55 million during the same
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The Timken Company |
3
period a year ago. Adjusted EBIT was $69.7 million, or 20.7 percent of sales, on improved volume and manufacturing performance. This compares to $55.1 million, or 17.3 percent of sales, for
the same period a year ago. Adjusted margins improved both year-on-year and sequentially by more than 300 basis points.
Aerospace sales were essentially
flat compared to last year’s second-quarter sales. EBIT for the quarter was $2.8 million, which compares to $7.8 million during the same period a year ago. Adjusted EBIT was $3.2 million, or 3.9 percent of sales, including an unfavorable
inventory valuation adjustment of $3.8 million. This compares to adjusted EBIT of $7.9 million, or 9.6 percent of sales, for the same period a year ago. The company continues to focus on achieving an appropriate level of performance in
Aerospace. An analysis is underway, and the results are expected to be communicated in the third quarter as plans are developed and approved.
Outlook
(Continuing Operations)
The company continues to expect 2014 sales to be up approximately 3 percent compared to 2013.
| • |
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Mobile Industries’ sales are expected to be down 2 to 4 percent, anticipating that revenue reductions of approximately $110 million in the light vehicle sector will be partially offset by organic growth in the
rail sector. |
| • |
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Process Industries’ sales are estimated to be up 10 to 12 percent as a result of improved penetration in targeted original equipment sectors, stable to modestly improving end markets, and acquisitions.
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| • |
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Although the company anticipates increased shipments in the defense rotorcraft market sector, lower demand across the civil markets sectors and other defense platforms are expected to keep Aerospace sales relatively
flat. |
Timken projects 2014 annual earnings per diluted share to range from $2.20 to $2.40, which includes approximately $0.25 per
diluted share of non-cash pension settlement charges related to ongoing and planned lump-sum programs, and $0.15 per share of costs associated with previously announced cost-reduction initiatives and plant rationalizations, partially offset by a
$0.20 per share gain on the sale of land in Brazil. Excluding these items, adjusted earnings per diluted share would range from $2.40 to $2.60.
The
company expects to generate cash from operations of approximately $370 million in 2014. Free cash flow is projected to be $250 million after making capital expenditures of $120 million.
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.
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The Timken Company |
4
| Conference Call: |
Thursday, July 31, 2014 |
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Live Dial-In: 800-344-6698 or 785-830-7979 |
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(Call in 10 minutes prior to be included.) |
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Conference ID: Timken Earnings Call |
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Live Webcast: www.timken.com/investors |
| Conference Call Replay: |
Replay Dial-In available through August 14, 2014: |
| |
888-203-1112 or 719-457-0820 |
About The Timken Company
The Timken Company (NYSE: TKR; www.timken.com) engineers, manufactures and markets Timken® bearings, transmissions, gearboxes, chain, and related products, and
offers a spectrum of power system rebuild and repair services around the world. The leading authority on tapered roller bearings, Timken today applies its deep knowledge of metallurgy, tribology and power transmission across the broad spectrum of
bearings and related systems to improve the reliability and efficiency of machinery and equipment all around the world. Known for its quality products and collaborative technical sales model, Timken posted $3 billion in sales in 2013 (excluding
Steel business sales). With approximately 17,000 people operating from 28 countries, Timken makes the world more productive and keeps industry in motion.
Certain
statements in this release (including statements regarding the company’s forecasts, estimates and expectations) that are not historical in nature are “forward-looking” statements within the meaning of the Private Securities Litigation
Reform Act of 1995. In particular, the statements related to expectations regarding the company’s future financial performance, including information under the heading “Outlook,” are forward-looking. The company cautions that actual
results may differ materially from those projected or implied in forward-looking statements due to a variety of important factors, including: the finalization of the company’s financial statements for the second quarter of 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; 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; 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 company’s ability to realize the potential benefits of the spinoff of the steel business and avoid possible indemnification liabilities
under certain agreements it entered into with TimkenSteel Corporation in connection with the spinoff; and the taxable nature of 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, 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.
# # #
|
|
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| Media Contact: Gloria Irwin |
|
Investor Contact: Steve Tschiegg |
| Communications Manager |
|
Director – Capital Markets & Investor Relations |
| Telephone: (234) 262-3514 |
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Telephone: (234) 262-7446 |
| mediarelations@timken.com |
|
steve.tschiegg@timken.com |
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The Timken Company |
The Timken Company
CONDENSED
CONSOLIDATED STATEMENT OF INCOME
(Dollars in millions, except share data) (Unaudited)
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Three Months Ended
June 30, |
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Six Months Ended
June 30, |
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2014 |
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2013 |
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2014 |
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|
2013 |
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| Net sales |
|
$ |
789.2 |
|
|
$ |
791.3 |
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|
$ |
1,526.0 |
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$ |
1,554.5 |
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| Cost of products sold |
|
|
555.6 |
|
|
|
551.7 |
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|
1,074.3 |
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|
1,096.0 |
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| Gross Profit |
|
|
233.6 |
|
|
|
239.6 |
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|
|
451.7 |
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|
|
458.5 |
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| Selling, general & administrative expenses (SG&A) |
|
|
136.8 |
|
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|
139.4 |
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|
|
278.6 |
|
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273.2 |
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|
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| Impairment and restructuring |
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|
5.4 |
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6.7 |
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9.3 |
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7.9 |
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| Operating Income |
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|
91.4 |
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|
93.5 |
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163.8 |
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|
177.4 |
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| Other (expense) income, net |
|
|
(1.5 |
) |
|
|
(0.9 |
) |
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|
18.9 |
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|
(0.9 |
) |
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| Earnings Before Interest and Taxes (EBIT) (1) |
|
|
89.9 |
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|
|
92.6 |
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|
182.7 |
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176.5 |
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| Interest expense, net |
|
|
(4.7 |
) |
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(5.6 |
) |
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(9.2 |
) |
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|
(11.5 |
) |
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| Income From Continuing Operations Before Income Taxes |
|
|
85.2 |
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|
87.0 |
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|
173.5 |
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165.0 |
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| Provision for income taxes |
|
|
27.6 |
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|
31.6 |
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|
55.6 |
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58.1 |
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| Income From Continuing Operations |
|
|
57.6 |
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|
55.4 |
|
|
|
117.9 |
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|
106.9 |
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| Income from Discontinued Operations, net of income
taxes(2) |
|
|
6.2 |
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27.5 |
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29.7 |
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|
50.9 |
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| Net Income |
|
|
63.8 |
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|
|
82.9 |
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|
|
147.6 |
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|
157.8 |
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| Less: Net Income (Loss) Attributable to Noncontrolling Interest |
|
|
1.1 |
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|
0.1 |
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1.4 |
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(0.1 |
) |
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| Net Income Attributable to The Timken Company |
|
$ |
62.7 |
|
|
$ |
82.8 |
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|
$ |
146.2 |
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$ |
157.9 |
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| Net Income per Common Share Attributable to The Timken Company Common Shareholders
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| Earnings Per Share - Continuing Operations |
|
$ |
0.62 |
|
|
$ |
0.58 |
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|
$ |
1.27 |
|
|
$ |
1.12 |
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| Earnings Per Share - Discontinued Operations |
|
$ |
0.07 |
|
|
$ |
0.28 |
|
|
$ |
0.33 |
|
|
$ |
0.52 |
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| Basic Earnings Per Share |
|
$ |
0.69 |
|
|
$ |
0.86 |
|
|
$ |
1.60 |
|
|
$ |
1.64 |
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|
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| Diluted Earnings Per Share - Continuing Operations |
|
$ |
0.61 |
|
|
$ |
0.57 |
|
|
$ |
1.26 |
|
|
$ |
1.10 |
|
|
|
|
|
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| Diluted Earnings Per Share - Discontinued Operations |
|
$ |
0.07 |
|
|
$ |
0.29 |
|
|
$ |
0.32 |
|
|
$ |
0.53 |
|
|
|
|
|
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| Diluted Earnings Per Share
|
|
$ |
0.68 |
|
|
$ |
0.86 |
|
|
$ |
1.58 |
|
|
$ |
1.63 |
|
|
|
|
|
|
| Average Shares Outstanding |
|
|
90,859,587 |
|
|
|
95,695,015 |
|
|
|
91,558,614 |
|
|
|
95,732,984 |
|
|
|
|
|
|
| Average Shares Outstanding - assuming dilution |
|
|
91,726,593 |
|
|
|
96,549,121 |
|
|
|
92,395,891 |
|
|
|
96,647,554 |
|
(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.
(2) Discontinued Operations relate to the spinoff of the Steel
Business on June 30, 2014 and includes both operating results and separation costs.
BUSINESS SEGMENTS
(Dollars in
millions) (Unaudited)
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|
|
|
|
|
|
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|
| |
|
Three Months Ended
June 30, |
|
|
Six Months Ended
June 30, |
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
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|
|
| Mobile Industries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net sales to external customers |
|
$ |
370.8 |
|
|
$ |
391.8 |
|
|
$ |
715.2 |
|
|
$ |
789.5 |
|
| Earnings before interest and taxes (EBIT) (1) |
|
$ |
39.7 |
|
|
$ |
52.5 |
|
|
$ |
97.5 |
|
|
$ |
104.3 |
|
| EBIT Margin (1) |
|
|
10.7 |
% |
|
|
13.4 |
% |
|
|
13.6 |
% |
|
|
13.2 |
% |
|
|
|
|
|
| Process Industries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net sales to external customers |
|
$ |
336.6 |
|
|
$ |
317.5 |
|
|
$ |
646.3 |
|
|
$ |
600.5 |
|
| Earnings before interest and taxes (EBIT) (1) |
|
$ |
67.9 |
|
|
$ |
55.0 |
|
|
$ |
118.6 |
|
|
$ |
98.5 |
|
| EBIT Margin (1) |
|
|
20.2 |
% |
|
|
17.3 |
% |
|
|
18.4 |
% |
|
|
16.4 |
% |
|
|
|
|
|
| Aerospace |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net sales to external customers |
|
$ |
81.8 |
|
|
$ |
82.0 |
|
|
$ |
164.5 |
|
|
$ |
164.5 |
|
| Earnings before interest and taxes (EBIT) (1) |
|
$ |
2.8 |
|
|
$ |
7.8 |
|
|
$ |
8.3 |
|
|
$ |
16.4 |
|
| EBIT Margin (1) |
|
|
3.4 |
% |
|
|
9.5 |
% |
|
|
5.0 |
% |
|
|
10.0 |
% |
|
|
|
|
|
| Unallocated corporate expense |
|
$ |
(20.5 |
) |
|
$ |
(22.7 |
) |
|
$ |
(41.7 |
) |
|
$ |
(42.7 |
) |
|
|
|
|
|
| Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net sales to external customers |
|
$ |
789.2 |
|
|
$ |
791.3 |
|
|
$ |
1,526.0 |
|
|
$ |
1,554.5 |
|
| Earnings before interest and taxes (EBIT) (1) |
|
$ |
89.9 |
|
|
$ |
92.6 |
|
|
$ |
182.7 |
|
|
$ |
176.5 |
|
| EBIT Margin (1) |
|
|
11.4 |
% |
|
|
11.7 |
% |
|
|
12.0 |
% |
|
|
11.4 |
% |
(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.
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions) (Unaudited)
|
|
|
|
|
|
|
|
|
| |
|
|
| |
|
June 30,
2014 |
|
|
December 31,
2013 |
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
294.8 |
|
|
$ |
384.6 |
|
|
|
|
| Restricted cash |
|
|
15.3 |
|
|
|
15.1 |
|
|
|
|
| Accounts receivable |
|
|
486.5 |
|
|
|
444.0 |
|
|
|
|
| Inventories, net |
|
|
625.0 |
|
|
|
582.6 |
|
|
|
|
| Other current assets |
|
|
140.5 |
|
|
|
144.7 |
|
|
|
|
| Current assets, discontinued operations |
|
|
— |
|
|
|
366.5 |
|
|
|
|
| Total Current Assets |
|
|
1,562.1 |
|
|
|
1,937.5 |
|
|
|
|
| Property, Plant and Equipment, net |
|
|
838.3 |
|
|
|
855.8 |
|
|
|
|
| Goodwill |
|
|
349.2 |
|
|
|
346.1 |
|
|
|
|
| Non-current pension assets |
|
|
250.0 |
|
|
|
223.5 |
|
|
|
|
| Other assets |
|
|
265.6 |
|
|
|
265.8 |
|
|
|
|
| Non-current assets, discontinued operations |
|
|
— |
|
|
|
849.2 |
|
|
|
|
| Total Assets |
|
$ |
3,265.2 |
|
|
$ |
4,477.9 |
|
|
|
|
| LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
| Accounts payable |
|
$ |
178.0 |
|
|
$ |
139.9 |
|
|
|
|
| Short-term debt |
|
|
314.6 |
|
|
|
269.3 |
|
|
|
|
| Income taxes |
|
|
60.6 |
|
|
|
114.3 |
|
|
|
|
| Accrued expenses |
|
|
296.7 |
|
|
|
304.3 |
|
|
|
|
| Current liabilities, discontinued operations |
|
|
— |
|
|
|
152.3 |
|
|
|
|
| Total Current Liabilities |
|
|
849.9 |
|
|
|
980.1 |
|
|
|
|
| Long-term debt |
|
|
176.2 |
|
|
|
176.4 |
|
|
|
|
| Accrued pension cost |
|
|
138.5 |
|
|
|
159.0 |
|
|
|
|
| Accrued postretirement benefits cost |
|
|
129.8 |
|
|
|
138.3 |
|
|
|
|
| Other non-current liabilities |
|
|
166.7 |
|
|
|
157.8 |
|
|
|
|
| Non-current liabilities, discontinued operations |
|
|
— |
|
|
|
217.7 |
|
|
|
|
| Total Liabilities |
|
|
1,461.1 |
|
|
|
1,829.3 |
|
|
|
|
| EQUITY |
|
|
|
|
|
|
|
|
|
|
|
| The Timken Company shareholders’ equity |
|
|
1,790.3 |
|
|
|
2,636.6 |
|
|
|
|
| Noncontrolling Interest |
|
|
13.8 |
|
|
|
12.0 |
|
|
|
|
| Total Equity |
|
|
1,804.1 |
|
|
|
2,648.6 |
|
|
|
|
| Total Liabilities and Equity |
|
$ |
3,265.2 |
|
|
$ |
4,477.9 |
|
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended
June 30, |
|
|
Six Months Ended
June 30, |
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
| Cash Provided (Used) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income attributable to The Timken Company |
|
$ |
62.7 |
|
|
$ |
82.8 |
|
|
$ |
146.2 |
|
|
$ |
157.9 |
|
|
|
|
|
|
| Net income from discontinued operations |
|
|
(6.2 |
) |
|
|
(27.5 |
) |
|
|
(29.7 |
) |
|
|
(50.9 |
) |
|
|
|
|
|
| Net income (loss) attributable to noncontrolling interest |
|
|
1.1 |
|
|
|
0.1 |
|
|
|
1.4 |
|
|
|
(0.1 |
) |
|
|
|
|
|
| Adjustments to reconcile net income to net cash provided (used) by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
|
34.3 |
|
|
|
35.8 |
|
|
|
69.3 |
|
|
|
71.6 |
|
|
|
|
|
|
| Impairment Charges |
|
|
0.8 |
|
|
|
— |
|
|
|
0.8 |
|
|
|
— |
|
|
|
|
|
|
| Pension and other postretirement expense |
|
|
5.6 |
|
|
|
13.6 |
|
|
|
15.1 |
|
|
|
28.7 |
|
| Pension and other postretirement benefit contributions and payments |
|
|
(23.4 |
) |
|
|
(6.8 |
) |
|
|
(41.0 |
) |
|
|
(71.9 |
) |
|
|
|
|
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts receivable |
|
|
(15.4 |
) |
|
|
(3.2 |
) |
|
|
(39.3 |
) |
|
|
(37.9 |
) |
|
|
|
|
|
| Inventories |
|
|
(19.9 |
) |
|
|
9.6 |
|
|
|
(39.8 |
) |
|
|
1.8 |
|
|
|
|
|
|
| Accounts payable |
|
|
18.9 |
|
|
|
3.2 |
|
|
|
36.9 |
|
|
|
12.4 |
|
|
|
|
|
|
| Accrued expenses |
|
|
55.5 |
|
|
|
(4.3 |
) |
|
|
3.5 |
|
|
|
(74.1 |
) |
|
|
|
|
|
| Income taxes |
|
|
(58.4 |
) |
|
|
21.5 |
|
|
|
(47.4 |
) |
|
|
52.9 |
|
|
|
|
|
|
| Other, net |
|
|
14.8 |
|
|
|
(5.1 |
) |
|
|
(6.3 |
) |
|
|
(7.7 |
) |
|
|
|
|
|
| Net Cash Provided By Operating Activities - Continuing Operations |
|
$ |
70.4 |
|
|
$ |
119.7 |
|
|
$ |
69.7 |
|
|
$ |
82.7 |
|
|
|
|
|
|
| Net Cash Provided (Used) By Operating Activities - Discontinued Operations |
|
$ |
5.7 |
|
|
$ |
55.7 |
|
|
$ |
46.6 |
|
|
$ |
54.8 |
|
|
|
|
|
|
| Net Cash Provided By Operating Activities |
|
$ |
76.1 |
|
|
$ |
175.4 |
|
|
$ |
116.3 |
|
|
$ |
137.5 |
|
|
|
|
|
|
| INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Capital expenditures |
|
$ |
(29.5 |
) |
|
$ |
(42.0 |
) |
|
$ |
(48.5 |
) |
|
$ |
(63.9 |
) |
|
|
|
|
|
| Acquisitions |
|
|
(12.0 |
) |
|
|
(52.9 |
) |
|
|
(12.0 |
) |
|
|
(67.3 |
) |
|
|
|
|
|
| Other |
|
|
9.0 |
|
|
|
— |
|
|
|
17.8 |
|
|
|
8.8 |
|
|
|
|
|
|
| Net Cash Used by Investing Activities - Continuing Operations |
|
$ |
(32.5 |
) |
|
$ |
(94.9 |
) |
|
$ |
(42.7 |
) |
|
$ |
(122.4 |
) |
|
|
|
|
|
| Net Cash Used by Investing Activities - Discontinued Operations |
|
$ |
(42.3 |
) |
|
$ |
(39.7 |
) |
|
$ |
(77.0 |
) |
|
$ |
(81.2 |
) |
|
|
|
|
|
| Net Cash Used by Investing Activities |
|
$ |
(74.8 |
) |
|
$ |
(134.6 |
) |
|
$ |
(119.7 |
) |
|
$ |
(203.6 |
) |
|
|
|
|
|
| FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash dividends paid to shareholders |
|
$ |
(22.7 |
) |
|
$ |
(22.1 |
) |
|
$ |
(45.7 |
) |
|
$ |
(44.2 |
) |
|
|
|
|
|
| Purchase of treasury shares |
|
|
(33.6 |
) |
|
|
(81.8 |
) |
|
|
(151.3 |
) |
|
|
(81.8 |
) |
|
|
|
|
|
| Net proceeds (payments) from credit facilities |
|
|
41.4 |
|
|
|
(9.5 |
) |
|
|
45.2 |
|
|
|
(16.5 |
) |
|
|
|
|
|
| Distribution of TimkenSteel |
|
|
(43.7 |
) |
|
|
— |
|
|
|
(43.7 |
) |
|
|
— |
|
|
|
|
|
|
| Other |
|
|
2.8 |
|
|
|
18.4 |
|
|
|
8.7 |
|
|
|
29.4 |
|
|
|
|
|
|
| Net Cash Used by Financing Activities - Continuing Operations |
|
$ |
(55.8 |
) |
|
$ |
(95.0 |
) |
|
$ |
(186.8 |
) |
|
$ |
(113.1 |
) |
|
|
|
|
|
| Net Cash Provided by Financing Activities - Discontinued Operations |
|
$ |
100.0 |
|
|
$ |
- |
|
|
$ |
100.0 |
|
|
$ |
- |
|
|
|
|
|
|
| Net Cash Used by Financing Activities |
|
$ |
44.2 |
|
|
$ |
(95.0 |
) |
|
$ |
(86.8 |
) |
|
$ |
(113.1 |
) |
|
|
|
|
|
| Effect of exchange rate changes on cash |
|
|
1.0 |
|
|
|
(6.9 |
) |
|
|
0.4 |
|
|
|
(10.4 |
) |
|
|
|
|
|
| Increase (decrease) In Cash and Cash Equivalents |
|
$ |
46.5 |
|
|
$ |
(61.1 |
) |
|
$ |
(89.8 |
) |
|
$ |
(189.6 |
) |
|
|
|
|
|
| Cash and cash equivalents at beginning of period |
|
|
248.3 |
|
|
|
457.9 |
|
|
|
384.6 |
|
|
|
586.4 |
|
|
|
|
|
|
| Cash and Cash Equivalents at End of Period |
|
$ |
294.8 |
|
|
$ |
396.8 |
|
|
$ |
294.8 |
|
|
$ |
396.8 |
|
Reconciliation of EBIT to GAAP Net Income:
This reconciliation is provided as additional relevant information about the Company’s performance. Management believes consolidated earnings before interest and
taxes (EBIT) are representative of the Company’s performance and therefore useful to investors. Management also believes that it is appropriate to compare GAAP net income to consolidated EBIT.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Dollars in millions) (Unaudited) |
|
|
|
|
|
|
| |
|
Three Months Ended
June 30, |
|
|
Six Months Ended
June 30, |
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
| Net Income |
|
$ |
63.8 |
|
|
$ |
82.9 |
|
|
$ |
147.6 |
|
|
$ |
157.8 |
|
|
|
|
|
|
| Income From Discontinued Operations, net of income taxes |
|
|
(6.2 |
) |
|
|
(27.5 |
) |
|
|
(29.7 |
) |
|
|
(50.9 |
) |
| Provision for income taxes |
|
|
27.6 |
|
|
|
31.6 |
|
|
|
55.6 |
|
|
|
58.1 |
|
| Interest expense |
|
|
5.8 |
|
|
|
6.1 |
|
|
|
11.3 |
|
|
|
12.6 |
|
| Interest income |
|
|
(1.1 |
) |
|
|
(0.5 |
) |
|
|
(2.1 |
) |
|
|
(1.1 |
) |
| Consolidated earnings before interest and taxes (EBIT) |
|
$ |
89.9 |
|
|
$ |
92.6 |
|
|
$ |
182.7 |
|
|
$ |
176.5 |
|
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: (a) gain on the sale of real estate in Brazil; and (b) cost-reduction initiatives and
plant rationalization costs are representative of the Company’s performance and therefore useful to investors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Six Months Ended |
|
| (Dollars in millions, except share data) (Unaudited) |
|
June 30, |
|
|
June 30, |
|
| |
|
2014 |
|
|
EPS |
|
|
2013 |
|
|
EPS |
|
|
2014 |
|
|
EPS |
|
|
2013 |
|
|
EPS |
|
| Income from Continuing Operations |
|
$ |
57.6 |
|
|
|
|
|
|
$ |
55.4 |
|
|
|
|
|
|
$ |
117.9 |
|
|
|
|
|
|
$ |
106.9 |
|
|
|
|
|
| Less: Net Income (Loss) Attributable to Noncontrolling Interest |
|
|
1.1 |
|
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
1.4 |
|
|
|
|
|
|
|
(0.1 |
) |
|
|
|
|
|
|
$ |
56.5 |
|
|
$ |
0.61 |
|
|
$ |
55.3 |
|
|
$ |
0.57 |
|
|
$ |
116.5 |
|
|
$ |
1.26 |
|
|
$ |
107.0 |
|
|
$ |
1.10 |
|
|
|
|
|
|
|
|
|
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gain on sale of real estate in Brazil (1) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(22.6 |
) |
|
|
(0.24 |
) |
|
|
- |
|
|
|
- |
|
| Cost-reduction initiatives and plant rationalization costs (2) |
|
|
6.2 |
|
|
|
0.07 |
|
|
|
7.6 |
|
|
|
0.08 |
|
|
|
11.2 |
|
|
|
0.12 |
|
|
|
12.3 |
|
|
|
0.13 |
|
| Provision for income taxes (3) |
|
|
(3.3 |
) |
|
|
(0.03 |
) |
|
|
(1.7 |
) |
|
|
(0.02 |
) |
|
|
0.7 |
|
|
|
0.01 |
|
|
|
(4.2 |
) |
|
|
(0.04 |
) |
| Total Adjustments: |
|
|
2.9 |
|
|
|
0.04 |
|
|
|
5.9 |
|
|
|
0.06 |
|
|
|
(10.7 |
) |
|
|
(0.11 |
) |
|
|
8.1 |
|
|
|
0.09 |
|
| Net Income Attributable to The Timken Company, after adjustments |
|
$ |
59.4 |
|
|
$ |
0.65 |
|
|
$ |
61.2 |
|
|
$ |
0.63 |
|
|
$ |
105.8 |
|
|
$ |
1.15 |
|
|
$ |
115.1 |
|
|
$ |
1.19 |
|
(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 inititiatives.
(3) 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Dollars in millions, except share data) |
|
Three Months Ended |
|
|
Six Months Ended |
|
| (Unaudited) |
|
June 30, |
|
|
June 30, |
|
| |
|
2014 |
|
|
Percentage to
Net Sales |
|
|
2013 |
|
|
Percentage to
Net Sales |
|
|
2014 |
|
|
Percentage to
Net Sales |
|
|
2013 |
|
|
Percentage to
Net Sales |
|
|
|
|
|
|
|
|
|
|
| Net Income |
|
$ |
63.8 |
|
|
|
8.1 |
% |
|
$ |
82.9 |
|
|
|
10.5 |
% |
|
$ |
147.6 |
|
|
|
9.7 |
% |
|
$ |
157.8 |
|
|
|
10.2 |
% |
|
|
|
|
|
|
|
|
|
| Income From Discontinued Operations, net of income taxes |
|
|
(6.2 |
) |
|
|
(0.8 |
)% |
|
|
(27.5 |
) |
|
|
(3.5 |
)% |
|
|
(29.7 |
) |
|
|
(1.9 |
)% |
|
|
(50.9 |
) |
|
|
(3.3 |
)% |
|
|
|
|
|
|
|
|
|
| Provision for income taxes |
|
|
27.6 |
|
|
|
3.5 |
% |
|
|
31.6 |
|
|
|
4.0 |
% |
|
|
55.6 |
|
|
|
3.7 |
% |
|
|
58.1 |
|
|
|
3.7 |
% |
|
|
|
|
|
|
|
|
|
| Interest expense |
|
|
5.8 |
|
|
|
0.7 |
% |
|
|
6.1 |
|
|
|
0.8 |
% |
|
|
11.3 |
|
|
|
0.7 |
% |
|
|
12.6 |
|
|
|
0.8 |
% |
|
|
|
|
|
|
|
|
|
| Interest income |
|
|
(1.1 |
) |
|
|
(0.1 |
)% |
|
|
(0.5 |
) |
|
|
(0.1 |
)% |
|
|
(2.1 |
) |
|
|
(0.1 |
)% |
|
|
(1.1 |
) |
|
|
(0.1 |
)% |
|
|
|
|
|
|
|
|
|
| Consolidated earnings before interest and taxes (EBIT) |
|
$ |
89.9 |
|
|
|
11.4 |
% |
|
$ |
92.6 |
|
|
|
11.7 |
% |
|
$ |
182.7 |
|
|
|
12.1 |
% |
|
$ |
176.5 |
|
|
|
11.4 |
% |
|
|
|
|
|
|
|
|
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gain on sale of real estate in Brazil (1) |
|
|
— |
|
|
|
— |
% |
|
|
— |
|
|
|
— |
% |
|
|
(22.6 |
) |
|
|
(1.5 |
)% |
|
|
— |
|
|
|
— |
% |
|
|
|
|
|
|
|
|
|
| Cost-reduction initiatives and plant rationalization costs (2) |
|
|
6.2 |
|
|
|
0.8 |
% |
|
|
7.6 |
|
|
|
1.0 |
% |
|
|
11.2 |
|
|
|
0.7 |
% |
|
|
12.3 |
|
|
|
0.8 |
% |
|
|
|
|
|
|
|
|
|
| Total Adjustments |
|
|
6.2 |
|
|
|
0.8 |
% |
|
|
7.6 |
|
|
|
1.0 |
% |
|
|
(11.4 |
) |
|
|
(0.8 |
)% |
|
|
12.3 |
|
|
|
0.8 |
% |
| Consolidated earnings before interest and taxes (EBIT), after adjustments |
|
$ |
96.1 |
|
|
|
12.2 |
% |
|
$ |
100.2 |
|
|
|
12.7 |
% |
|
$ |
171.3 |
|
|
|
11.3 |
% |
|
$ |
188.8 |
|
|
|
12.2 |
% |
(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 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
June 30,
2014 |
|
|
Percentage
to Net
Sales |
|
|
Three Months
Ended
June 30,
2013 |
|
|
Percentage
to Net
Sales |
|
|
Six Months
Ended
June 30,
2014 |
|
|
Percentage
to Net
Sales |
|
|
Six Months
Ended
June 30,
2013 |
|
|
Percentage
to Net
Sales |
|
| Earnings before interest and taxes (EBIT) |
|
$ |
39.7 |
|
|
|
10.7 |
% |
|
$ |
52.5 |
|
|
|
13.4 |
% |
|
$ |
97.5 |
|
|
|
13.6 |
% |
|
$ |
104.3 |
|
|
|
13.2 |
% |
|
|
|
|
|
|
|
|
|
| Gain on sale of real estate in Brazil (1) |
|
|
- |
|
|
|
— |
% |
|
|
- |
|
|
|
— |
% |
|
|
(22.6 |
) |
|
|
(3.2 |
)% |
|
|
- |
|
|
|
— |
% |
| Cost-reduction initiatives and plant rationalization
costs(2) |
|
|
4.0 |
|
|
|
1.1 |
% |
|
|
7.4 |
|
|
|
1.9 |
% |
|
|
7.1 |
|
|
|
1.0 |
% |
|
|
11.8 |
|
|
|
1.5 |
% |
| Earnings before interest and taxes (EBIT), after adjustments |
|
$ |
43.7 |
|
|
|
11.8 |
% |
|
$ |
59.9 |
|
|
|
15.3 |
% |
|
$ |
82.0 |
|
|
|
11.4 |
% |
|
$ |
116.1 |
|
|
|
14.7 |
% |
|
|
| |
|
Process Industries |
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
(Unaudited) |
|
Three Months
Ended
June 30,
2014 |
|
|
Percentage
to Net
Sales |
|
|
Three Months
Ended
June 30,
2013 |
|
|
Percentage
to Net
Sales |
|
|
Six Months
Ended
June 30,
2014 |
|
|
Percentage
to Net
Sales |
|
|
Six Months
Ended
June 30,
2013 |
|
|
Percentage
to Net
Sales |
|
| Earnings before interest and taxes (EBIT) |
|
$ |
67.9 |
|
|
|
20.2 |
% |
|
$ |
55.0 |
|
|
|
17.3 |
% |
|
$ |
118.6 |
|
|
|
18.4 |
% |
|
$ |
98.5 |
|
|
|
16.4 |
% |
|
|
|
|
|
|
|
|
|
| Cost-reduction initiatives and plant rationalization
costs(2) |
|
|
1.8 |
|
|
|
0.5 |
% |
|
|
0.1 |
|
|
|
— |
% |
|
|
3.0 |
|
|
|
0.5 |
% |
|
|
0.4 |
|
|
|
0.1 |
% |
| Earnings before interest and taxes (EBIT), after adjustments |
|
$ |
69.7 |
|
|
|
20.7 |
% |
|
$ |
55.1 |
|
|
|
17.3 |
% |
|
$ |
121.6 |
|
|
|
18.9 |
% |
|
$ |
98.9 |
|
|
|
16.5 |
% |
|
|
| |
|
Aerospace |
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
(Unaudited) |
|
Three Months
Ended
June 30,
2014 |
|
|
Percentage
to Net
Sales |
|
|
Three Months
Ended
June 30,
2013 |
|
|
Percentage
to Net
Sales |
|
|
Six Months
Ended
June 30,
2014 |
|
|
Percentage
to Net
Sales |
|
|
Six Months
Ended
June 30,
2013 |
|
|
Percentage
to Net
Sales |
|
| Earnings before interest and taxes (EBIT) |
|
$ |
2.8 |
|
|
|
3.4 |
% |
|
$ |
7.8 |
|
|
|
9.5 |
% |
|
$ |
8.3 |
|
|
|
5.0 |
% |
|
$ |
16.4 |
|
|
|
10.0 |
% |
|
|
|
|
|
|
|
|
|
| Cost-reduction initiatives and plant rationalization
costs(2) |
|
|
0.4 |
|
|
|
0.5 |
% |
|
|
0.1 |
|
|
|
0.1 |
% |
|
|
1.1 |
|
|
|
0.7 |
% |
|
|
0.1 |
|
|
|
0.1 |
% |
| Earnings before interest and taxes (EBIT), after adjustments |
|
$ |
3.2 |
|
|
|
3.9 |
% |
|
$ |
7.9 |
|
|
|
9.6 |
% |
|
$ |
9.4 |
|
|
|
5.7 |
% |
|
$ |
16.5 |
|
|
|
10.1 |
% |
| (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 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 |
|
|
|
11.4 |
% |
|
$ |
74.9 |
|
|
|
9.8 |
% |
|
|
|
|
|
| Income From Discontinued Operations, net of income taxes |
|
|
(23.5 |
) |
|
|
(3.2 |
)% |
|
|
(23.4 |
) |
|
|
(3.1 |
)% |
|
|
|
|
|
| Provision for income taxes |
|
|
28.0 |
|
|
|
3.8 |
% |
|
|
26.5 |
|
|
|
3.5 |
% |
|
|
|
|
|
| Interest expense |
|
|
5.5 |
|
|
|
0.8 |
% |
|
|
6.4 |
|
|
|
0.8 |
% |
|
|
|
|
|
| Interest income |
|
|
(1.0 |
) |
|
|
(0.1 |
)% |
|
|
(0.5 |
) |
|
|
(0.1 |
)% |
|
|
|
|
|
| Consolidated earnings before interest and taxes (EBIT) |
|
$ |
92.8 |
|
|
|
12.6 |
% |
|
$ |
83.9 |
|
|
|
11.0 |
% |
|
|
|
|
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gain on sale of real estate in Brazil (1) |
|
|
(22.6 |
) |
|
|
(3.1 |
)% |
|
|
— |
|
|
|
— |
% |
|
|
|
|
|
| Cost-reduction initiatives and plant rationalization costs
(2) |
|
|
5.0 |
|
|
|
0.7 |
% |
|
|
4.7 |
|
|
|
0.6 |
% |
|
|
|
|
|
| Total Adjustments |
|
|
(17.6 |
) |
|
|
(2.4 |
)% |
|
|
4.7 |
|
|
|
0.6 |
% |
| Consolidated earnings before interest and taxes (EBIT), after adjustments |
|
$ |
75.2 |
|
|
|
10.2 |
% |
|
$ |
88.6 |
|
|
|
11.6 |
% |
(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 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) |
|
$ |
57.8 |
|
|
|
16.8 |
% |
|
$ |
51.7 |
|
|
|
13.0 |
% |
|
|
|
|
|
| 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 |
|
$ |
38.4 |
|
|
|
11.1 |
% |
|
$ |
56.3 |
|
|
|
14.2 |
% |
|
|
| |
|
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) |
|
$ |
50.7 |
|
|
|
16.4 |
% |
|
$ |
43.5 |
|
|
|
15.4 |
% |
|
|
|
|
|
| Cost-reduction initiatives and plant rationalization
costs(2) |
|
|
1.1 |
|
|
|
0.4 |
% |
|
|
0.1 |
|
|
|
— |
% |
| Earnings before interest and taxes (EBIT), after adjustments |
|
$ |
51.8 |
|
|
|
16.7 |
% |
|
$ |
43.6 |
|
|
|
15.4 |
% |
|
|
| |
|
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) |
|
$ |
5.5 |
|
|
|
6.7 |
% |
|
$ |
8.6 |
|
|
|
10.4 |
% |
|
|
|
|
|
| Cost-reduction initiatives and plant rationalization
costs(2) |
|
|
0.5 |
|
|
|
0.6 |
% |
|
|
- |
|
|
|
— |
% |
| Earnings before interest and taxes (EBIT), after adjustments |
|
$ |
6.0 |
|
|
|
7.3 |
% |
|
$ |
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 Income from Discontinued Operations, net of income taxes, to income from Discontinued Operations, net
of income taxes, after adjustments:
This reconciliation is provided as additional relevant information about the Company’s performance. Management believes
that income from discontinued operations, net of income taxes, adjusted to remove: (a) Steel business separation-related costs and (b) provision for income taxes are representative of the Company’s steel business performance and
therefore useful to investors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Dollars in millions, except share data) (Unaudited) |
|
Three Months Ended
June 30, |
|
|
Six Months Ended
June 30, |
|
|
|
|
|
|
|
|
|
|
| |
|
2014
|
|
|
EPS |
|
|
2013 |
|
|
EPS |
|
|
2014 |
|
|
EPS |
|
|
2013 |
|
|
EPS |
|
|
|
|
|
|
|
|
|
|
| Income from Discontinued Operations, net of income taxes |
|
$ |
6.2 |
|
|
$ |
0.07 |
|
|
$ |
27.5 |
|
|
$ |
0.28 |
|
|
$ |
29.7 |
|
|
$ |
0.32 |
|
|
$ |
50.9 |
|
|
$ |
0.52 |
|
|
|
|
|
|
|
|
|
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Separation Costs (1) |
|
|
33.1 |
|
|
|
0.36 |
|
|
|
— |
|
|
|
— |
|
|
|
44.6 |
|
|
|
0.48 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
| Provison for income taxes (2) |
|
|
(11.2 |
) |
|
|
(0.12 |
) |
|
|
— |
|
|
|
— |
|
|
|
(10.6 |
) |
|
|
(0.11 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
| Total Adjustments: |
|
|
21.9 |
|
|
|
0.24 |
|
|
|
— |
|
|
|
— |
|
|
|
34.0 |
|
|
|
0.37 |
|
|
|
— |
|
|
|
— |
|
| Income from Discontinued operations, net of income taxes, after adjustments |
|
$ |
28.1 |
|
|
$ |
0.31 |
|
|
$ |
27.5 |
|
|
$ |
0.28 |
|
|
$ |
63.7 |
|
|
$ |
0.69 |
|
|
$ |
50.9 |
|
|
$ |
0.52 |
|
(1) Separation-related costs include severance costs associated with the
Company’s spinoff of the Steel business.
(2) Provison 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 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)
|
|
|
|
|
|
|
|
|
| |
|
June 30,
2014 |
|
|
December 31,
2013 |
|
|
|
|
| Short-term debt |
|
$ |
314.6 |
|
|
$ |
269.3 |
|
|
|
|
| Long-term debt |
|
|
176.2 |
|
|
|
176.4 |
|
|
|
|
| Total Debt |
|
$ |
490.8 |
|
|
$ |
445.7 |
|
|
|
|
| Less: Cash, cash equivalents and restricted cash |
|
|
(310.1 |
) |
|
|
(399.7 |
) |
| Net Debt |
|
$ |
180.7 |
|
|
$ |
46.0 |
|
|
|
|
| Total equity |
|
$ |
1,804.1 |
|
|
$ |
2,648.6 |
|
|
|
|
| Ratio of Total Debt to Capital |
|
|
21.4 |
% |
|
|
14.4 |
% |
|
|
|
| Ratio of Net Debt to Capital |
|
|
9.1 |
% |
|
|
1.7 |
% |
Reconciliations of Free Cash Flow to GAAP Net Cash Provided by Operating Activities:
Management believes that free cash flow and free cash flow is useful to investors because it is a meaningful indicator of cash generated from operating activities
available for the execution of its business strategy.
(Dollars in millions) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Six Months Ended |
|
| |
|
June 30, |
|
|
June 30, |
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
| Net cash provided by operating activities from continuing operations |
|
$ |
70.4 |
|
|
$ |
119.7 |
|
|
$ |
69.7 |
|
|
$ |
82.7 |
|
|
|
|
|
|
| Less: capital expenditures |
|
|
(29.5 |
) |
|
|
(42.0 |
) |
|
|
(48.5 |
) |
|
|
(63.9 |
) |
|
|
|
|
|
| Free cash flow |
|
$ |
40.9 |
|
|
$ |
77.7 |
|
|
$ |
21.2 |
|
|
$ |
18.8 |
|
Exhibit 99.2
Exhibit 99.2
THE TIMKEN COMPANY
2Q 2014 EARNINGS
JULY 31, 2014
EARNINGS CALL DETAILS
Timken 2Q 2014 Conference
Call Schedule
Conference Call: Thursday – July 31, 2014
11:00 a.m. Eastern Time
Live Dial-In: 800-344-6698 or 785-830-7979
(Call
in 10 minutes prior to be included.)
Conference ID: Timken Earnings Call
Replay: Replay Dial-In available through August 14, 2014:
888-203-1112 or 719-457-0820
(Replay available approx. two hours after the live call.)
Replay Passcode: 2219857
Live Webcast:
www.timken.com/investors
2
FORWARD-LOOKING STATEMENTS SAFE HARBOR AND
NON-GAAP FINANCIAL INFORMATION
Certain statements in this presentation (including statements regarding the company’s forecasts, beliefs, 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 Timken’s plans, outlook, future financial performance, targets, projected sales, cash flows, liquidity and expectations regarding the future financial performance of the company, including the
information under the headings “2Q 2014 Highlights”, “DeltaX”, “Performance Improvement” and “2014 Full-Year 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 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; 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 integrate acquired companies to achieve satisfactory operating results; the impact on operations of general economic conditions; fluctuations in customer demand; the impact on the company’s pension obligations
due to the changes in interest rates or investment performance, the company’s ability to complete and achieve the benefits of its announced plans, programs, initiatives and capital investments; the taxable nature of the spinoff; and the
company’s ability to realize the potential benefits of the spinoff of the steel business and avoid possible indemnification liabilities under certain agreements it entered into with TimkenSteel Corporation in connection with 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, 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.
This presentation includes certain non-GAAP financial measures as defined by the rules and regulations of the Securities
and Exchange Commission. Reconciliation of those measures to the most directly comparable GAAP equivalents are provided in the Appendix to this presentation.
3
AGENDA
2Q Business & Strategy Update
Rich Kyle – President & CEO
2Q Financial Review
Phil Fracassa – CFO
Q & A with Timken
Management
Rich Kyle – President & CEO
Phil Fracassa – CFO
Steve Tschiegg – Director, Capital Markets & Investor Relations
4
2Q 2014 HIGHLIGHTS
Sales of $789 million,
relatively flat compared with prior-year 2Q
Sales up in Process Industries segment
Lower shipments in Mobile Industries segment due to planned program exits
Net income per diluted share of $0.61 versus $0.57 in same quarter last year
After adjustments, EPS of $0.65 compared with adjusted EPS of $0.63 a year ago
Adjusted EBIT margins improved 200 basis points from 1Q 2014
Completed TimkenSteel Corporation spinoff on June 30
Communicated Capital Allocation Plan at Investor Day on June 19
Announced intent to maintain quarterly dividend of $0.25 per share in the third quarter despite TimkenSteel spinoff
Additional 10 million share repurchase authorization approved by Board
Purchased approximately 0.6 million shares for $34 million in 2Q 2014
Announced the DeltaX initiative to accelerate product development and line expansion commercialization efforts, a
multi-year $60 million investment
Acquired the assets of Schulz Group
Note: See page Appendix for reconciliation of adjusted EBIT margin and adjusted earnings per share (EPS) to its most
directly comparable GAAP equivalents.
5
INITIATIVE
Multi-year initiative to accelerate
product development and line expansion
Objective to firmly position Timken among its customers as a full-line
leader in industrial bearings and power transmission products and services
Enhance Timken’s collaborative
technical sales model
XSell, a project within the DeltaX initiative, will provide the global sales team with
mobility-enabled sales processes and business tools
$22 million project will leverage the SAP infrastructure
Timken deployed enterprise-wide over the past several years
Expand our global reach
6
SCHULZ GROUP ACQUISITION
Industrial Services:
provides electric motor & generator repairs and motor rewinds for a broad range of commercial and industrial applications
U.S. Markets Sectors Served: nuclear, hydro and fossil, fuel power generator, water management, paper mills & general manufacturing
2013 sales of approx. $18 million
Based in New Haven, CT, with ~125 employees
Strategic Fit: advances industrial services capabilities, expanding geographic reach and servicing within the nuclear and
hydro market sectors
The acquisitions of Philadelphia Gear, Wazee, Smith Services, Standard Machine, and now
Schulz Group allow Timken to provide industrial services across US and Canada with a growing international presence
7
FINANCIAL REVIEW
2Q 2014 FINANCIAL HIGHLIGHTS
($ Millions) 2Q
’14 2Q ’13 $ change % change
Sales $789.2 $791.3 $(2.1) Nil.
Gross Profit 233.6 239.6
% of sales 29.6% 30.3% (70) bps
SG&A
136.8 139.4
% of sales 17.3% 17.6% 30 bps
Impairment & restructuring 5.4 6.7
Other income, net (1.5) (0.9)
EBIT $89.9
$92.6 $(2.7) (3)%
EBIT Margins 11.4% 11.7% (30) bps
Adjustments:
Charges for cost-reduction initiatives 6.2 7.6
and plant rationalizations
EBIT after adjustments $ 96.1 $100.2 $(4.1) (4)%
EBIT Margins 12.2% 12.7% (50) bps
Note: See Appendix for reconciliation of EBIT, adjusted EBIT, and EBIT and adjusted EBIT margins to their most directly comparable GAAP equivalents.
9
2Q 2014 SALES COMPARISON
Sales of $789 million,
essentially unchanged from 2Q a year ago
Stronger demand from Process Industries, offset by lower shipments
(planned program exits) in Mobile Industries
Excluding program exits in Mobile Industries, sales were up 4%
Sales - ($ Millions)
$26 $(30) $791 $4 $(2) $789
2Q 2013 Organic
Growth Mobile Planned Acquisitions Currency 2Q 2014 Exits
Note: Certain data contained in the graph above has
been rounded for presentation purposes. Organic Growth represents volume, mix and price.
10
2Q 2014 GEOGRAPHIC SALES VS. PRIOR-YEAR 2Q
Sales
of $789 million, essentially flat
EMEA
Flat
( -4% excluding impact of currency)
NA
(4)%
Canada
U.S.
Mexico
Spain
LatAm
+5%
(+9% excluding
impact of currency)
Brazil
Argentina
South Africa
U.K. Germany Poland
Czech Republic France Italy Romania Turkey
U.A.E.
Russia
Japan China South Korea India Taiwan Thailand Vietnam
Singapore
Indonesia
Australia
APAC
+13% (+16% excluding impact of currency)
11
2Q 2014 EARNINGS COMPARISON
EBIT of $90 million,
or 11.4% of sales, down from prior year 2Q of $93 million
Adjusted EBIT of $96 million, or 12.2% of sales,
compares with $100 million, or 12.7% of sales in the same period a year ago
Strong manufacturing performance
and lower selling and administrative expenses, more than offset by unfavorable mix, an accrual for value-added tax and an inventory valuation adjustment
Adjusted EBIT - ($ Millions)
$100 $(6) $9 $3
$(10) $96
Other includes:
Brazil VAT tax ~$ (4) M
Aerospace inventory
~$ (4) M
valuation adjustment
2Q 2013 Volume/Mix Manufacturing SG&A Other 2Q 2014
Costs
Note: Certain data contained in the graph
above has been rounded for presentation purposes. Adjusted EBIT reflects the elimination of gain on sale of land in Brazil and charges related to cost-reduction initiatives and plant rationalizations. See Appendix for reconciliations of EBIT,
adjusted EBIT and EBIT and adjusted EBIT margins to their most directly comparable GAAP equivalents.
12
2Q NET INCOME AND
DILUTED EARNINGS PER SHARE
(EPS)
2Q ’14 2Q ’13
$ in Millions EPS $ in Millions EPS
Net Income
from Continuing Operations $56.5 $ 0.61
Tax rate 32.4% 36.3%
Charges for cost-reduction initiatives and 6.2 7.6
plant rationalizations (pre-tax)
Provision for income taxes (3.3) (1.7)
Net
Income, after adjustments $59.4 $ 0.65 $61.2 $0.63
Adjusted Tax rate 34.0% 35.1%
13
MOBILE INDUSTRIES
2014 2013 Change
Sales $370.8 $391.8 $(21.0)
EBIT $39.7 $52.5 $(12.8)
Margin 10.7% 13.4%
(270) bps
Adjusted(1):
EBIT $43.7 $59.9 $(16.2)
Margin 11.8% 15.3%
(350) bps
2Q vs. 1Q – 2014
Sales EBIT (Adjusted)
$400 12.0% 11.8%
$375 $ 371
11.1%
$ 345
$350 11.0%
$325
$300 10.0%
1Q-14 2Q-14 1Q-14 2Q-14
8% increase +70 bps change
2Q YOY Commentary
Sales decrease driven by light vehicle sector program exits
(~$30M), partially offset by stronger demand in rail; excluding impact of exits, sales were up 2%
Decrease in adjusted EBIT driven by lower light-vehicle volume, mix, higher logistics costs, and VAT taxes ($3.8M);
Adjusted EBIT margins up 70 bps from 1Q-14
2014 Full-Year Outlook
Down 2 to 4%
Light Vehicle Heavy Truck Rail
Off-highway
(1) See Appendix for reconciliations of adjusted EBIT and adjusted EBIT margin to their most
directly comparable GAAP equivalents. (2) Includes the full-year impact of $110 million from planned program exits, primarily in the light-vehicle sector, that concluded in 2013
2Q Performance ($ Millions) Sales expected to be Down 2 to 4%(2)
14
PROCESS INDUSTRIES
2Q Performance
2014 2013 Change
Sales $336.6 $317.5 $19.1
EBIT $67.9 $55.0 $12.9
Margin 20.2% 17.3% 290 bps
Adjusted(1):
EBIT $69.7 $55.1 $14.6
Margin 20.7% 17.3% 340 bps
2Q vs. 1Q – 2014
Sales EBIT (Adjusted)
$350 22.0%
$337 20.7%
20.0%
$325
$ 310
18.0% 16.7%
$300
16.0%
$275 14.0%
1Q-14 2Q-14 1Q-14 2Q-14
9% increase +400 bps change
2Q YOY Commentary
Sales increase due to improved industrial OE demand and penetration, primarily in the wind energy market
sector, and the benefit of acquisitions Adjusted EBIT increase reflects improved demand and strong manufacturing performance, partially offset by unfavorable mix
2014 Full-Year Outlook
Sales expected to be up 10
to 12%
up 10 to 12%
Industrial Distribution Industrial OE
Gears & Services
See Appendix for reconciliations of adjusted EBIT and adjusted EBIT margin to their most directly comparable GAAP equivalents.
2Q Performance ($ Millions)
15
AEROSPACE
2Q Performance
2014 2013 Change
Sales $81.8 $82.0 $(0.2)
EBIT $2.8 $7.8 $(5.0)
Margin 3.4% 9.5% (610) bps
Adjusted(1):
EBIT $3.2 $7.9 $(4.7)
Margin 3.9% 9.6% (570) bps
Performance Improvement
Focus on achieving an
appropriate
level of performance
An analysis is underway; results
are expected to
be communicated
in 3Q-14 as plans are developed
and approved
2Q YOY Commentary
Sales were relatively flat
across
most end-market sectors
Decline in adjusted EBIT primarily reflects an unfavorable inventory valuation adjustment of $3.8M
2014 Full-Year Outlook
relatively flat
Defense Civil Critical Motion
(1) See Appendix for reconciliations of adjusted EBIT and adjusted EBIT margin to their most directly comparable GAAP equivalents.
Sales expected to be relatively flat ($ Millions)
16
CAPITAL STRUCTURE AT A GLANCE
Strong Balance
Sheet
Cash position of $310 million, or $181 million of net debt
Liquidity of $1.1 billion
Return of Capital to Shareholders
Repurchased
approximately 0.6 million common shares in 2Q-2014 for $34 million
Dividend of $0.25 per share, or $23
million, paid in 2Q-2014
($ Millions)
2Q ‘14 4Q ‘13
Cash $310 $400
Debt $491 $446
% Debt to capital 21.4% 14.4%
Net Debt $181 $46
% Net debt to capital 9.1% 1.7%
Shareholders’ equity $1,804 $2,649
Note: Net
Debt is not a GAAP measure. Management believes Net Debt is an important measure of the Company’s financial position, due to the amount of cash and cash equivalents. See Appendix for reconciliation of Net Debt to its most directly comparable
GAAP equivalent.
17
CASH FLOW OVERVIEW (CONTINUING OPERATIONS)
($
Millions) 2Q ‘14 2Q ‘13
Net Income $57.6 $55.4
Change in working capital (16.4) 9.6
Pension & OPEB expense 5.6 13.6
Pension & OPEB contributions / payments (23.4) (6.8)
Depreciation & Amortization 34.3 35.8
Income taxes (58.4) 21.5
Other 74.1 (9.4)
Cash from operations $70.4 $119.7
Capital Expenditures (29.5) (42.0)
Free cash
flow $40.9 $77.7
Note: OPEB is defined as other postretirement benefit. Free cash flow is defined as net cash
provided by operating activities (includes pension contributions) minus capital expenditures. See Appendix for reconciliation of free cash flow to its most directly comparable GAAP equivalent.
18
2014 FULL-YEAR OUTLOOK
July
Sales (vs. 2013) Up 3%
Mobile Industries Down 2-4%
Process Industries Up
10-12%
Aerospace Flat
Earnings Per Share (EPS) $2.20—$2.40
Includes:
Expected pension liability settlement charges ~$(0.25)
Cost-reduction and plant rationalizations ~$(0.15)
Gain on the sale of land in Brazil ~$0.20
Earnings Per Share (EPS); excluding $2.40—$2.60
unusual items
Free Cash Flow ($ Millions)
Cash from operations $370M
Less: CapEx $120M
Free Cash Flow $250M
Sales: up approximately 3%
Driven by demand in industrial, rail and off-highway end market sectors
Assumes $110 million less sales in Mobile Industries driven by full-year impact of planned program exits that concluded by the end of 2013
EPS Estimate: $2.20 to $2.40 per diluted share
Includes 2H non-cash pension settlement charge of approx. $35 million (pre-tax) or $0.25 per share
Relates to existing program to offer lump sums to new retirees, and 2H initiative for deferred vested participants
Consistent with pension de-risking strategy
EPS
estimate of $2.40 to $2.60 excluding unusual items
Reflects adj. EBIT margin of ~12%
2014 FCF Estimate: $250M
Note: Outlook does not reflect the impact of potential charges from any actions that may be taken based on ongoing analysis of the Aerospace segment
Notes: The company’s outlook reflects its continuing operations for the full 12 months of 2014. Free cash flow is
defined as net cash provided by operating activities (includes pension contributions) minus capital expenditures.
19
2Q 2014 EARNINGS
JULY 31, 2014
Appendix
GAAP RECONCILIATION OF EBIT & EBIT MARGIN
Reconciliation of EBIT Margin, After Adjustments, to Net Income as a Percentage of Sales and EBIT, After Adjustments, to
Net Income:
The following reconciliation is provided as additional relevant information about the
Company’s performance. Management believes that EBIT and EBIT margin, after adjustments, are representative of the Company’s core operations and therefore useful to investors.
Three Months Ended Six Months Ended
(Dollars in millions, except share data) (Unaudited) June 30, June 30,
Percentage Percentage Percentage Percentage
2014
to 2013 to 2014 to 2013 to
Net Sales Net Sales Net Sales Net Sales
Net Income $ 63.8 8.1% $ 82.9 10.5% $ 147.6 9.7% $ 157.8 10.2%
Income From Discontinued Operations, net of income taxes(6.2)(0.8)%(27.5)(3.5)%(29.7)(1.9)%(50.9)(3.3)%
Provision for income taxes 27.6 3.5% 31.6 4.0% 55.6 3.7% 58.1 3.7%
Interest expense 5.8 0.7% 6.1 0.8% 11.3 0.7% 12.6 0.8%
Interest income(1.1)(0.1)%(0.5)(0.1)%(2.1)(0.1)%(1.1)(0.1)%
Consolidated earnings before interest and taxes (EBIT) $ 89.9 11.4% $ 92.6 11.7% $ 182.7 12.1% $ 176.5 11.4%
Adjustments:
Gain on sale of real estate in Brazil (1) — —% — —%(22.6)(1.5)% — —%
Cost-reduction initiatives and plant rationalization costs (2) 6.2 0.8% 7.6 1.0% 11.2 0.7% 12.3 0.8%
Total Adjustments 6.2 0.8% 7.6 1.0%(11.4)(0.8)% 12.3 0.8%
adjustments $ 96.1 12.2% $ 100.2 12.7% $ 171.3 11.3% $ 188.8 12.2%
(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 .
22
GAAP RECONCILIATION OF EBIT & EBIT MARGIN
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,
Percentage to Percentage to
2014 2013
Net Sales Net Sales
Net Income $ 83.8 11.4% $ 74.9 9.8%
Income From
Discontinued Operations, net of income taxes(23.5)(3.2)%(23.4)(3.1)%
Provision for income taxes 28.0 3.8% 26.5
3.5%
Interest expense 5.5 0.8% 6.4 0.8%
Interest income(1.0)(0.1)%(0.5)(0.1)%
Consolidated earnings before interest and taxes (EBIT) $ 92.8 12.6% $ 83.9 11.0%
Adjustments:
Gain on sale of real estate in
Brazil (1)(22.6)(3.1)% — —%
Cost-reduction initiatives and plant rationalization costs (2) 5.0
0.7% 4.7 0.6%
Total Adjustments(17.6)(2.4)% 4.7 0.6%
Consolidated earnings before interest and taxes (EBIT), after adjustments $ 75.2 10.2% $ 88.6 11.6%
(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 .
23
SEGMENT GAAP RECONCILIATION OF EBIT
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
Three Months Three Months Six
Months Six Months
Ended Percentage to Ended Percentage to Ended Percentage to Ended Percentage to
(Dollars in millions) (Unaudited) June 30, 2014 Net Sales June 30, 2013 Net Sales June 30, 2014 Net Sales
June 30, 2013 Net Sales
Earnings before interest and taxes (EBIT) $ 39.7 10.7% $ 52.5 13.4% $ 97.5 13.6%
$ 104.3 13.2%
Gain on sale of real estate in Brazil (1)——%——%(22.6)(3.2)%——%
Cost-reduction initiatives and plant rationalization costs (2) 4.0 1.1% 7.4 1.9% 7.1 1.0% 11.8 1.5%
Earnings before interest and taxes (EBIT), after adjustments $ 43.7 11.8% $ 59.9 15.3% $ 82.0 11.4% $ 116.1
14.7%
Process Industries
Three Months Three Months Six Months Six Months
Ended Percentage to Ended Percentage to Ended Percentage to Ended Percentage to
(Dollars in millions) (Unaudited) June 30, 2014 Net Sales June 30, 2013 Net Sales June 30, 2014 Net Sales
June 30, 2013 Net Sales
Earnings before interest and taxes (EBIT) $ 67.9 20.2% $ 55.0 17.3% $ 118.6 18.4%
$ 98.5 16.4%
Cost-reduction initiatives and plant rationalization costs (2) 1.8 0.5% 0.1 —% 3.0 0.5%
0.4 0.1 %
Earnings before interest and taxes (EBIT), after adjustments $ 69.7 20.7% $ 55.1 17.3% $ 121.6
18.9% $ 98.9 16.5%
Aerospace
Three Months Three Months Six Months Six Months
Ended Percentage to Ended Percentage to Ended Percentage to Ended Percentage to
(Dollars in millions) (Unaudited) June 30, 2014 Net Sales June 30, 2013 Net Sales June 30, 2014 Net Sales
June 30, 2013 Net Sales
Earnings before interest and taxes (EBIT) $ 2.8 3.4% $ 7.8 9.5% $ 8.3 5.0% $ 16.4
10.0%
Cost-reduction initiatives and plant rationalization costs (2) 0.4 0.5% 0.1 0.1 % 1.1 0.7% 0.1
0.1 %
Earnings before interest and taxes (EBIT), after adjustments $ 3.2 3.9% $ 7.9 9.6% $ 9.4 5.7% $
16.5 10.1%
(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.
24
SEGMENT GAAP RECONCILIATION OF EBIT
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
Three Months Three Months
Ended Percentage to Net
Ended Percentage to Net
(Dollars in millions) (Unaudited) March 31, 2014 Sales March 31, 2013 Sales
Earnings before interest and taxes (EBIT) $ 57.8 16.8% $ 51.7 13.0%
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 $ 38.4 11.1% $ 56.3 14.2%
Process Industries
Three Months Three Months
Ended Percentage to Net
Ended Percentage to Net
(Dollars in millions) (Unaudited) March 31, 2014 Sales March 31, 2013 Sales
Earnings before interest and taxes (EBIT) $ 50.7 16.4% $ 43.5 15.4%
Cost-reduction initiatives and plant rationalization costs (2) 1.1 0.4% 0.1 —%
Earnings before interest and taxes (EBIT), after adjustments $ 51.8 16.7% $ 43.6 15.4%
Aerospace
Three Months Three Months
Ended Percentage to Net
Ended Percentage to Net
(Dollars in millions) (Unaudited) March 31, 2014 Sales March 31, 2013 Sales
Earnings before interest and taxes (EBIT) $ 5.5 6.7% $ 8.6 10.4%
Cost-reduction initiatives and plant rationalization costs (2) 0.5 0.6%——%
Earnings before interest and taxes (EBIT), after adjustments $ 6.0 7.3% $ 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 .
25
GAAP RECONCILIATION OF NET INCOME & EPS
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) gain on the sale of real estate in Brazil; and (b) cost-reduction initiatives and plant
rationalization costs are representative of the Company’s performance and therefore useful to investors .
Three Months Ended Six Months Ended
(Dollars in millions, except share data) (Unaudited) June 30, June 30,
2014 EPS 2013 EPS 2014 EPS 2013 EPS
Income from
Continuing Operations $ 57.6 $ 55.4 $ 117.9 $ 106.9
Less: Net Income (Loss) Attributable to Noncontrolling
Interest 1.1 0.1 1.4(0.1)
$ 56.5 $ 0.61 $ 55.3 $ 0.57 $ 116.5 $ 1.26 $ 107.0 $ 1.10
Adjustments:
Gain on sale of real estate in Brazil (1) — —(22.6)(0.24) —
Cost-reduction initiatives and plant rationalization costs (2) 6.2 0.07 7.6 0.08 11.2 0.12 12.3 0.13
Provision for income taxes (3)(3.3)(0.03)(1.7)(0.02) 0.7 0.01(4.2)(0.04)
Total Adjustments: 2.9 0.04 5.9 0.06(10.7)(0.11) 8.1 0.09
Net Income Attributable to The Timken Company, after adjustments $ 59.4 $ 0.65 $ 61.2 $ 0.63 $ 105.8 $ 1.15 $ 115.1 $ 1.19
(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 inititiatives .
(3) 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 .
26
GAAP RECONCILIATION OF NET DEBT
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)
June 30, December 31,
2014 2013
Short-term debt $ 314.6 $ 269.3
Long-term debt 176.2 176.4
Total Debt $ 490.8 $
445.7
Less: Cash, cash equivalents and restricted cash(310.1)(399.7)
Net Debt $ 180.7 $ 46.0
Total equity $ 1,804.1 $ 2,648.6
Ratio of Total
Debt to Capital 21.4% 14.4%
Ratio of Net Debt to Capital 9.1% 1.7%
27
GAAP RECONCILIATION OF FREE CASH FLOW
Reconciliation of Free Cash Flow to GAAP Net Cash Provided (used) by Operating Activities:
Management believes that free cash flow is a meaningful indicator of cash generated from operating activities available
for
the execution of its business strategy.
(Dollars in millions) (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
Net cash provided by
operating activities from
continuing operations $ 70.4 $ 119.7 $ 69.7 $ 82.7
Less: capital expenditures(29.5)(42.0)(48.5)(63.9)
Free cash flow $ 40.9 $ 77.7 $ 21.2 $ 18.8
28
TIMKEN
Grafico Azioni Timken (NYSE:TKR)
Storico
Da Giu 2024 a Lug 2024
Grafico Azioni Timken (NYSE:TKR)
Storico
Da Lug 2023 a Lug 2024
