UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): January 29, 2015
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 |
|
34-0577130 |
| (Commission
File Number) |
|
(IRS Employer
Identification No.) |
4500 Mt. Pleasant St., N.W., North Canton, Ohio 44720-5450
(Address of Principal Executive Offices) (Zip Code)
(234) 262-3000
(Registrant’s telephone number, including area code)
(Former Name or Former Address, if Changed Since Last Report)
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)) |
| Item 2.02 |
Results of Operation and Financial Condition |
The Timken Company issued a press release
on January 29, 2015 announcing results for the fourth quarter and full year 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.
Also on January 29, 2015, The Timken Company will host 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.
| Item 9.01 |
Financial Statements and Exhibits. |
(d) Exhibits.
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| Exhibit
No. |
|
Description |
|
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| 99.1 |
|
Press Release of The Timken Company dated January 29, 2015. |
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| 99.2 |
|
Conference Call Materials dated January 29, 2015. |
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 Executive Vice
President, General Counsel and Secretary |
Date: January 29, 2015
EXHIBIT INDEX
|
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| Exhibit
No. |
|
Description |
|
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| 99.1 |
|
Press Release of The Timken Company dated January 29, 2015. |
|
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| 99.2 |
|
Conference Call Materials dated January 29, 2015. |
Exhibit 99.1
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NEWS RELEASE |
Timken Improves Fourth Quarter,
Full-Year 2014 Results;
Expects Continued EPS Growth in 2015
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• |
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Fourth-quarter sales up 2 percent over prior year despite currency |
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• |
|
Fourth-quarter adjusted earnings of $0.65 per diluted share (EPS) up 35 percent from year-ago period |
| |
• |
|
Full-year 2014 adjusted EPS of $2.55, up 23 percent from 2013 |
| |
• |
|
2015 adjusted EPS estimated to be $2.65 to 2.75 |
NORTH CANTON, Ohio: Jan. 29,
2015 — The Timken Company (NYSE: TKR; www.timken.com) today reported fourth-quarter sales of $762.2 million, up approximately 2 percent over the prior-year quarter. The revenue increase was driven
by organic growth in Process Industries, partially offset by unfavorable currency and a decrease in Mobile Industries sales due to planned program exits. For the fourth quarter, the company generated net income from continuing operations of
$38.9 million, or $0.43 per diluted share; this compares with $33.7 million or $0.35 per diluted share from a year ago.
Adjusted net
income from continuing operations in the fourth quarter was $57.9 million or $0.65 per diluted share (reference table for adjustments). This was up from $45.2 million or $0.48 per diluted share for the same period a year ago. Revenue growth,
lower manufacturing costs and a lower tax rate drove the net income improvement, which was partially offset by currency. Earnings per share in the quarter also benefited from fewer shares outstanding versus the prior period.
For 2014, sales were $3.1 billion, up slightly over 2013. Excluding the impact of $110 million of planned program exits in Mobile
Industries that concluded in 2013, sales were up approximately 5 percent. Net income from continuing operations was $144.5 million, or $1.58 per diluted share, which compared with $175.2 million or $1.82 per diluted share in 2013.
Adjusted net income from continuing operations improved in 2014 to $232.9 million or $2.55 per diluted share. This compares with $198.6
million or $2.07 per diluted share in the prior year. Revenue growth and cost reductions drove the net income improvement. In addition, earnings per share also benefited from the company’s share repurchase program.
“We are pleased to report solid fourth-quarter results that reflect strong execution in a slow-growth, strong-dollar environment,”
said Timken President and Chief Executive Officer Richard G. Kyle. “For the full year, we were able to grow the top line modestly and convert that revenue growth into a 23 percent increase in adjusted EPS through our continued focus
on portfolio improvement and cost reduction, complemented by our share repurchase program.
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The Timken Company |
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“Looking ahead to 2015, we are viewing our markets slightly more cautiously than 2014. New
business wins combined with modest market growth are expected to result in approximately 4 percent organic growth, but that will largely be offset by the impact of currency,” Kyle added. “As in 2014, we expect to continue to improve our
cost structure and mix to deliver solid earnings per share growth on the revenue. We remain focused on creating value for our customers and are well-positioned to respond favorably should the economy grow faster than we are currently
projecting.”
Adjusted Net Income and Diluted Earnings Per Share (EPS) from Continuing Operations
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Fourth Quarter |
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Full Year |
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($ in Mils.) |
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EPS |
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($ in Mils.) |
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EPS |
|
| 2014 Net Income from Continuing Operations |
|
$ |
38.9 |
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|
$ |
0.43 |
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|
$ |
144.5 |
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$ |
1.58 |
|
| 2014 Adjustments (pre-tax): |
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| - Pension settlement charges |
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33.0 |
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|
0.37 |
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33.7 |
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|
0.37 |
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| - Aerospace impairment and restructuring charges |
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3.7 |
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|
0.04 |
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|
121.6 |
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|
1.33 |
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| - Charges for cost-reduction initiatives and plant rationalization costs |
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2.2 |
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0.02 |
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14.6 |
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0.16 |
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| - Gain on sale of real estate in Brazil |
|
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— |
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— |
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(22.6 |
) |
|
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(0.25 |
) |
| - Provision (benefit) for income taxes |
|
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(19.9 |
) |
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(0.22 |
) |
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(58.9 |
) |
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(0.65 |
) |
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| 2014 Total adjustments |
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19.0 |
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|
0.21 |
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|
88.4 |
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|
0.97 |
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| 2014 Adjusted Net Income from Continuing Operations |
|
$ |
57.9 |
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|
$ |
0.65 |
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$ |
232.9 |
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$ |
2.55 |
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Among recent developments, the company:
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• |
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Continued to execute its aerospace business restructuring plan, completing the sale of its engine overhaul assets in Mesa, Arizona; |
| |
• |
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Acquired the assets of Revolvo Ltd. in the U.K., bringing additional breadth to the Timken portfolio of industrial product solutions; |
| |
• |
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Entered into a group annuity contract to transfer approximately $600 million of retiree pension obligations to Prudential Insurance Company of America, funded entirely with plan assets; and |
| |
• |
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Completed a special program to offer lump-sum pension distributions to eligible former employees. |
Fourth-Quarter Segment Results
Mobile Industries, which now also includes aerospace results for all periods, reported fourth-quarter sales of $389.5 million, down
approximately 7 percent from the same period a year ago. More than half of the decrease came from planned program exits in the light vehicle sector that were completed in 2013. The remainder was largely due to declines in aerospace and
agriculture, and the impact of currency, partially offset by growth in the rail sector. Earnings before interest and taxes (EBIT) for the fourth quarter were $22.4 million or 5.8 percent of sales. This compares with EBIT of
$38.0 million or 9.1 percent of sales during the same period in 2013.
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The Timken Company |
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2
Adjusted EBIT was $28.6 million or 7.3 percent of sales, compared with $34.0 million or 8.1 percent of sales in the fourth quarter last year. The decline in earnings was driven by lower
volume and unfavorable mix, partially offset by lower manufacturing costs.
Process Industries sales of $372.7 million for the
fourth quarter were up approximately 12 percent over the same period last year. Sales were driven by organic growth in both the original equipment and aftermarket channels as well as the benefit of acquisitions, partially offset by currency.
EBIT for the quarter was $79.7 million or 21.4 percent of sales on improved volume and strong manufacturing performance. This compares with EBIT of $50.9 million or 15.4 percent of sales during the same period in 2013.
2015 Outlook
For 2015, the
company expects year-over-year revenue to be up a net 1 percent after offsetting currency from an expected increase of approximately 4 percent organic growth. The outlook for full-year 2015 by segment:
| |
• |
|
Mobile Industries’ sales are expected to be roughly flat to down 2 percent. Without the impact of currency, sales are expected to increase 1 to 3 percent reflecting organic growth primarily from the light
vehicle market sector, partially offset by a decline in the agriculture market. Full-year Mobile Industries EBIT margins are expected be within the targeted 10 to 13 percent range. |
| |
• |
|
Process Industries’ sales are expected to increase approximately 2 to 4 percent. Excluding currency, sales are expected to increase 5 to 7 percent driven by organic growth in original equipment sectors,
including wind energy and marine, the industrial aftermarket and the benefit of acquisitions. Full-year Process Industries EBIT margins are expected to be near the high end of the targeted margin range of 17 to 20 percent. |
Timken projects 2015 earnings per diluted share to range from $0.85 to $0.95, which includes $1.80 of non-cash pension settlement charges and
$0.20 per share of charges associated with cost-reduction initiatives and plant rationalizations, partially offset by $0.25 of income associated with discrete tax accrual adjustments.
Excluding these items, 2015 adjusted earnings per diluted share are expected to range from $2.65 to $2.75, up 6 percent at the midpoint, as
organic growth and the benefit of margin expansion initiatives are expected to be largely offset by the impact of currency.
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 |
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3
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| Conference Call: |
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Thursday, Jan. 29, 2015 |
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11:00 a.m. Eastern Time |
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Live Dial-In: 888-211-4542 or 816-581-1736 |
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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 |
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| Conference Call Replay: |
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Replay Dial-In available through Feb. 12, 2015: |
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888-203-1112 or 719-457-0820 |
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Replay Passcode: 8692909 |
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 $3.1 billion in sales in 2014. With approximately 16,000 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 fourth quarter and full year 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, investment performance and other tactics designed to reduce risk; 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 |
|
Telephone: (234) 262-7446 |
| mediarelations@timken.com |
|
steve.tschiegg@timken.com |
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The Timken Company |
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4
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PRESS RELEASE |
The Timken Company
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Dollars in
millions, except share data) (Unaudited)
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Three Months Ended
December 31, |
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|
Twelve Months Ended
December 31, |
|
| |
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2014 |
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2013 |
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2014 |
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|
2013 |
|
| Net sales |
|
$ |
762.2 |
|
|
$ |
749.5 |
|
|
$ |
3,076.2 |
|
|
$ |
3,035.4 |
|
| Cost of products sold |
|
|
541.4 |
|
|
|
541.6 |
|
|
|
2,178.2 |
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|
2,167.0 |
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| Gross Profit |
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220.8 |
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|
|
207.9 |
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|
898.0 |
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|
868.4 |
|
| Selling, general & administrative expenses (SG&A) |
|
|
131.7 |
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134.0 |
|
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|
542.5 |
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|
546.6 |
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| Impairment and restructuring |
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5.4 |
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3.8 |
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113.4 |
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8.7 |
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| Pension settlement charges |
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|
33.0 |
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0.5 |
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33.7 |
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7.2 |
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| Operating Income |
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50.7 |
|
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|
69.6 |
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|
208.4 |
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|
305.9 |
|
| Other income (expense), net |
|
|
(0.8 |
) |
|
|
7.2 |
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|
19.9 |
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|
6.7 |
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| Earnings Before Interest and Taxes (EBIT) (1) |
|
|
49.9 |
|
|
|
76.8 |
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|
|
228.3 |
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|
312.6 |
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| Interest expense, net |
|
|
(7.0 |
) |
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|
(6.4 |
) |
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|
(24.3 |
) |
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|
(22.5 |
) |
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| Income From Continuing Operations Before Income Taxes |
|
|
42.9 |
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|
70.4 |
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|
|
204.0 |
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|
|
290.1 |
|
| Provision for income taxes |
|
|
3.6 |
|
|
|
36.6 |
|
|
|
57.0 |
|
|
|
114.6 |
|
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|
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|
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| Income From Continuing Operations |
|
|
39.3 |
|
|
|
33.8 |
|
|
|
147.0 |
|
|
|
175.5 |
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| Income from Discontinued Operations, net of income taxes(2) |
|
|
3.0 |
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|
|
18.9 |
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|
|
21.7 |
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|
|
87.5 |
|
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|
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| Net Income |
|
|
42.3 |
|
|
|
52.7 |
|
|
|
168.7 |
|
|
|
263.0 |
|
| Less: Net Income Attributable to Noncontrolling Interest |
|
|
0.4 |
|
|
|
0.1 |
|
|
|
2.5 |
|
|
|
0.3 |
|
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| Net Income Attributable to The Timken Company |
|
$ |
41.9 |
|
|
$ |
52.6 |
|
|
$ |
166.2 |
|
|
$ |
262.7 |
|
|
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| Net Income per Common Share Attributable to The Timken Company Common Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic earnings per share - Continuing Operations |
|
$ |
0.44 |
|
|
$ |
0.36 |
|
|
$ |
1.60 |
|
|
$ |
1.84 |
|
| Basic earnings per share - Discontinued Operations |
|
$ |
0.03 |
|
|
$ |
0.20 |
|
|
$ |
0.24 |
|
|
$ |
0.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic earnings per share |
|
$ |
0.47 |
|
|
$ |
0.56 |
|
|
$ |
1.84 |
|
|
$ |
2.76 |
|
| Diluted earnings per share - Continuing Operations |
|
$ |
0.43 |
|
|
$ |
0.35 |
|
|
$ |
1.58 |
|
|
$ |
1.82 |
|
| Diluted earnings per share - Discontinued Operations |
|
$ |
0.04 |
|
|
$ |
0.20 |
|
|
$ |
0.24 |
|
|
$ |
0.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted earnings per share |
|
$ |
0.47 |
|
|
$ |
0.55 |
|
|
$ |
1.82 |
|
|
$ |
2.74 |
|
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|
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|
|
|
| Average Shares Outstanding |
|
|
88,633,324 |
|
|
|
93,868,899 |
|
|
|
90,367,346 |
|
|
|
94,989,561 |
|
| Average Shares Outstanding - assuming dilution |
|
|
89,572,040 |
|
|
|
94,636,017 |
|
|
|
91,217,142 |
|
|
|
95,823,728 |
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| (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. |
5
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|
|
PRESS RELEASE |
BUSINESS SEGMENTS
(Dollars in millions) (Unaudited)
|
|
|
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|
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| |
|
Three Months Ended
December 31, |
|
|
Twelve Months Ended
December 31, |
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
| Mobile Industries (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net sales to external customers |
|
$ |
389.5 |
|
|
$ |
418.1 |
|
|
$ |
1,685.4 |
|
|
$ |
1,775.8 |
|
| Earnings before interest and taxes (EBIT) (2) |
|
$ |
22.4 |
|
|
$ |
38.0 |
|
|
$ |
65.6 |
|
|
$ |
193.7 |
|
| EBIT Margin (2) |
|
|
5.8 |
% |
|
|
9.1 |
% |
|
|
3.9 |
% |
|
|
10.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Process Industries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net sales to external customers |
|
$ |
372.7 |
|
|
$ |
331.4 |
|
|
$ |
1,390.8 |
|
|
$ |
1,259.6 |
|
| Earnings before interest and taxes (EBIT) (2) |
|
$ |
79.7 |
|
|
$ |
50.9 |
|
|
$ |
267.1 |
|
|
$ |
189.3 |
|
| EBIT Margin (2) |
|
|
21.4 |
% |
|
|
15.4 |
% |
|
|
19.2 |
% |
|
|
15.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unallocated corporate expense |
|
$ |
(19.2 |
) |
|
$ |
(12.1 |
) |
|
$ |
(71.4 |
) |
|
$ |
(70.4 |
) |
| Unallocated pension settlement charges |
|
$ |
(33.0 |
) |
|
$ |
— |
|
|
$ |
(33.0 |
) |
|
$ |
— |
|
| Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net sales to external customers |
|
$ |
762.2 |
|
|
$ |
749.5 |
|
|
$ |
3,076.2 |
|
|
$ |
3,035.4 |
|
| Earnings before interest and taxes (EBIT) (2) |
|
$ |
49.9 |
|
|
$ |
76.8 |
|
|
$ |
228.3 |
|
|
$ |
312.6 |
|
| EBIT Margin (2) |
|
|
6.5 |
% |
|
|
10.2 |
% |
|
|
7.4 |
% |
|
|
10.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Effective October 1, 2014, the results for the former Aerospace segment were primarily reported in the Mobile Industries segment. All prior periods presented reflect this change. |
| (2) |
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. |
6
|
|
|
|
|
|
PRESS RELEASE |
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions) (Unaudited)
|
|
|
|
|
|
|
|
|
| |
|
December 31,
2014 |
|
|
December 31,
2013 |
|
| ASSETS |
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
278.8 |
|
|
$ |
384.6 |
|
| Restricted cash |
|
|
15.3 |
|
|
|
15.1 |
|
| Accounts receivable |
|
|
475.7 |
|
|
|
444.0 |
|
| Inventories, net |
|
|
585.5 |
|
|
|
582.6 |
|
| Other current assets |
|
|
126.6 |
|
|
|
144.7 |
|
| Current assets, discontinued operations |
|
|
— |
|
|
|
366.5 |
|
|
|
|
|
|
|
|
|
|
| Total Current Assets |
|
|
1,481.9 |
|
|
|
1,937.5 |
|
| Property, Plant and Equipment, net |
|
|
780.5 |
|
|
|
855.8 |
|
| Goodwill |
|
|
259.5 |
|
|
|
346.1 |
|
| Non-current pension assets |
|
|
176.2 |
|
|
|
223.5 |
|
| Other assets |
|
|
303.3 |
|
|
|
265.8 |
|
| Non-current assets, discontinued operations |
|
|
— |
|
|
|
849.2 |
|
|
|
|
|
|
|
|
|
|
| Total Assets |
|
$ |
3,001.4 |
|
|
$ |
4,477.9 |
|
|
|
|
|
|
|
|
|
|
| LIABILITIES |
|
|
|
|
|
|
|
|
| Accounts payable |
|
$ |
143.9 |
|
|
$ |
139.9 |
|
| Short-term debt |
|
|
8.1 |
|
|
|
269.3 |
|
| Income taxes |
|
|
80.4 |
|
|
|
114.3 |
|
| Accrued expenses |
|
|
301.4 |
|
|
|
304.3 |
|
| Current liabilities, discontinued operations |
|
|
— |
|
|
|
152.3 |
|
|
|
|
|
|
|
|
|
|
| Total Current Liabilities |
|
|
533.8 |
|
|
|
980.1 |
|
| Long-term debt |
|
|
522.1 |
|
|
|
176.4 |
|
| Accrued pension cost |
|
|
165.9 |
|
|
|
159.0 |
|
| Accrued postretirement benefits cost |
|
|
141.8 |
|
|
|
138.3 |
|
| Other non-current liabilities |
|
|
48.7 |
|
|
|
138.8 |
|
| Non-current liabilities, discontinued operations |
|
|
— |
|
|
|
236.7 |
|
|
|
|
|
|
|
|
|
|
| Total Liabilities |
|
|
1,412.3 |
|
|
|
1,829.3 |
|
| EQUITY |
|
|
|
|
|
|
|
|
| The Timken Company shareholders’ equity |
|
|
1,576.2 |
|
|
|
2,636.6 |
|
| Noncontrolling Interest |
|
|
12.9 |
|
|
|
12.0 |
|
|
|
|
|
|
|
|
|
|
| Total Equity |
|
|
1,589.1 |
|
|
|
2,648.6 |
|
|
|
|
|
|
|
|
|
|
| Total Liabilities and Equity |
|
$ |
3,001.4 |
|
|
$ |
4,477.9 |
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
PRESS RELEASE |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended
December 31, |
|
|
Twelve Months Ended
December 31, |
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
| Cash Provided (Used) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income attributable to The Timken Company |
|
$ |
41.9 |
|
|
$ |
52.6 |
|
|
$ |
166.2 |
|
|
$ |
262.7 |
|
| Net income from discontinued operations |
|
|
(3.0 |
) |
|
|
(18.9 |
) |
|
|
(21.7 |
) |
|
|
(87.5 |
) |
| Net income attributable to noncontrolling interest |
|
|
0.4 |
|
|
|
0.1 |
|
|
|
2.5 |
|
|
|
0.3 |
|
| Adjustments to reconcile net income to net cash provided (used) by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
|
33.6 |
|
|
|
36.1 |
|
|
|
137.0 |
|
|
|
142.4 |
|
| Impairment charges |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
98.9 |
|
|
|
0.1 |
|
| (Gain) loss on sale of assets |
|
|
0.7 |
|
|
|
(3.4 |
) |
|
|
(20.2 |
) |
|
|
(1.1 |
) |
| Pension and other postretirement expense |
|
|
39.5 |
|
|
|
13.0 |
|
|
|
62.0 |
|
|
|
55.1 |
|
| Pension and other postretirement benefit contributions and payments |
|
|
(2.3 |
) |
|
|
(13.1 |
) |
|
|
(49.9 |
) |
|
|
(93.4 |
) |
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts receivable |
|
|
4.3 |
|
|
|
0.2 |
|
|
|
(48.3 |
) |
|
|
(4.6 |
) |
| Inventories |
|
|
25.3 |
|
|
|
35.9 |
|
|
|
(26.8 |
) |
|
|
34.6 |
|
| Accounts payable |
|
|
(39.3 |
) |
|
|
(1.0 |
) |
|
|
8.0 |
|
|
|
0.9 |
|
| Accrued expenses |
|
|
9.6 |
|
|
|
20.3 |
|
|
|
2.2 |
|
|
|
(39.6 |
) |
| Income taxes |
|
|
(21.0 |
) |
|
|
29.8 |
|
|
|
(68.6 |
) |
|
|
34.5 |
|
| Other, net |
|
|
16.6 |
|
|
|
4.5 |
|
|
|
37.9 |
|
|
|
(11.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Cash Provided by Operating Activities - Continuing Operations |
|
$ |
106.4 |
|
|
$ |
156.2 |
|
|
$ |
279.2 |
|
|
$ |
292.8 |
|
| Net Cash Provided by Operating Activities - Discontinued Operations |
|
|
5.2 |
|
|
|
23.9 |
|
|
|
27.8 |
|
|
|
137.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Cash Provided by Operating Activities |
|
$ |
111.6 |
|
|
$ |
180.1 |
|
|
$ |
307.0 |
|
|
$ |
430.0 |
|
| INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Capital expenditures |
|
$ |
(39.7 |
) |
|
$ |
(42.0 |
) |
|
$ |
(126.8 |
) |
|
$ |
(133.6 |
) |
| Acquisitions |
|
|
(9.7 |
) |
|
|
0.3 |
|
|
|
(21.7 |
) |
|
|
(64.2 |
) |
| Other |
|
|
11.8 |
|
|
|
5.5 |
|
|
|
30.8 |
|
|
|
13.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Cash Used by Investing Activities - Continuing Operations |
|
$ |
(37.6 |
) |
|
$ |
(36.2 |
) |
|
$ |
(117.7 |
) |
|
$ |
(184.1 |
) |
| Net Cash Used by Investing Activities - Discontinued Operations |
|
|
— |
|
|
|
(73.2 |
) |
|
|
(77.0 |
) |
|
|
(191.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Cash Used by Investing Activities |
|
$ |
(37.6 |
) |
|
$ |
(109.4 |
) |
|
$ |
(194.7 |
) |
|
$ |
(376.0 |
) |
| FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash dividends paid to shareholders |
|
$ |
(22.1 |
) |
|
$ |
(21.5 |
) |
|
$ |
(90.3 |
) |
|
$ |
(87.5 |
) |
| Purchase of treasury shares |
|
|
(4.4 |
) |
|
|
(81.9 |
) |
|
|
(270.9 |
) |
|
|
(189.2 |
) |
| Net proceeds (payments) from credit facilities |
|
|
(0.3 |
) |
|
|
(2.8 |
) |
|
|
(9.8 |
) |
|
|
4.8 |
|
| Net proceeds (payments) from long-term debt |
|
|
(0.1 |
) |
|
|
1.8 |
|
|
|
95.5 |
|
|
|
(8.0 |
) |
| Distribution of TimkenSteel |
|
|
— |
|
|
|
— |
|
|
|
(46.5 |
) |
|
|
— |
|
| Other |
|
|
(0.2 |
) |
|
|
(1.1 |
) |
|
|
19.8 |
|
|
|
30.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Cash Used by Financing Activities - Continuing Operations |
|
$ |
(27.1 |
) |
|
$ |
(105.5 |
) |
|
$ |
(302.2 |
) |
|
$ |
(249.3 |
) |
| Net Cash Provided by Financing Activities - Discontinued Operations |
|
|
— |
|
|
|
— |
|
|
|
100.0 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Cash Used by Financing Activities |
|
$ |
(27.1 |
) |
|
$ |
(105.5 |
) |
|
$ |
(202.2 |
) |
|
$ |
(249.3 |
) |
| Effect of exchange rate changes on cash |
|
|
(6.3 |
) |
|
|
1.3 |
|
|
|
(15.9 |
) |
|
|
(6.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Increase (decrease) In Cash and Cash Equivalents |
|
$ |
40.6 |
|
|
$ |
(33.5 |
) |
|
$ |
(105.8 |
) |
|
$ |
(201.8 |
) |
| Cash and cash equivalents at beginning of period |
|
|
238.2 |
|
|
|
418.1 |
|
|
|
384.6 |
|
|
|
586.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and Cash Equivalents at End of Period |
|
$ |
278.8 |
|
|
$ |
384.6 |
|
|
$ |
278.8 |
|
|
$ |
384.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
PRESS RELEASE |
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
December 31, |
|
|
Twelve Months Ended
December 31, |
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
| Net Income |
|
$ |
42.3 |
|
|
$ |
52.7 |
|
|
$ |
168.7 |
|
|
$ |
263.0 |
|
|
|
|
|
|
| Income From Discontinued Operations, net of income taxes |
|
|
(3.0 |
) |
|
|
(18.9 |
) |
|
|
(21.7 |
) |
|
|
(87.5 |
) |
| Provision for income taxes |
|
|
3.6 |
|
|
|
36.6 |
|
|
|
57.0 |
|
|
|
114.6 |
|
| Interest expense |
|
|
8.3 |
|
|
|
6.9 |
|
|
|
28.7 |
|
|
|
24.4 |
|
| Interest income |
|
|
(1.3 |
) |
|
|
(0.5 |
) |
|
|
(4.4 |
) |
|
|
(1.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Consolidated earnings before interest and taxes (EBIT) |
|
$ |
49.9 |
|
|
$ |
76.8 |
|
|
$ |
228.3 |
|
|
$ |
312.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
PRESS RELEASE |
Reconciliations of Adjusted Net Income from Continuing Operations and Net Income from Continuing
Operations to GAAP Income from Continuing Operations and Adjusted Earnings Per Share to GAAP Earnings Per Share:
These reconciliations are provided as
additional relevant information about the Company’s performance. Management believes that adjusted net income from continuing operations, net income from continuing operations, and diluted earnings per share, adjusted to remove: (a) gain
on the sale of real estate in Brazil; (b) charges for cost-reduction initiatives and plant rationalization costs; (c) Aerospace impairment and restructuring charges; (d) pension settlement charges; and (e) provision for income
taxes are representative of the Company’s performance and therefore useful to investors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Twelve Months Ended |
|
| (Dollars in millions, except share data) (Unaudited) |
|
December 31, |
|
|
December 31, |
|
| |
|
2014 |
|
|
EPS |
|
|
2013 |
|
|
EPS |
|
|
2014 |
|
|
EPS |
|
|
2013 |
|
|
EPS |
|
| Income from Continuing Operations |
|
$ |
39.3 |
|
|
|
|
|
|
$ |
33.8 |
|
|
|
|
|
|
$ |
147.0 |
|
|
|
|
|
|
$ |
175.5 |
|
|
|
|
|
| Less: Net Income Attributable to Noncontrolling Interest |
|
|
0.4 |
|
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
2.5 |
|
|
|
|
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Income from Continuing Operations |
|
$ |
38.9 |
|
|
$ |
0.43 |
|
|
$ |
33.7 |
|
|
$ |
0.35 |
|
|
$ |
144.5 |
|
|
$ |
1.58 |
|
|
$ |
175.2 |
|
|
$ |
1.82 |
|
|
|
|
|
|
|
|
|
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gain on sale of real estate in Brazil (1) |
|
|
— |
|
|
|
— |
|
|
|
(5.4 |
) |
|
|
(0.06 |
) |
|
|
(22.6 |
) |
|
|
(0.25 |
) |
|
|
(5.4 |
) |
|
|
(0.06 |
) |
| Charges for cost-reduction initiatives and plant rationalization costs
(2) |
|
|
2.2 |
|
|
|
0.02 |
|
|
|
4.4 |
|
|
|
0.05 |
|
|
|
14.6 |
|
|
|
0.16 |
|
|
|
14.8 |
|
|
|
0.15 |
|
| Aerospace impairment and restructuring charges (3) |
|
|
3.7 |
|
|
|
0.04 |
|
|
|
— |
|
|
|
— |
|
|
|
121.6 |
|
|
|
1.33 |
|
|
|
— |
|
|
|
— |
|
| Pension settlement charges (4) |
|
|
33.0 |
|
|
|
0.37 |
|
|
|
0.5 |
|
|
|
0.01 |
|
|
|
33.7 |
|
|
|
0.37 |
|
|
|
7.2 |
|
|
|
0.08 |
|
| Provision (benefit) for income taxes (5) |
|
|
(19.9 |
) |
|
|
(0.22 |
) |
|
|
12.0 |
|
|
|
0.13 |
|
|
|
(58.9 |
) |
|
|
(0.65 |
) |
|
|
6.8 |
|
|
|
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Adjustments: |
|
|
19.0 |
|
|
|
0.21 |
|
|
|
11.5 |
|
|
|
0.12 |
|
|
|
88.4 |
|
|
|
0.97 |
|
|
|
23.4 |
|
|
|
0.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted Net Income from Continuing Operations |
|
$ |
57.9 |
|
|
$ |
0.65 |
|
|
$ |
45.2 |
|
|
$ |
0.48 |
|
|
$ |
232.9 |
|
|
$ |
2.55 |
|
|
$ |
198.6 |
|
|
$ |
2.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (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 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) |
Pension settlement charges related to the settlement of certain U.S. pension obligations. |
| (5) |
Provision (benefit) 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. |
10
|
|
|
|
|
|
PRESS RELEASE |
Reconciliation of Net Sales After Planned Program Exits for the Total Company and Mobile Industries
Segment to Net Sales
The following reconciliation is provided as additional relevant information about the Company’s performance. Management
believes that net sales, after planned program exits, are representative of the Company’s continuing operations and therefore useful to investors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| The Timken Company |
|
Three Months Ended
December 31, |
|
|
Twelve Months Ended
December 31, |
|
| (Dollars in millions) (Unaudited) |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
| Net Sales |
|
$ |
762.2 |
|
|
$ |
749.5 |
|
|
$ |
3,076.2 |
|
|
$ |
3,035.4 |
|
| Planned Program Exits |
|
|
15.0 |
|
|
|
— |
|
|
|
110.0 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
777.2 |
|
|
$ |
749.5 |
|
|
$ |
3,186.2 |
|
|
$ |
3,035.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mobile Industries Segment |
|
Three Months Ended
December 31, |
|
|
Twelve Months Ended
December 31, |
|
| (Dollars in millions) (Unaudited) |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
| Net Sales |
|
$ |
389.5 |
|
|
$ |
418.1 |
|
|
$ |
1,685.4 |
|
|
$ |
1,775.8 |
|
| Planned Program Exits |
|
|
15.0 |
|
|
|
— |
|
|
|
110.0 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
404.5 |
|
|
$ |
418.1 |
|
|
$ |
1,795.4 |
|
|
$ |
1,775.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
PRESS RELEASE |
Reconciliation of EBIT Margin, After Adjustments, to Net Income as a Percentage of Sales and EBIT, After
Adjustments, to Net Income:
The following reconciliation is provided as additional relevant information about the Company’s performance.
Management believes that EBIT and EBIT margin, after adjustments, are representative of the Company’s core operations and therefore useful to investors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Twelve Months Ended |
|
| (Dollars in millions, except share data) (Unaudited) |
|
December 31, |
|
|
December 31, |
|
| |
|
2014 |
|
|
Percentage
to
Net Sales |
|
|
2013 |
|
|
Percentage
to
Net Sales |
|
|
2014 |
|
|
Percentage
to
Net Sales |
|
|
2013 |
|
|
Percentage
to
Net Sales |
|
| Net Income |
|
$ |
42.3 |
|
|
|
5.5 |
% |
|
$ |
52.7 |
|
|
|
7.0 |
% |
|
$ |
168.7 |
|
|
|
5.5 |
% |
|
$ |
263.0 |
|
|
|
8.7 |
% |
| Income From Discontinued Operations, net of income taxes |
|
|
(3.0 |
) |
|
|
(0.4 |
)% |
|
|
(18.9 |
) |
|
|
(2.5 |
)% |
|
|
(21.7 |
) |
|
|
(0.7 |
)% |
|
|
(87.5 |
) |
|
|
(2.9 |
)% |
| Provision for income taxes |
|
|
3.6 |
|
|
|
0.5 |
% |
|
|
36.6 |
|
|
|
4.9 |
% |
|
|
57.0 |
|
|
|
1.9 |
% |
|
|
114.6 |
|
|
|
3.8 |
% |
| Interest expense |
|
|
8.3 |
|
|
|
1.1 |
% |
|
|
6.9 |
|
|
|
0.9 |
% |
|
|
28.7 |
|
|
|
0.9 |
% |
|
|
24.4 |
|
|
|
0.8 |
% |
| Interest income |
|
|
(1.3 |
) |
|
|
(0.2 |
)% |
|
|
(0.5 |
) |
|
|
(0.1 |
)% |
|
|
(4.4 |
) |
|
|
(0.1 |
)% |
|
|
(1.9 |
) |
|
|
(0.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Consolidated earnings before interest and taxes (EBIT) |
|
$ |
49.9 |
|
|
|
6.5 |
% |
|
$ |
76.8 |
|
|
|
10.2 |
% |
|
$ |
228.3 |
|
|
|
7.4 |
% |
|
$ |
312.6 |
|
|
|
10.3 |
% |
|
|
|
|
|
|
|
|
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gain on sale of real estate in Brazil (1) |
|
|
— |
|
|
|
— |
% |
|
|
(5.4 |
) |
|
|
(0.7 |
)% |
|
|
(22.6 |
) |
|
|
(0.7 |
)% |
|
|
(5.4 |
) |
|
|
(0.2 |
)% |
| Charges for cost-reduction initiatives and plant rationalization costs
(2) |
|
|
2.2 |
|
|
|
0.3 |
% |
|
|
4.4 |
|
|
|
0.6 |
% |
|
|
14.6 |
|
|
|
0.5 |
% |
|
|
14.8 |
|
|
|
0.5 |
% |
| Aerospace impairment and restructuring charges (3) |
|
|
3.7 |
|
|
|
0.5 |
% |
|
|
— |
|
|
|
— |
% |
|
|
121.6 |
|
|
|
4.0 |
% |
|
|
— |
|
|
|
— |
% |
| Pension settlement charges (4) |
|
|
33.0 |
|
|
|
4.3 |
% |
|
|
0.5 |
|
|
|
0.1 |
% |
|
|
33.7 |
|
|
|
1.1 |
% |
|
|
7.2 |
|
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Adjustments |
|
|
38.9 |
|
|
|
5.1 |
% |
|
|
(0.5 |
) |
|
|
(0.1 |
)% |
|
|
147.3 |
|
|
|
4.8 |
% |
|
|
16.6 |
|
|
|
0.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Consolidated earnings before interest and taxes (EBIT), after adjustments |
|
$ |
88.8 |
|
|
|
11.7 |
% |
|
$ |
76.3 |
|
|
|
10.2 |
% |
|
$ |
375.6 |
|
|
|
12.2 |
% |
|
$ |
329.2 |
|
|
|
10.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (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 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) |
Pension settlement charges related to the settlement of certain U.S. pension obligations. |
12
|
|
|
|
|
|
PRESS RELEASE |
Reconciliation of segment EBIT Margin, After Adjustments, to segment EBIT as a Percentage of Sales and
segment EBIT, After Adjustments, to segment EBIT:
The following reconciliation is provided as additional relevant information about the Company’s
Mobile Industries and Process Industries 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
December 31,
2014 |
|
|
Percentage
to Net
Sales |
|
|
Three
Months
Ended
December 31,
2013 |
|
|
Percentage
to Net
Sales |
|
|
Twelve
Months
Ended
December 31,
2014 |
|
|
Percentage
to Net
Sales |
|
|
Twelve
Months
Ended
December 31,
2013 |
|
|
Percentage
to Net
Sales |
|
| Earnings before interest and taxes (EBIT) |
|
$ |
22.4 |
|
|
|
5.8 |
% |
|
$ |
38.0 |
|
|
|
9.1 |
% |
|
$ |
65.6 |
|
|
|
3.9 |
% |
|
$ |
193.7 |
|
|
|
10.9 |
% |
| Gain on sale of real estate in Brazil (1) |
|
|
— |
|
|
|
— |
% |
|
|
(5.4 |
) |
|
|
(1.3 |
)% |
|
|
(22.6 |
) |
|
|
(1.3 |
)% |
|
|
(5.4 |
) |
|
|
(0.3 |
)% |
| Charges for cost-reduction initiatives and plant rationalization costs(2) |
|
|
2.5 |
|
|
|
0.6 |
% |
|
|
0.9 |
|
|
|
0.2 |
% |
|
|
11.8 |
|
|
|
0.7 |
% |
|
|
10.2 |
|
|
|
0.6 |
% |
| Aerospace impairment and restructuring charges(3) |
|
|
3.7 |
|
|
|
0.9 |
% |
|
|
— |
|
|
|
— |
% |
|
|
121.6 |
|
|
|
7.2 |
% |
|
|
— |
|
|
|
— |
% |
| Pension settlement charges(4) |
|
|
— |
|
|
|
— |
% |
|
|
0.5 |
|
|
|
0.1 |
% |
|
|
0.7 |
|
|
|
— |
% |
|
|
7.2 |
|
|
|
0.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings before interest and taxes (EBIT), after adjustments |
|
$ |
28.6 |
|
|
|
7.3 |
% |
|
$ |
34.0 |
|
|
|
8.1 |
% |
|
$ |
177.1 |
|
|
|
10.5 |
% |
|
$ |
205.7 |
|
|
|
11.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Process Industries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Dollars in millions) (Unaudited) |
|
Three
Months
Ended
December 31,
2014 |
|
|
Percentage
to Net
Sales |
|
|
Three
Months
Ended
December 31,
2013 |
|
|
Percentage
to Net
Sales |
|
|
Twelve
Months
Ended
December 31,
2014 |
|
|
Percentage
to Net
Sales |
|
|
Twelve
Months
Ended
December 31,
2013 |
|
|
Percentage
to Net
Sales |
|
| Earnings before interest and taxes (EBIT) |
|
$ |
79.7 |
|
|
|
21.4 |
% |
|
$ |
50.9 |
|
|
|
15.4 |
% |
|
$ |
267.1 |
|
|
|
19.2 |
% |
|
$ |
189.3 |
|
|
|
15.0 |
% |
| Charges for cost-reduction initiatives and plant rationalization costs(2) |
|
|
(0.3 |
) |
|
|
(0.1 |
)% |
|
|
3.5 |
|
|
|
1.1 |
% |
|
|
2.2 |
|
|
|
0.2 |
% |
|
|
4.5 |
|
|
|
0.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings before interest and taxes (EBIT), after adjustments |
|
$ |
79.4 |
|
|
|
21.3 |
% |
|
$ |
54.4 |
|
|
|
16.4 |
% |
|
$ |
269.3 |
|
|
|
19.4 |
% |
|
$ |
193.8 |
|
|
|
15.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (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 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) |
Pension settlement charges related to the settlement of certain U.S. pension obligations. |
13
|
|
|
|
|
|
PRESS RELEASE |
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, cash equivalents and restricted cash 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) |
|
|
|
|
|
|
|
|
| |
|
December 31,
2014 |
|
|
December 31,
2013 |
|
| Short-term debt |
|
$ |
8.1 |
|
|
$ |
269.3 |
|
| Long-term debt |
|
|
522.1 |
|
|
|
176.4 |
|
|
|
|
|
|
|
|
|
|
| Total Debt (1) |
|
$ |
530.2 |
|
|
$ |
445.7 |
|
| Less: Cash, cash equivalents and restricted cash |
|
|
(294.1 |
) |
|
|
(399.7 |
) |
|
|
|
|
|
|
|
|
|
| Net Debt (1) |
|
$ |
236.1 |
|
|
$ |
46.0 |
|
|
|
|
|
|
|
|
|
|
| Total equity |
|
$ |
1,589.1 |
|
|
$ |
2,648.6 |
|
|
|
|
| Ratio of Total Debt to Capital |
|
|
25.0 |
% |
|
|
14.4 |
% |
| Ratio of Net Debt to Capital |
|
|
12.9 |
% |
|
|
1.7 |
% |
|
|
|
|
|
|
|
|
|
| (1) |
Total Debt and Net Debt at December 31, 2013 excludes $30.2 million of debt transferred to TimkenSteel and is considered discontinued operations. |
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 |
|
|
Twelve Months Ended |
|
| |
|
December 31, |
|
|
December 31, |
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
| Net cash provided by operating activities from continuing operations |
|
$ |
106.4 |
|
|
$ |
156.2 |
|
|
$ |
279.2 |
|
|
$ |
292.8 |
|
| Less: capital expenditures |
|
|
(39.7 |
) |
|
|
(42.0 |
) |
|
|
(126.8 |
) |
|
|
(133.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Free cash flow |
|
$ |
66.7 |
|
|
$ |
114.2 |
|
|
$ |
152.4 |
|
|
$ |
159.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
| 4Q 2014 Earnings
Investor Presentation January 29, 2015
Exhibit 99.2 |
|
|
| Timken 4Q 2014
Earnings Conference Call Conference Call:
Thursday, Jan. 29, 2015
11:00 a.m. Eastern Time
Live Dial-In: 888-211-4542 or 816-581-1736
(Call in 10 minutes prior to be included.)
Conference ID: Timken Earnings Call
Conference Call Replay: Replay Dial-In available through Feb. 12, 2015
888-203-1112 or 719-457-0820
Replay Passcode: 8692909
Live Webcast:
www.timken.com/investors
2
EARNINGS
CALL
DETAIL |
|
|
| 3
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, “2014 Positions Timken For Growth”, “2014 Outgrowth
Initiatives”, “2015 Market Outlook Drivers”, “2015 Outlook Highlights”, “2015 Full-Year Outlook”,
“Pension Strategy & De-Risking Update” and “2015 Adj. EPS Outlook
– Walk from 2014” are forward-looking. The company cautions that actual
results may differ materially from those projected or implied in forward-looking
statements due to a variety of important factors, including: the finalization of the company's
financial statements for the fourth quarter and full year of 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 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, investment performance and other tactics designed to reduce risk, 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. FORWARD
LOOKING
STATEMENTS
SAFE
HARBOR
AND
NON
GAAP
FINANCIAL
INFORMATION |
|
|
| Overview &
Business Update Rich Kyle –
President and CEO
Financial Review
Phil Fracassa –
Executive Vice President and CFO
Question/Answer
4
AGENDA |
|
|
| 4Q 2014
Sales of $762 million, up 2% from prior-year 4Q despite strong dollar
Sales increase 12% in Process Industries
Mobile Industries sales down 7%; more than half of decline related to
planned program exits
Net income per diluted share of $0.43 versus $0.35 in same quarter
last year
4Q-14 adjusted EPS of $0.65, up 35% compared to prior year
GAAP earnings include non-cash pension settlement charges
of $33 million, pre-tax
Adjusted EBIT margin of 11.7%, up 150 bps from prior year period, driven
by growth and cost reduction, partially offset by currency
Continued Aerospace restructuring plan; completed sale of Mesa, AZ
engine overhaul assets
Took actions to reduce pension risk / exposure, including recent
annuitization
Completed acquisition of Revolvo Ltd.
Note: See Appendix for reconciliation of adjusted EPS and adjusted EBIT margins to their
most directly comparable GAAP equivalents. 5
HIGHLIGHTS |
|
|
| Strengthens
Timken Bearing Product Line Offering Strong Strategic Fit
Strengthens Timken bearing offering in the global
housed unit market sector with addition of split roller
housed units and precision products
Core industrial market sectors include: metals,
mining, pulp and paper, food and beverage, power
generation, cement, marine and waste water
Premium solutions designed to improve customer
uptime
Synergies expected to accelerate growth by
leveraging Timken channels, global scale,
capabilities and cost reductions
Based in Dudley, U.K., with 2014 sales of
$9 million
6
REVOLVO
LTD. ACQUISITION
|
|
|
| Completed
Spinoff of TimkenSteel mid-year
Launched DeltaX,
a multi-year initiative to accelerate product
development and line expansion efforts, enhancing the Timken
collaborative technical sales model
Achieved several key business wins
across market sectors including
defense, rail, wind energy, process industries and light vehicle
Continued to diversify product and services portfolio
beyond core
tapered roller bearing line
Reorganized Aerospace segment
and launched initiative aimed at
improving margins to double digits
Acquired the assets of Schulz Group and Revolvo Ltd., providing
additional breadth to Timken industrial product solutions Returned $360 million to
shareholders through dividends and the
repurchase of 5.2 million shares
7
2014 POSITIONS
TIMKEN
FOR
GROWTH |
|
|
| 8
8
Enhanced large bore Timken wind
energy bearings with wear-
resistant technologies
Expanded line of
Timken housed
unit bearings
with new part
numbers and
designs
New and improved designs
revitalize Timken spherical
thrust bearings
Extended line of
Timken spherical and
cylindrical bearings
Invested
in new
technologies
to advance
high-speed
gear sales.
Added a new
service
center in
Raipur,
opening new
market space
for gear
repair in
India
2014 OUTGROWTH
INITIATIVES |
|
|
| 9
Negative
Neutral
Positive
Currency
Industrial Machinery
Light Vehicle
Agriculture
Mining / Metals
Rail
Energy (Oil & Gas)
Construction
Wind Energy
Defense
Heavy Truck
Aerospace Civil
Europe
North America
Asia
Russia
Latin America
Expected Organic Growth of ~4% Driven by Market Growth
And Penetration Gains, Largely Offset by Currency
2015 MARKET
OUTLOOK
DRIVERS |
|
|
| 2015
Outlook
Sales (Mid-point)
$3.1 Billion
YOY Change
Up 1%
(+4% growth, largely offset by currency)
GAAP EPS
$0.85 to $0.95
Adjusted EPS
$2.65 to $2.75
Adj. EPS YOY Change (Mid-point)
Up 6%
Adj. EBIT Margin
12.5% to 13%
Margin Expansion Expected to Help Drive 6% EPS Growth
10
2015 OUTLOOK
HIGHLIGHTS |
|
|
| Sales of $762
million, up 2% from a year ago Driven by growth in OE sectors (including wind energy
and rail) and the industrial aftermarket, as well as the benefit of acquisitions
Partially offset by the impact of planned program exits in Mobile Industries, lower
defense related Aerospace shipments and unfavorable currency
4Q ’14
4Q ’13
$762.2
$749.5
$ B/(W)
Sales
% B/(W)
$12.7
2%
($ Millions)
$41
$5
$750
$762
$(18)
$(15)
Geographic Sales Comparison
4Q-2014
Excluding
vs.
impact
Region
4Q-2013
of currency
NA
6%
6%
EMEA
-11%
-3%
APAC
3%
4%
LatAm
3%
8%
•
5.5% growth driven by
market demand and new
business wins
•
Price was relatively flat
•
Largely driven
by weaker Euro
12
4Q 2013
Organic
Growth
Mobile
Planned Exits
Acquisitions
Currency
4Q 2014
4Q 2014 FINANCIAL
HIGHLIGHTS
–
SALES |
|
|
| 4Q
’14 4Q ’13
$762.2
$749.5
$ B/(W)
Sales
% B/(W)
$12.7
2%
220.8
207.9
Gross Profit
131.7
134.0
SG&A
3.8
Impairment & restructuring
$76.8
EBIT
($ Millions)
% of sales
17.3%
17.9%
% of sales
29.0%
27.7%
130 bps
60 bps
Note: See Appendix for reconciliation of EBIT and EBIT margin to their most directly
comparable GAAP equivalents. 7.2
Other income, net
2.3
5.4
$49.9
(0.8)
$(26.9)
12.9
0.5
Pension settlement charges
33.0
Includes benefit of cost
reduction initiatives and
currency, partially offset
by M&A-related expenses
Non-cash pension
settlement charges
related to lump sum
payouts
6.5%
10.2%
EBIT Margins
(370) bps
13
4Q 2014 FINANCIAL
HIGHLIGHTS
–
EBIT |
|
|
| 4Q
’14 4Q ’13
$762.2
$749.5
$ B/(W)
Sales
% B/(W)
$12.7
2%
($ Millions)
Note: See Appendix for reconciliation of EBIT, adjusted EBIT, and EBIT and adjusted EBIT
margin to their most directly comparable GAAP equivalents. 2.2
4.4
-
Charges for cost-reduction
Adjustments:
$88.8
$76.3
EBIT after adjustments
$12.5
16%
11.7%
10.2%
EBIT Margins
150bps
initiatives, plant rationalizations
3.7
--
-
Aerospace charges
33.0
0.5
-
Pension settlement charges
(5.4)
-
Gain on Brazil land sale
--
131.7
134.0
SG&A
3.8
Impairment & restructuring
% of sales
17.3%
17.9%
% of sales
29.0%
27.7%
130 bps
60 bps
2.3
5.4
Pension settlement charges
220.8
207.9
Gross Profit
12.9
0.5
33.0
14
$76.8
EBIT
7.2
Other income, net
$49.9
(0.8)
$(26.9)
4Q 2014 FINANCIAL
HIGHLIGHTS –
ADJ. EBIT |
|
|
| 4Q 2014 EARNINGS COMPARISON
Adjusted EBIT of $89 million or 11.7% of sales compares with
$76 million or 10.2% of sales in the same period a year ago
Driven
by
volume
and
lower
manufacturing
costs,
partially
offset
by
currency
Adjusted EBIT -
($ Millions)
$76
$89
$4
$14
$(6)
15
$1
Note: Certain data contained in the graph above has been rounded for presentation purposes.
See Appendix for reconciliations of adjusted EBIT and adjusted EBIT margin to their
most directly comparable GAAP equivalents. |
|
|
| 4Q
2014
NET
INCOME
AND
DILUTED
EPS
4Q ’14
-
Provision (benefit) for income taxes
Net Income, after adjustments
$57.9
$0.65
$ in Millions
EPS
(19.9)
4Q ’13
$45.2
$0.48
$ in Millions
EPS
-
Charges for cost-reduction initiatives and
plant rationalization costs
2.2
4.4
12.0
Adjusted tax rate: Quarter
29%
35%
-
Aerospace impairment and restructuring
charges
3.7
-
-
0.04
(0.22)
0.02
0.05
0.13
Adjusted EPS of $0.65, up 35% from prior-year, primarily reflecting the benefit of lower
manufacturing, a lower tax rate and share repurchases
Full-year adjusted tax rate of 33%; lower than anticipated due to passage of U.S. tax
extenders legislation
-
Adjusted tax rate of 33% is expected for 2015
-
-
-
Pension settlement charges
33.0
0.5
0.37
0.01
-
Gain on sale of real estate in Brazil
-
-
(5.4)
-
-
(0.06)
YTD
33%
35%
16
$38.9
$0.43
Net Income from Continuing Operations
$33.7
$0.35 |
|
|
| RESEGMENTATION OVERVIEW
Current quarter and prior period financial results have been
re-segmented to reflect:
Elimination of Aerospace segment; financial results reported
primarily in Mobile Industries segment
Reallocation of corporate SG&A expense to business segments to
better reflect the Company’s operating model after steel spinoff and
elimination of Aerospace segment
Currency gains/losses related to foreign affiliate financing moved
from business segments to corporate
17 |
|
|
| Sales Flat to
Down 2% Heavy Truck
Light Vehicle
Off-highway
Rail
($ Millions)
2014
2013
Change
Sales
$389.5
$418.1
$(28.6)
EBIT
$22.4
$38.0
$(15.6)
Margin
5.8% 9.1%
(330) bps
Adjusted
(1)
:
EBIT
$28.6
$34.0
$(5.4)
Margin
7.3% 8.1% (80) bps
4Q YOY Commentary
4Q Performance
2015 Full-Year Outlook
•
Sales decrease of 7% driven by light
vehicle sector program exits ($15M),
lower aerospace and agriculture demand,
and currency, partially offset by growth
in rail
-
Excluding planned exits and currency,
sales were down 1%
•
Decrease in adjusted EBIT margin driven
by lower volume and unfavorable mix,
partially offset by lower manufacturing
costs
2014 Business Mix –
Market
(1)
See Appendix for reconciliations of adjusted EBIT, adjusted EBIT margin and adjusted sales to
their most directly comparable GAAP equivalents. Business Mix is based on
2014 sales of $1.7B
Aerospace
Currency
+ 1 to 3%
-3%
Light Vehicle
Off-highway
Rail
Aerospace
Heavy Truck
Adj. EBIT Margin within 10-13% Range
18
MOBILE
INDUSTRIES
25%
24%
20%
17%
14% |
|
|
| ($
Millions) 2014
2013
Change
Sales
$372.7
$331.4
$41.3
EBIT
$79.7
$50.9
$28.8
Margin
21.4% 15.4%
600 bps
Adjusted
(1)
:
EBIT
$79.4
$54.4
$25.0
Margin 21.3%
16.4% 490 bps
4Q YOY Commentary
4Q Performance
2015 Full-Year Outlook
•
Sales increase of 12% due to market
growth and share gains in OE sectors
(wind energy & marine), the industrial
aftermarket, as well as the impact of
acquisitions, partially offset by
unfavorable currency
•
Adjusted EBIT margin increase reflects
improved demand and cost reductions,
driven by operational improvement
initiatives
Industrial Aftermarket
Original Equipment
2014 Business Mix –
Channel
(1)
See Appendix for reconciliations of adjusted EBIT and adjusted EBIT margin to their most
directly comparable GAAP equivalents. Original
Equipment
Aftermarket
Products &
Services
Currency
+ 5 to 7%
-3%
Business Mix is based on
2014 sales of $1.4B
Sales Up 2 to 4%
Adj. EBIT margin at high-end
of 17-20% Range
19
PROCESS
INDUSTRIES |
|
|
| 2014 CASH FLOW
OVERVIEW
2014
2013
$147.0
$175.5
Income from Continuing Operations
$279.2
$292.8
Cash from operations
30.9
(67.1)
(93.4)
Change in working capital
(68.6)
34.5
Income taxes
137.0
55.1
Depreciation & Amortization
$152.4
$159.2
Free cash flow
(49.9)
Pension & OPEB contributions / payments
62.0
Pension & OPEB expense
142.4
(133.6)
(126.8)
Capital Expenditures
19.9
Other
($ Millions)
(52.3)
Impairment charges
98.9
0.1
20 |
|
|
| CAPITAL ALLOCATION
Capital Structure
Cash
$294
Debt
530
Net Debt
236
Equity
1,589
Net Capital
$1,825
Leverage
Total Debt/Capital
25%
Net Debt/Capital
13%
($ Millions)
Balance Sheet (12/31/14)
Target:
30 –
40%
Net Debt
Net Debt/ Capital
($ Millions)
Net Debt / Capital
2014 Actual
Invested $127M in CapEx (4.1% of sales),
including growth initiatives
Paid dividends totaling $1.00 per share; 39%
payout ratio (on Adj. EPS of $2.55)
Completed acquisitions of Schulz Group and
Revolvo Ltd.
Repurchased 5.2M shares for $271 million (6%
of outstanding as of 12/31/13), incl. 100k
shares in 4Q
21
9%
2%
13%
Capital Expenditures
Dividend
Share Repurchases
Acquisitions
Executing Plan:
2015 Outlook
Target CapEx at ~4% of sales
Expect
to
remain
at
or
above
top-end
of
25
–
35%
targeted
payout
ratio
Continued focus on pipeline of attractive M&A
targets aligned with criteria
Remaining share repurchase authorization of
8.9M shares; expires 12/31/15
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 and Net Debt/Capital to their most directly comparable
GAAP equivalents.
|
|
|
| 22
PENSION
STRATEGY
& DE-RISKING
UPDATE
Focus on de-risking initiatives to protect fully-funded status, reduce earnings
volatility and manage obligations down over time with minimal cash flow impact
Pension plans are well-funded, and have been closed to new entrants since
2004
Recent
Actions:
1.
Shifted
pension
asset
allocation
more
toward
fixed
income
during
2014,
creating
natural
hedge against liability and seeking to reduce volatility
2.
Continued and expanded lump sum benefit option in the U.S.
Payouts reduced PBO by ~$110 million; funded entirely with plan assets
Triggered non-cash charge of $33 million in 4Q 2014
3.
Purchased group annuity contract for certain U.S. retirees
Reduces PBO by ~$600 million (just under 30% of global PBO); funded entirely with plan
assets U.S. plans over 100% funded pre-
and post-transaction
Will trigger non-cash charge of ~$220 million in 1Q 2015
•
Expect continued lump sum payouts and certain smaller plan settlements in 2015 to
result in additional non-cash charges of ~$30 million during 2015
•
2015
pension
expense
expected
to
increase
by
$5
to
$10
million
versus
2014
–
driven
by
new mortality & asset return assumptions, partially offset by favorable impact of
annuitization and lump sum payouts |
|
|
| Sales: Up
approximately 1% Driven by organic growth in light vehicle,
wind energy, marine and the industrial
aftermarket, partially offset by declines in
agriculture
Organic growth largely offset by effects of
currency
EPS Estimate: $0.85 to $0.95 per
diluted share
Adjusted EPS Estimate of
$2.65 to $2.75 per diluted share
excluding unusual items
Adjusted EBIT margin of 12.5 to 13%
Mobile Industries within 10 to 13%
target range
Process Industries near high end of
17 to 20% target range
Tax rate of 33%
Free Cash Flow
Assumes CapEx of ~4% of sales
(1)
Adjusted
net
income
divided
by
free
cash
flow.
Adjusted
net
income
excludes
pension
liability
settlement
charges
and
cost-reduction
and
plant
rationalizations costs identified above. Free cash flow is defined as net cash provided
by operating activities (includes pension contributions) minus capital
expenditures.
23
Sales (vs. 2014)
Organic
Net
Growth
Currency
Sales
Mobile Industries
+1 to 3%
~(3)%
Flat to Down 2%
Process Industries
+5 to 7%
~(3)%
Up 2 to 4%
Timken
+ ~4%
~(3)%
Up ~1%
Earnings Per Share (EPS) - GAAP
$0.85 - $0.95
Includes:
- Pension settlement charges (non-cash)
$(1.85)
- Cost-reduction / plant rationalization initiatives
$(0.20)
- Discrete tax accrual adjustments (non-cash)
$0.25
Adjusted EPS - excluding unusual items
$2.65 - $2.75
Free Cash Flow (FCF)
~$220M
FCF Conversion
(1)
~0.9x
2015 FULL
YEAR
OUTLOOK |
|
|
| 2015 ADJ. EPS OUTLOOK –
WALK
FROM
2014
24
2015 Adjusted EPS Guidance Range:
$2.65 -
$2.75
Positives:
Core organic sales growth of ~4% with
operating leverage and margin expansion
from operational excellence initiatives to
contribute roughly $0.35 to EPS
Share repurchases completed in 2014
contribute roughly $0.05 to EPS
Negatives:
Currency environment is biggest risk –
outlook assumes an impact of
approximately $0.15 to EPS
Other items including:
-
Pension expense is expected to
increase EPS by roughly $0.05,
primarily reflecting new mortality
assumption
-
Higher interest expense
Note: Share repurchases reflect the full year benefit of share repurchases completed in
2014. See Appendix for reconciliation of adjusted 2014 EPS to its most directly
comparable GAAP equivalent. $2.55
$2.70
Mid-point of
Guidance
$0.05
$(0.05)
$(0.15)
$0.35
-
-
-
Approximate Estimates -
-
-
$(0.05)
+14%
(6)%
(2)%
(2)%
+2%
2014 Adj. EPS
Growth /
Margin
Expansion
Currency
Impact
Pension /
OPEB
Expense
Interest Exp.
/ Other
Share
Repurchases
(2014)
2015 Adj. EPS |
|
|
| Sales of
$3.1 billion, up 1% year-over-year Currency had a negative impact of 1%
26
26
Argentina
U.S.
Mexico
Brazil
Australia
China
Spain
France
India
South Africa
Poland
Italy
U.K.
Romania
Russia
Czech Republic
Germany
Indonesia
Taiwan
Thailand
Singapore
Japan
South Korea
Vietnam
Turkey
U.A.E.
Canada
LatAm
+6%
(+11% excluding
impact of currency)
NA
-2%
(-1% excluding
impact of currency
EMEA
-1%
(flat excluding
impact of currency)
APAC
+12%
(+14% excluding
impact of currency)
2014
GEOGRAPHIC
SALES
2013
VS. |
|
|
| 27
GAAP RECONCILIATION: CONSOLIDATED EBIT
&
EBIT
MARGIN
(Dollars in millions, except share data) (Unaudited)
2014
Percentage
to
Net Sales
2013
Percentage
to
Net Sales
2014
Percentage
to
Net Sales
2013
Percentage
to
Net Sales
Net Income
42.3
$
5.5
%
52.7
$
7.0
%
168.7
$
5.5
%
263.0
$
8.7
%
Income From Discontinued Operations, net of income taxes
(3.0)
(0.4)%
(18.9)
(2.5)%
(21.7)
(0.7)%
(87.5)
(2.9)%
Provision for income taxes
3.6
0.5
%
36.6
4.9
%
57.0
1.9
%
114.6
3.8
%
Interest expense
8.3
1.1
%
6.9
0.9
%
28.7
0.9
%
24.4
0.8
%
Interest income
(1.3)
(0.2)%
(0.5)
(0.1)%
(4.4)
(0.1)%
(1.9)
(0.1)%
Consolidated earnings before interest and taxes (EBIT)
49.9
$
6.5
%
76.8
$
10.2
%
228.3
$
7.4
%
312.6
$
10.3
%
Adjustments:
Gain on sale of real estate in Brazil
(1)
—
—%
(5.4)
(0.7)%
(22.6)
(0.7)%
(5.4)
(0.2)%
Charges for cost-reduction initiatives and plant rationalization costs
(2)
2.2
0.3
%
4.4
0.6
%
14.6
0.5
%
14.8
0.5
%
Aerospace impairment and restructuring charges
(3)
3.7
0.5
%
—
—%
121.6
4.0
%
—
—%
Pension settlement charges
(4)
33.0
4.3
%
0.5
0.1
%
33.7
1.1
%
7.2
0.2
%
Total Adjustments
38.9
5.1
%
(0.5)
(0.1)%
147.3
4.8
%
16.6
0.5
%
Consolidated earnings before interest and taxes (EBIT), after
adjustments
88.8
$
11.7
%
76.3
$
10.2
%
375.6
$
12.2
%
329.2
$
10.8
%
(4)
Pension settlement charges related to the settlement of certain U.S. pension
obligations. (3)
Aerospace impairment and restructuring charges related to goodwill impairment
charges, inventory valuation adjustments, and severance. (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
related
to
plant
closures,
the
rationalization
of
certain
plants,
and
severance
related
to
cost
reduction
initiatives.
December 31,
Three Months Ended
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. Twelve Months Ended
December 31,
Reconciliation of EBIT Margin, After Adjustments, to Net Income as a Percentage of
Sales and EBIT, After Adjustments, to Net Income: |
|
|
| 28
Mobile Industries
(Dollars in millions) (Unaudited)
Three Months
Ended
December 31,
2014
Percentage
to Net Sales
Three Months
Ended
December 31,
2013
Percentage
to Net Sales
Twelve
Months
Ended
December 31,
2014
Percentage
to Net Sales
Twelve
Months
Ended
December 31,
2013
Percentage
to Net Sales
Earnings before interest and taxes (EBIT)
22.4
$
5.8%
38.0
$
9.1%
65.6
$
3.9%
193.7
$
10.9%
Gain on sale of real estate in Brazil
(1)
-
—%
(5.4)
(1.3)%
(22.6)
(1.3)%
(5.4)
(0.3)%
Charges for cost-reduction initiatives and plant rationalization costs
(2)
2.5
0.6
%
0.9
0.2
%
11.8
0.7
%
10.2
0.6
%
Aerospace impairment and restructuring charges
(3)
3.7
0.9
%
-
—%
121.6
7.2
%
-
—%
Pension settlement charges
(4)
-
—%
0.5
0.1%
0.7
—%
7.2
0.4%
Earnings before interest and taxes (EBIT), after adjustments
28.6
$
7.3%
34.0
$
8.1%
177.1
$
10.5%
205.7
$
11.6%
Process Industries
(Dollars in millions) (Unaudited)
Three Months
Ended
December 31,
2014
Percentage
to Net Sales
Three Months
Ended
December 31,
2013
Percentage
to Net Sales
Twelve
Months
Ended
December 31,
2014
Percentage
to Net Sales
Twelve
Months
Ended
December 31,
2013
Percentage
to Net Sales
Earnings before interest and taxes (EBIT)
79.7
$
21.4%
50.9
$
15.4%
267.1
$
19.2%
189.3
$
15.0%
Charges for cost-reduction initiatives and plant rationalization costs
(2)
(0.3)
(0.1)%
3.5
1.1
%
2.2
0.2%
4.5
0.4
%
Earnings before interest and taxes (EBIT), after adjustments
79.4
$
21.3%
54.4
$
16.4%
269.3
$
19.4%
193.8
$
15.4%
(4)
Pension settlement charges related to the settlement of certain U.S. pension
obligations. (3)
Aerospace impairment and restructuring charges related to goodwill impairment
charges, inventory valuation adjustments, and severance.
(2)
Cost-reduction
initiatives
and
plant
rationalization
costs
related
to
plant
closures,
the
rationalization
of
certain
plants,
and
severance
related
to
cost
reduction
initiatives.
(1)
Gain on the sale of real estate relates to the sale of the former manufacturing
facility in Sao Paulo, Brazil. The following reconciliation is provided as
additional relevant information about the Company's Mobile Industries and Process Industries 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.
Reconciliation of segment EBIT Margin, After Adjustments, to segment EBIT as a
Percentage of Sales and segment EBIT, After Adjustments, to segment EBIT:
ECONCILIATION:
SEGMENT
EBIT
&
EBIT
MARGIN
|
|
|
| 29
(Dollars in millions, except share data) (Unaudited)
2014
EPS
2013
EPS
2014
EPS
2013
EPS
Income from Continuing Operations
39.3
$
33.8
$
147.0
$
175.5
$
Less: Net Income Attributable to Noncontrolling Interest
0.4
0.1
2.5
0.3
Net Income from Continuing Operations
38.9
$
0.43
$
33.7
$
0.35
$
144.5
$
1.58
$
175.2
$
1.82
$
Adjustments:
Gain on sale of real estate in Brazil
(1)
-
-
(5.4)
(0.06)
(22.6)
(0.25)
(5.4)
(0.06)
Charges for cost-reduction initiatives and plant rationalization costs
(2)
2.2
0.02
4.4
0.05
14.6
0.16
14.8
0.15
Aerospace impairment and restructuring charges
(3)
3.7
0.04
-
-
121.6
1.33
-
-
Pension settlement charges
(4)
33.0
0.37
0.5
0.01
33.7
0.37
7.2
0.08
Provision (benefit) for income taxes
(5)
(19.9)
(0.22)
12.0
0.13
(58.9)
(0.65)
6.8
0.07
Total Adjustments:
19.0
0.21
11.5
0.12
88.4
0.97
23.4
0.24
Adjusted Net Income from Continuing Operations
57.9
$
0.65
$
45.2
$
0.48
$
232.9
$
2.55
$
198.6
$
2.07
$
Reconciliations of Adjusted Net Income from Continuing Operations and Net Income from
Continuing Operations to GAAP Income from Continuing Operations and Adjusted
Earnings Per Share to GAAP Earnings Per Share: These
reconciliations
are
provided
as
additional
relevant
information
about
the
Company's
performance.
Management
believes
that
adjusted
net
income
from
continuing
operations, net income from continuing operations and diluted earnings per share,
adjusted to remove: (a) gain on the sale of real estate in Brazil; (b) charges for cost-
reduction initiatives and plant rationalization costs; (c) Aerospace impairment and
restructuring charges; (d) pension settlement charges; and (e) provision for income
taxes are representative of the Company's performance and therefore useful to
investors. Twelve Months Ended
December 31,
(1)
Gain on the sale of real estate relates to the sale of the former manufacturing
facility in Sao Paulo, Brazil. (5)
Provision (benefit) 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. (4)
Pension settlement charges related to the settlement of certain U.S. pension
obligations. (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. Three Months Ended
December 31,
GAAP RECONCILIATION:
NET
INCOME
& EPS |
|
|
| 30
GAAP RECONCILIATION:
NET
DEBT
& FREE
CASH
FLOW
(Dollars in millions) (Unaudited)
June 30,
2014
December 31,
2014
December 31,
2013
Short-term debt
314.6
$
8.1
$
269.3
$
Long-term debt
176.2
522.1
176.4
Total Debt
(1)
490.8
$
530.2
$
445.7
$
Less: Cash, cash
equivalents and restricted cash (310.1)
(294.1)
(399.7)
Net Debt
(1)
180.7
$
236.1
$
46.0
$
Total
equity 1,804.1
$
1,589.1
$
2,648.6
$
Ratio of Total Debt to Capital
21.4
%
25.0
%
14.4
%
Ratio of Net Debt to Capital
9.1
%
12.9
%
1.7
%
(Dollars in millions) (Unaudited)
2014
2013
2014
2013
Net cash provided by operating activities from continuing operations
106.4
$
156.2
$
279.2
$
292.8
$
Less: capital
expenditures (39.7)
(42.0)
(126.8)
(133.6)
Free cash flow
66.7
$
114.2
$
152.4
$
159.2
$
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.
Three Months Ended
December 31,
Twelve Months Ended
December 31,
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, cash equivalents and restricted cash
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.
Reconciliations of Free Cash Flow to GAAP Net Cash Provided by Operating
Activities: (1) Total Debt and Net Debt at December 31, 2013 excludes $30.2
million of debt transferred to TimkenSteel and is considered discontinued operations. |
|
|
| 31
The Timken Company
(Dollars in millions) (Unaudited)
2014
2013
2014
2013
Net Sales
762.2
$
749.5
$
3,076.2
$
3,035.4
$
Less: Planned Program Exits
15.0
110.0
Total
777.2
$
749.5
$
3,186.2
$
3,035.4
$
Mobile Industries Segment
(Dollars in millions) (Unaudited)
2014
2013
2014
2013
Net Sales
389.5
$
418.1
$
1,685.4
$
1,775.8
$
Less: Planned Program Exits
15.0
110.0
Total
404.5
$
418.1
$
1,795.4
$
1,775.8
$
Mobile Industries Segment
(Dollars in millions) (Unaudited)
2014
2013
2014
2013
Net Sales
389.5
$
418.1
$
1,685.4
$
1,775.8
$
Less: Planned Program Exits
15.0
110.0
Add back: Currency impact
(10.1)
(17.1)
Total
414.6
$
418.1
$
1,812.5
$
1,775.8
$
Three Months Ended
December 31,
Twelve Months Ended
December 31,
Reconciliation of Net Sales After Planned Program Exits and Currency Effects for Mobile Industries
Segment to Net Sales The following reconciliation is provided as additional relevant information
about the Company's performance. Management believes that net sales, after planned
program exits and currency effects, are representative of the Company's continuing operations and therefore useful to investors.
Reconciliation of Net Sales After Planned Program Exits for the Total Company and Mobile Industries
Segment to Net Sales Three Months Ended
December 31,
Twelve Months Ended
December 31,
The following reconciliation is provided as additional relevant information about the Company's
performance. Management believes that net sales, after planned program exits, are
representative of the Company's continuing operations and therefore useful to investors.
Three Months Ended
December 31,
Twelve Months Ended
December 31,
GAAP RECONCILIATION: SALES
EXCLUDING PLANNED
PROGRAM
EXITS
& CURRENCY
IMPACT
-
-
-
-
-
-
-
- |
Grafico Azioni Timken (NYSE:TKR)
Storico
Da Giu 2024 a Lug 2024
Grafico Azioni Timken (NYSE:TKR)
Storico
Da Lug 2023 a Lug 2024
