NORTH CANTON, Ohio,
Oct. 28, 2014 /PRNewswire/ --
- Third-quarter sales
increase 8 percent compared with prior-year
- Non-cash charges in
Aerospace result in loss in the quarter of $0.04 per share from continuing
operations
- Adjusted earnings of
$0.77 per share in the quarter,
nearly double the third quarter of last year, with strong operating
margins
- Full-year 2014
adjusted earnings per share estimate of $2.45 to $2.55 consistent with prior
outlook
The Timken Company (NYSE: TKR; www.timken.com) today
reported sales of $788 million for the third quarter of 2014,
an 8 percent increase from a year ago. The increase was
primarily driven by organic growth in Process Industries.
As a result of non-cash charges taken in the third quarter and
discontinued operations, Timken posted a consolidated net loss
during the quarter of $14.8 million
or $0.16 per share. The quarter
includes a loss of $11.0 million or
$0.12 per share from discontinued
operations. Net income from continuing operations was a loss
of $3.8 million or $0.04 per share. This compares with net
income from continuing operations during the same period a year ago
of $34.5 million or $0.36 per diluted share. The loss in the
current quarter includes expense of $74.5
million net of tax or $0.83
per share, which relates to non-cash impairment and restructuring
charges previously announced as part of the company's efforts to
improve the performance of the aerospace business.
Adjusted net income from continuing operations in the third
quarter was $69.9 million or
$0.77 per diluted share. This
compares with adjusted net income from continuing operations during
the same period a year ago of $38.1
million or $0.40 per diluted
share (reference Table 1). Revenue growth, mix and strong
manufacturing performance as well as lower selling, general and
administrative expenses drove the earnings improvement. In
addition, earnings per share benefited from the company's increased
share repurchase activity.
"Timken performed well this quarter," said
Richard G. Kyle, Timken president and chief executive
officer. "Our sales increased eight percent year-on-year as
we continue to gain share in targeted end markets, even in a
relatively soft environment.
"We delivered strong operating margins, capitalizing on the
increased demand and continuing our efforts to decrease costs
across the enterprise. We also returned $138 million of
capital to shareholders through dividends and the repurchase of
2.5 million shares in the quarter," Kyle said. "With our
current traction in the marketplace and focus on execution, we
continue to expect revenue to be up year-on-year in the fourth
quarter and to achieve our full-year earnings targets."
Table 1: 3Q
Adjusted Net Income and Diluted Earnings Per Share
(EPS)
|
|
2014 –
3Q
|
|
2013 –
3Q
|
|
($ in
Mils.)
|
|
EPS
|
|
($ in
Mils.)
|
|
EPS
|
Net Income/(Loss)
from Continuing Operations
|
$ (3.8)
|
|
$(0.04)
|
|
$ 34.5
|
|
$ 0.36
|
Adjustments:
|
|
|
|
|
|
|
|
Aerospace impairment
and restructuring charges (pre-tax)
|
109.5
|
|
1.22
|
|
|
|
|
Charges for
cost-reduction initiatives and plant rationalizations
(pre-tax)
|
1.5
|
|
0.02
|
|
4.5
|
|
0.05
|
Provision for income
taxes
Dilutive effect on
special items
|
(37.3)
|
|
(0.42)
(0.01)
|
|
(0.9)
|
|
(0.01)
|
Total
adjustments
|
73.7
|
|
0.81
|
|
3.6
|
|
0.04
|
Net Income, after
adjustments
|
$ 69.9
|
|
$ 0.77
|
|
$ 38.1
|
|
$ 0.40
|
In the third quarter, the company:
- Achieved notable new bearing business wins, including a new
rail contract in Canada, a major
wind energy contract for an installation in Europe and a multi-year commitment from a
global cement manufacturer;
- Announced and started restructuring actions to improve the
performance of its aerospace business;
- Returned $138 million in capital
to shareholders through the payment of dividends and the repurchase
of 2.5 million shares, bringing year-to-date repurchases to 5.1
million shares; and
- Completed a $350-million offering
of 3.875 percent senior notes due 2024, part of which was used to
repay $250 million 6 percent senior
notes that matured in September.
Other third-quarter business results from continuing operations
worth noting include:
Mobile Industries sales increased 3 percent compared
with the same period a year ago. Excluding the impact of planned
program exits that concluded in 2013, sales were up 8 percent,
driven largely by market growth and share gains in the rail sector.
Earnings before interest and taxes (EBIT) for the third
quarter were $47 million or 13.2 percent of sales on
higher volume, strong operating performance and favorable mix.
This compares to $27.8 million or 8.0 percent of sales
for the same period a year ago.
Process Industries sales increased 16 percent
compared with last year's third quarter, driven by market growth
and share gains in the wind energy sector and the industrial
aftermarket. EBIT for the quarter was $77.4 million or 21.8 percent of sales on
improved demand and strong manufacturing performance. This
compares to $51.1 million or
16.6 percent of sales during the same period a year ago.
Aerospace sales were essentially flat compared with
third-quarter sales last year. EBIT for the quarter was a
loss of $104.8 million, primarily
reflecting the impact of goodwill impairment and inventory
valuation charges of $109.5 million.
Adjusted EBIT was $4.9 million
or 6.5 percent of sales and compares to similar earnings for the
same period a year ago. Beginning with the fourth quarter of
2014, Timken will no longer report Aerospace financial results
separately but rather will incorporate aerospace business results
primarily within the company's Mobile Industries segment.
Outlook
The company expects fourth-quarter
revenue to be up approximately 3 percent compared with last
year.
For full-year 2014, the company expects revenue from continuing
operations to increase approximately 2 percent compared to
2013. The outlook for full-year 2014 by segment:
- Mobile Industries' sales are expected to be down approximately
5 percent, reflecting lower revenue of approximately $110 million related to the final impact from
planned program exits in the light vehicle sector, partially offset
by organic growth primarily from the rail sector.
- Process Industries' sales are expected to be up approximately
11 percent, driven by organic growth in targeted original equipment
sectors and the industrial aftermarket as well as the benefit of
acquisitions.
- Aerospace sales are expected to be down approximately 5 percent
due to lower defense shipments.
Timken projects 2014 earnings per diluted share from continuing
operations to range from $1.45 to
$1.55, which includes approximately:
- $0.85 per share of non-cash
impairment and other charges related to the company's restructuring
of its aerospace business,
- $0.25 per share of non-cash
pension settlement charges related to lump-sum programs, and
- $0.10 per share of charges
associated with previously announced cost-reduction initiatives and
plant rationalizations;
- these items will be partially offset by a gain of $0.20 per share from the sale of land in
Brazil.
Excluding these items, adjusted earnings per diluted share are
expected to range from $2.45 to
$2.55, consistent with prior estimates at the
midpoint. Operating margins in the fourth quarter are
expected to be up from prior year but will be lower than third
quarter 2014 due to seasonality and actions to reduce inventory
levels.
The company now expects to generate cash from operations of
approximately $305 million in 2014. Free cash flow is
projected to be $190 million after making capital expenditures
of $115 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.
Conference
Call:
|
Tuesday, Oct. 28,
2014
|
|
11:00 a.m. Eastern
Time
|
|
Live Dial-In:
888/254-3615 or 913/312-0386
|
|
(Call in 10 minutes
prior to be included.)
|
|
Conference ID: Timken
Earnings Call
|
|
Live
Webcast: www.timken.com/investors
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through Nov. 11, 2014:
|
|
888/203-1112 or
719/457-0820
|
|
Replay Passcode:
6977680
|
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. 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 third 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.
Media Contact:
Gloria Irwin
|
Investor
Contact: Steve Tschiegg
|
Communications
Manager
|
Director – Capital
Markets & Investor Relations
|
Telephone: (234)
262-3514
|
Telephone: (234)
262-7446
|
mediarelations@timken.com
|
steve.tschiegg@timken.com
|
The Timken
Company
|
CONDENSED
CONSOLIDATED STATEMENT OF INCOME
|
(Dollars in
millions, except share data) (Unaudited)
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2014
|
2013
|
|
2014
|
2013
|
Net sales
|
$
788.0
|
$
731.4
|
|
$
2,314.0
|
$
2,285.9
|
Cost of products
sold
|
562.5
|
529.4
|
|
1,636.8
|
1,625.4
|
Gross
Profit
|
225.5
|
202.0
|
|
677.2
|
660.5
|
Selling, general
& administrative expenses (SG&A)
|
132.2
|
139.4
|
|
410.8
|
412.6
|
Impairment and
restructuring
|
91.0
|
3.7
|
|
100.3
|
11.6
|
Operating
Income
|
2.3
|
58.9
|
|
166.1
|
236.3
|
Other income
(expense), net
|
1.8
|
0.4
|
|
20.7
|
(0.5)
|
Earnings Before
Interest and Taxes (EBIT) (1)
|
4.1
|
59.3
|
|
186.8
|
235.8
|
Interest expense,
net
|
(8.1)
|
(4.6)
|
|
(17.3)
|
(16.1)
|
Income (Loss) From
Continuing Operations Before Income Taxes
|
(4.0)
|
54.7
|
|
169.5
|
219.7
|
Provision (benefit)
for income taxes
|
(0.9)
|
19.9
|
|
54.7
|
78.0
|
Income (Loss) From
Continuing Operations
|
(3.1)
|
34.8
|
|
114.8
|
141.7
|
Income (loss) from
Discontinued Operations, net of income
taxes(2)
|
(11.0)
|
17.7
|
|
18.7
|
68.6
|
Net Income
(Loss)
|
(14.1)
|
52.5
|
|
133.5
|
210.3
|
Less: Net Income
Attributable to Noncontrolling Interest
|
0.7
|
0.3
|
|
2.1
|
0.2
|
Net Income (Loss)
Attributable to The Timken Company
|
$
(14.8)
|
$
52.2
|
|
$
131.4
|
$
210.1
|
|
|
|
|
|
|
Net Income (Loss)
per Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
|
|
|
Earnings (Loss)
Per Share - Continuing Operations
|
$
(0.04)
|
$
0.36
|
|
$
1.24
|
$
1.48
|
Earnings (Loss)
Per Share - Discontinued Operations
|
$
(0.12)
|
$
0.19
|
|
$
0.21
|
$
0.72
|
Basic Earnings
(Loss) Per Share
|
$
(0.16)
|
$
0.55
|
|
$
1.45
|
$
2.20
|
|
|
|
|
|
|
Diluted Earnings
(Loss) Per Share - Continuing Operations
|
$
(0.04)
|
$
0.36
|
|
$
1.23
|
$
1.47
|
Diluted Earnings
(Loss) Per Share - Discontinued Operations
|
$
(0.12)
|
$
0.18
|
|
$
0.20
|
$
0.71
|
Diluted Earnings
(Loss) Per Share
|
$
(0.16)
|
$
0.54
|
|
$
1.43
|
$
2.18
|
|
|
|
|
|
|
Average Shares
Outstanding
|
89,683,436
|
94,667,659
|
|
90,889,871
|
95,391,695
|
Average Shares
Outstanding - assuming dilution
|
89,683,436
|
95,408,069
|
|
91,728,048
|
96,248,211
|
|
|
|
|
|
|
(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)
|
|
Three Months
Ended
September 30,
|
Nine Months
Ended
September 30,
|
|
2014
|
2013
|
2014
|
2013
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
Net sales to external
customers
|
$
357.1
|
$
348.0
|
$
1,072.3
|
$
1,137.5
|
Earnings before
interest and taxes (EBIT) (1)
|
$
47.0
|
$
27.8
|
$
144.5
|
$
132.1
|
EBIT Margin
(1)
|
13.2 %
|
8.0 %
|
13.5 %
|
11.6 %
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
Net sales to external
customers
|
$
355.6
|
$
307.2
|
$
1,001.9
|
$
907.7
|
Earnings before
interest and taxes (EBIT) (1)
|
$
77.4
|
$
51.1
|
$
196.0
|
$
149.6
|
EBIT Margin
(1)
|
21.8 %
|
16.6 %
|
19.6 %
|
16.5 %
|
|
|
|
|
|
Aerospace
|
|
|
|
|
Net sales to external
customers
|
$
75.3
|
$
76.2
|
$
239.8
|
$
240.7
|
Earnings (loss)
before interest and taxes (EBIT)
(1)
|
$
(104.8)
|
$
4.6
|
$
(96.5)
|
$
21.0
|
EBIT Margin
(1)
|
(139.2)%
|
6.0 %
|
(40.2)%
|
8.7 %
|
Unallocated corporate expense
|
$
(15.5)
|
$
(24.2)
|
$
(57.2)
|
$
(66.9)
|
|
|
|
|
|
Consolidated
|
|
|
|
|
Net sales to external
customers
|
$
788.0
|
$
731.4
|
$
2,314.0
|
$
2,285.9
|
Earnings before
interest and taxes (EBIT) (1)
|
$
4.1
|
$
59.3
|
$
186.8
|
$
235.8
|
EBIT Margin
(1)
|
0.5 %
|
8.1 %
|
8.1 %
|
10.3 %
|
|
|
|
|
|
(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)
|
|
September 30,
2014
|
December 31,
2013
|
ASSETS
|
|
|
Cash and cash
equivalents
|
$
238.2
|
$
384.6
|
Restricted
cash
|
15.3
|
15.1
|
Accounts
receivable
|
488.7
|
444.0
|
Inventories,
net
|
618.3
|
582.6
|
Other current
assets
|
139.2
|
144.7
|
Current assets,
discontinued operations
|
—
|
366.5
|
Total Current
Assets
|
1,499.7
|
1,937.5
|
Property, Plant and
Equipment, net
|
833.4
|
855.8
|
Goodwill
|
263.5
|
346.1
|
Non-current pension
assets
|
259.7
|
223.5
|
Other
assets
|
258.8
|
265.8
|
Non-current assets,
discontinued operations
|
—
|
849.2
|
Total
Assets
|
$
3,115.1
|
$
4,477.9
|
|
|
|
LIABILITIES
|
|
|
Accounts
payable
|
$
185.3
|
$
139.9
|
Short-term
debt
|
9.4
|
269.3
|
Income
taxes
|
75.7
|
114.3
|
Accrued
expenses
|
293.0
|
304.3
|
Current liabilities,
discontinued operations
|
—
|
152.3
|
Total Current
Liabilities
|
563.4
|
980.1
|
|
|
|
Long-term
debt
|
522.0
|
176.4
|
Accrued pension
cost
|
133.6
|
159.0
|
Accrued
postretirement benefits cost
|
123.9
|
138.3
|
Other non-current
liabilities
|
121.2
|
138.8
|
Non-current
liabilities, discontinued operations
|
—
|
236.7
|
Total
Liabilities
|
1,464.1
|
1,829.3
|
|
|
|
EQUITY
|
|
|
The Timken Company
shareholders' equity
|
1,637.0
|
2,636.6
|
Noncontrolling
Interest
|
14.0
|
12.0
|
Total
Equity
|
1,651.0
|
2,648.6
|
Total Liabilities and
Equity
|
$
3,115.1
|
$
4,477.9
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
|
(Dollars in
millions) (Unaudited)
|
|
|
Three Months
Ended
September 30,
|
Nine Months
Ended
September 30,
|
|
2014
|
2013
|
2014
|
2013
|
Cash Provided
(Used)
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net income (loss)
attributable to The Timken Company
|
$
(14.8)
|
$
52.2
|
$
131.4
|
$
210.1
|
Net income (loss)
from discontinued operations
|
11.0
|
(17.7)
|
(18.7)
|
(68.6)
|
Net income
attributable to noncontrolling interest
|
0.7
|
0.3
|
2.1
|
0.2
|
Adjustments to
reconcile net income to net cash provided (used) by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
34.1
|
34.7
|
103.4
|
106.3
|
Impairment
Charges
|
89.6
|
—
|
90.4
|
—
|
(Gain) loss on sale of
assets
|
1.3
|
0.3
|
(20.9)
|
2.3
|
Pension and other
postretirement expense
|
7.6
|
13.4
|
22.5
|
42.1
|
Pension and other
postretirement benefit
contributions and payments
|
(6.6)
|
(8.4)
|
(47.6)
|
(80.3)
|
Changes in operating assets
and liabilities:
|
|
|
|
|
Accounts
receivable
|
(13.3)
|
33.1
|
(52.6)
|
(4.8)
|
Inventories
|
(12.3)
|
(3.1)
|
(52.1)
|
(1.3)
|
Accounts payable
|
10.3
|
(10.4)
|
47.3
|
1.9
|
Accrued expenses
|
(11.0)
|
14.2
|
(7.5)
|
(59.9)
|
Income taxes
|
(10.0)
|
(48.2)
|
(46.2)
|
4.8
|
Other, net
|
3.6
|
(6.0)
|
21.3
|
(16.2)
|
Net Cash Provided By
Operating Activities - Continuing Operations
|
$
90.2
|
$
54.4
|
$
172.8
|
$
136.6
|
Net Cash Provided
(Used) By Operating Activities - Discontinued Operations
|
(11.0)
|
58.0
|
22.6
|
113.3
|
Net Cash Provided By
Operating Activities
|
$
79.2
|
$
112.4
|
$
195.4
|
$
249.9
|
INVESTING
ACTIVITIES
|
|
|
|
|
Capital
expenditures
|
$
(38.6)
|
$
(27.7)
|
$
(87.1)
|
$
(91.6)
|
Acquisitions
|
—
|
2.8
|
(12.0)
|
(64.5)
|
Other
|
1.2
|
(0.6)
|
19.0
|
8.2
|
Net Cash Used by
Investing Activities - Continuing Operations
|
$
(37.4)
|
$
(25.5)
|
$
(80.1)
|
$
(147.9)
|
Net Cash Used by
Investing Activities - Discontinued Operations
|
-
|
(37.5)
|
(77.0)
|
(118.7)
|
Net Cash Used by
Investing Activities
|
$
(37.4)
|
$
(63.0)
|
$
(157.1)
|
$
(266.6)
|
FINANCING
ACTIVITIES
|
|
|
|
|
Cash dividends paid to
shareholders
|
$
(22.5)
|
$
(21.8)
|
$
(68.2)
|
$
(66.0)
|
Purchase of treasury
shares
|
(115.2)
|
(25.5)
|
(266.5)
|
(107.3)
|
Net proceeds (payments) from
credit facilities
|
(54.9)
|
14.4
|
(9.4)
|
7.6
|
Net proceeds (payments) from
long-term debt
|
95.8
|
—
|
95.6
|
(9.8)
|
Distribution of
TimkenSteel
|
(3.0)
|
—
|
(46.5)
|
—
|
Other
|
11.4
|
2.2
|
19.9
|
31.7
|
Net Cash Used by
Financing Activities - Continuing Operations
|
$
(88.4)
|
$
(30.7)
|
$
(275.1)
|
$
(143.8)
|
Net Cash Provided by
Financing Activities - Discontinued Operations
|
-
|
-
|
100.0
|
-
|
Net Cash Used by
Financing Activities
|
$
(88.4)
|
$
(30.7)
|
$
(175.1)
|
$
(143.8)
|
Effect of exchange
rate changes on cash
|
(10.0)
|
2.6
|
(9.6)
|
(7.8)
|
Increase (decrease)
In Cash and Cash Equivalents
|
$
(56.6)
|
$
21.3
|
$
(146.4)
|
$
(168.3)
|
Cash and cash
equivalents at beginning of period
|
294.8
|
396.8
|
384.6
|
586.4
|
Cash and Cash
Equivalents at End of Period
|
$
238.2
|
$
418.1
|
$
238.2
|
$
418.1
|
|
|
|
|
|
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) is representative of the Company's
performance and therefore useful to investors. Management
also believes that it is appropriate to compare GAAP net income to
consolidated EBIT.
|
|
|
|
|
|
|
(Dollars in
millions) (Unaudited)
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2014
|
2013
|
|
2014
|
2013
|
Net Income
(Loss)
|
$
(14.1)
|
$
52.5
|
|
$
133.5
|
$
210.3
|
|
|
|
|
|
|
Income (Loss) From
Discontinued Operations, net of income taxes
|
11.0
|
(17.7)
|
|
(18.7)
|
(68.6)
|
Provision (benefit)
for income taxes
|
(0.9)
|
19.9
|
|
54.7
|
78.0
|
Interest
expense
|
9.1
|
5.0
|
|
20.4
|
17.5
|
Interest
income
|
(1.0)
|
(0.4)
|
|
(3.1)
|
(1.4)
|
Consolidated earnings
before interest and taxes (EBIT)
|
$
4.1
|
$
59.3
|
|
$
186.8
|
$
235.8
|
|
|
|
|
|
|
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; (b)
cost-reduction initiatives and plant rationalization costs; (c)
Aerospace impairment and restructuring charges; (d) provision for
income taxes; and (e) the anti-dilutive effect on special items are
representative of the Company's performance and therefore useful to
investors.
|
|
Three Months
Ended
|
Nine Months
Ended
|
(Dollars in
millions, except share data) (Unaudited)
|
September
30,
|
September
30,
|
|
2014
|
EPS
|
2013
|
EPS
|
2014
|
EPS
|
2013
|
EPS
|
Income (loss) from
Continuing Operations
|
$
(3.1)
|
|
$
34.8
|
|
$
114.8
|
|
$ 219.7
|
|
Less: Net
Income Attributable to Noncontrolling Interest
|
0.7
|
|
0.3
|
|
2.1
|
|
0.2
|
|
|
$
(3.8)
|
$
(0.04)
|
$
34.5
|
$
0.36
|
$
112.7
|
$
1.23
|
$ 219.5
|
$
1.47
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Gain on sale
of real estate in Brazil (1)
|
-
|
-
|
-
|
-
|
(22.6)
|
(0.25)
|
-
|
-
|
Charges for
cost-reduction initiatives and plant
rationalization costs (2)
|
1.5
|
0.02
|
4.5
|
0.05
|
12.5
|
0.14
|
16.8
|
0.17
|
Aerospace
impairment and restructuring charges (3)
|
109.5
|
1.22
|
-
|
-
|
109.5
|
1.19
|
-
|
-
|
Provision for
income taxes (4)
|
(37.3)
|
(0.42)
|
(0.9)
|
(0.01)
|
(36.7)
|
(0.40)
|
(5.2)
|
(0.05)
|
Dilutive
effect on special items (5)
|
-
|
(0.01)
|
-
|
-
|
-
|
-
|
-
|
-
|
Total Adjustments:
|
73.7
|
0.81
|
3.6
|
0.04
|
62.7
|
0.68
|
11.6
|
0.12
|
Net Income
Attributable to The Timken Company, after adjustments
|
$
69.9
|
$
0.77
|
$
38.1
|
$
0.40
|
$
175.4
|
$
1.91
|
$ 231.1
|
$
1.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Gain on the sale of real estate related to the sale of the former
manufacturing facility in Sao Paulo, Brazil.
|
|
|
|
|
|
|
|
|
|
(2)
Cost-reduction initiatives and plant rationalization costs related
to plant closures, the rationalization of certain plants, and
severance related to cost reduction
initiatives.
|
|
|
|
|
|
|
|
|
|
(3)
Aerospace impairment and restructuring charges related to goodwill
impairment charges, inventory valuation adjustments, and
severance.
|
|
|
|
|
|
|
|
|
|
(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.
|
|
|
|
|
|
|
|
|
|
(5)
The Dilutive effect on special items represents the impact of
calculating earnings per share on loss from continuing operations
using average shares outstanding compared to calculating earnings
per share on income from continuing operations, as adjusted, using
average shares outstanding - assuming dilution of 90,523,412 for
the third quarter of 2014.
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Gross Profit, After Adjustments, to Gross Profit as a Percentage of
Sales and Gross Profit, After Adjustments, to Gross
Profit
|
The following
reconciliation is provided as additional relevant information about
the Company's gross profit performance. Management
believes that gross profit and gross
profit margin, after adjustments, are representative of the
Company's core operations and therefore useful to
investors.
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
(Dollars in
millions, except share data) (Unaudited)
|
September
30,
|
September
30,
|
|
2014
|
Percentage to
Net Sales
|
2013
|
Percentage to
Net Sales
|
2014
|
Percentage to
Net Sales
|
2013
|
Percentage to
Net Sales
|
Gross
Profit
|
$
225.5
|
28.6 %
|
$
202.0
|
27.6 %
|
$
677.2
|
29.3 %
|
$
660.5
|
28.9 %
|
|
|
|
|
|
|
|
|
|
Aerospace Inventory
Valuation Adjustment and Other
|
20.2
|
2.6 %
|
—
|
—%
|
20.2
|
0.9 %
|
—
|
—%
|
Gross Profit, After
Adjustments
|
$
245.7
|
31.2 %
|
$
202.0
|
27.6 %
|
$
697.4
|
30.1 %
|
$
660.5
|
28.9 %
|
|
|
|
|
|
|
|
|
|
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
|
Nine Months
Ended
|
(Dollars in
millions, except share data) (Unaudited)
|
September
30,
|
September
30,
|
|
2014
|
Percentage to
Net Sales
|
2013
|
Percentage to
Net Sales
|
2014
|
Percentage to
Net Sales
|
2013
|
Percentage to
Net Sales
|
Net Income
(Loss)
|
$
(14.1)
|
(1.8)%
|
$
52.5
|
7.2 %
|
$
133.5
|
5.8 %
|
$
210.3
|
9.2 %
|
|
|
|
|
|
|
|
|
|
Income (Loss) From
Discontinued Operations, net of income taxes
|
11.0
|
1.4 %
|
(17.7)
|
(2.4)%
|
(18.7)
|
(0.8)%
|
(68.6)
|
(3.0)%
|
Provision (benefit)
for income taxes
|
(0.9)
|
(0.1)%
|
19.9
|
2.7 %
|
54.7
|
2.4 %
|
78.0
|
3.4 %
|
Interest
expense
|
9.1
|
1.2 %
|
5.0
|
0.7 %
|
20.4
|
0.9 %
|
17.5
|
0.8 %
|
Interest
income
|
(1.0)
|
(0.1)%
|
(0.4)
|
(0.1)%
|
(3.1)
|
(0.1)%
|
(1.4)
|
(0.1)%
|
Consolidated earnings
before interest and taxes (EBIT)
|
$
4.1
|
0.5 %
|
$
59.3
|
8.1 %
|
$
186.8
|
8.1 %
|
$
235.8
|
10.3 %
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Gain on sale
of real estate in Brazil (1)
|
—
|
—%
|
—
|
—%
|
(22.6)
|
(1.0)%
|
—
|
—%
|
Charges for
cost-reduction initiatives and plant
rationalization costs (2)
|
1.5
|
0.2 %
|
4.5
|
0.6 %
|
12.5
|
0.5 %
|
16.8
|
0.7 %
|
Aerospace
impairment and restructuring charges (3)
|
109.5
|
13.9 %
|
—
|
—%
|
109.5
|
4.7 %
|
—
|
—%
|
Total Adjustments
|
111.0
|
14.1 %
|
4.5
|
0.6 %
|
99.4
|
4.3 %
|
16.8
|
0.7 %
|
Consolidated earnings
before interest and taxes (EBIT), after adjustments
|
$
115.1
|
14.6 %
|
$
63.8
|
8.7 %
|
$
286.2
|
12.4 %
|
$
252.6
|
11.0 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Gain on the sale of real estate related to the sale of the former
manufacturing facility in Sao Paulo, Brazil.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
Cost-reduction initiatives and plant rationalization costs related
to plant closures, the rationalization of certain plants, and
severance related to cost reduction
initiatives.
|
|
|
|
|
|
|
|
|
|
(3)
Aerospace impairment and restructuring charges related to goodwill
impairment charges, inventory valuation adjustments, and
severance.
|
|
|
|
|
|
|
|
|
|
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
September
30, 2014
|
Percentage to Net
Sales
|
Three
Months
Ended
September
30, 2013
|
Percentage to Net
Sales
|
Nine
Months
Ended
September
30, 2014
|
Percentage to Net
Sales
|
Nine
Months
Ended
September
30, 2013
|
Percentage to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
47.0
|
13.2%
|
$
27.8
|
8.0%
|
$
144.5
|
13.5%
|
$
132.1
|
11.6%
|
|
|
|
|
|
|
|
|
|
Gain on sale of real
estate in Brazil (1)
|
-
|
—%
|
-
|
—%
|
(22.6)
|
(2.1)%
|
-
|
—%
|
Charges for
cost-reduction initiatives and plant rationalization
costs(2)
|
1.7
|
0.5%
|
3.7
|
1.1%
|
8.8
|
0.8%
|
15.5
|
1.4%
|
Earnings before
interest and taxes (EBIT), after adjustments
|
$
48.7
|
13.7%
|
$
31.5
|
9.1%
|
$
130.7
|
12.2%
|
$
147.6
|
13.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Process
Industries
|
(Dollars in
millions) (Unaudited)
|
Three
Months
Ended
September
30, 2014
|
Percentage to Net
Sales
|
Three
Months
Ended
September
30, 2013
|
Percentage to Net
Sales
|
Nine
Months
Ended
September
30, 2014
|
Percentage to Net
Sales
|
Nine
Months
Ended
September
30, 2013
|
Percentage to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
77.4
|
21.8%
|
$
51.1
|
16.6%
|
$
196.0
|
19.6%
|
$
149.6
|
16.5%
|
|
|
|
|
|
|
|
|
|
Charges for
cost-reduction initiatives and plant rationalization
costs(2)
|
(0.4)
|
(0.1)%
|
0.5
|
—%
|
2.5
|
0.2%
|
0.9
|
0.1 %
|
Earnings before
interest and taxes (EBIT), after adjustments
|
$
77.0
|
21.7%
|
$
51.6
|
16.6%
|
$
198.5
|
19.8%
|
$
150.5
|
16.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace
|
(Dollars in
millions) (Unaudited)
|
Three
Months
Ended
September
30, 2014
|
Percentage to Net
Sales
|
Three
Months
Ended
September
30, 2013
|
Percentage to Net
Sales
|
Nine
Months
Ended
September
30, 2014
|
Percentage to Net
Sales
|
Nine
Months
Ended
September
30, 2013
|
Percentage to Net
Sales
|
Earnings (loss)
before interest and taxes (EBIT)
|
$
(104.8)
|
(139.2)%
|
$
4.6
|
6.0%
|
$
(96.5)
|
(40.2)%
|
$
21.0
|
8.7%
|
|
|
|
|
|
|
|
|
|
Charges for
cost-reduction initiatives and plant rationalization
costs(2)
|
0.2
|
0.3%
|
0.3
|
0.4 %
|
1.2
|
0.5%
|
0.4
|
0.2 %
|
Aerospace impairment
and restructuring charges(3)
|
109.5
|
145.4%
|
-
|
—%
|
109.5
|
45.7%
|
-
|
—%
|
Earnings before
interest and taxes (EBIT), after adjustments
|
$
4.9
|
6.5%
|
$
4.9
|
6.4%
|
$
14.2
|
5.9%
|
$
21.4
|
8.9%
|
|
|
|
|
|
|
|
|
|
(1)
Gain on the sale of real estate related to the sale of the former
manufacturing facility in Sao Paulo, Brazil.
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
Cost-reduction initiatives and plant rationalization costs related
to plant closures, the rationalization of certain plants, and
severance related to cost reduction
initiatives.
|
|
|
|
|
|
|
|
|
|
(3)
Aerospace impairment and restructuring charges related to goodwill
impairment charges, inventory valuation adjustments, and
severance.
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
|
September 30,
2014
|
December 31,
2013
|
Short-term
debt
|
|
|
$
9.4
|
$
269.3
|
Long-term
debt
|
|
|
522.0
|
176.4
|
Total Debt
|
|
|
$
531.4
|
$
445.7
|
Less: Cash, cash
equivalents and restricted cash
|
|
|
(253.5)
|
(399.7)
|
Net Debt
|
|
|
$
277.9
|
$
46.0
|
|
|
|
|
|
Total
equity
|
|
|
$
1,651.0
|
$
2,648.6
|
|
|
|
|
|
Ratio of Total Debt
to Capital
|
|
|
24.3 %
|
14.4 %
|
Ratio of Net Debt to
Capital
|
|
|
14.4 %
|
1.7 %
|
|
|
|
|
|
|
|
|
|
|
Reconciliations of
Free Cash Flow to GAAP Net Cash Provided by Operating
Activities:
|
Management believes
that 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
|
Nine Months
Ended
|
|
September
30,
|
September
30,
|
|
2014
|
2013
|
2014
|
2013
|
Net cash provided by
operating activities from continuing operations
|
$
90.3
|
$
54.4
|
$
172.8
|
$
136.6
|
Less: capital
expenditures
|
(38.6)
|
(27.7)
|
(87.1)
|
(91.6)
|
Free cash flow
|
$
51.7
|
$
26.7
|
$
85.7
|
$
45.0
|
|
|
|
|
|
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SOURCE The Timken Company