EX-99.1 2 l24563aexv99w1.htm EXHIBIT 99.1 exv99w1
 

     
Exhibit 99.1
CONDENSED CONSOLIDATED STATEMENT OF INCOME
                                                                                 
    AS REPORTED   AS ADJUSTED (1)
(Thousands of U.S. dollars, except share data)(Unaudited)   Q1 2006   Q2 2006   Q3 2006   Q4 2006   Year 2006   Q1 2006   Q2 2006   Q3 2006   Q4 2006 Year 2006
     
Net sales
   $ 1,254,308     $ 1,302,174     $ 1,185,962     $ 1,230,921     $ 4,973,365     $ 1,254,308     $ 1,302,174     $ 1,185,962     $ 1,230,921     $ 4,973,365  
Cost of products sold
     981,459       1,003,380       950,146       1,014,060       3,949,045       981,459       1,003,380       950,146       1,014,060       3,949,045  
Manufacturing rationalization/Reorganization expenses — cost of products sold
     3,036       4,945       3,419       7,076       18,476       —       —       —       —       —  
     
Gross Profit
   $ 269,813     $ 293,849     $ 232,397     $ 209,785     $ 1,005,844     $ 272,849     $ 298,794     $ 235,816     $ 216,861     $ 1,024,320  
Selling, administrative & general expenses (SG&A)
     170,375       171,193       159,635       170,222       671,425       170,375       171,193       159,635       170,222       671,425  
Manufacturing rationalization/reorganization expenses — SG&A
     377       1,316       1,044       3,180       5,917       —       —       —       —       —  
Loss on divestitures
     —       9,971       —       54,300       64,271       —       —       —       —       —  
Impairment and restructuring
     1,040       7,469       2,682       33,690       44,881       —       —       —       —       —  
     
Operating Income
   $ 98,021     $ 103,900     $ 69,036     $ (51,607 )   $ 219,350     $ 102,474     $ 127,601     $ 76,181     $ 46,639     $ 352,895  
Other expense
     (4,851 )     (4,843 )     (1,825 )     (3,465 )     (14,984 )     (4,851 )     (4,843 )     (1,825 )     (3,465 )     (14,984 )
Special items — other (expense) income
     (308 )     2,662       76       92,220       94,650       —       —       —       —       —  
     
Earnings Before Interest and Taxes (EBIT) (2)
   $ 92,862     $ 101,719     $ 67,287     $ 37,148     $ 299,016     $ 97,623     $ 122,758     $ 74,356     $ 43,174     $ 337,911  
Interest expense, net
     (11,602 )     (11,697 )     (10,850 )     (10,633 )     (44,782 )     (11,602 )     (11,697 )     (10,850 )     (10,633 )     (44,782 )
     
Income From Continuing Operations Before Income Taxes
   $ 81,260     $ 90,022     $ 56,437     $ 26,515     $ 254,234     $ 86,021     $ 111,061     $ 63,506     $ 32,541     $ 293,129  
Provision for income taxes
     24,166       25,134       17,749       10,746       77,795       27,851       36,070       17,134       11,280       92,335  
     
Income From Continuing Operations
   $ 57,094     $ 64,888     $ 38,688     $ 15,769     $ 176,439     $ 58,170     $ 74,991     $ 46,372     $ 21,261     $ 200,794  
     
Income from discontinued operations net of income taxes, special items (3)
     —       —       —       12,849       12,849       —       —       —       —       —  
Income from discontinued operations net of income taxes, other (3)
     8,846       9,803       7,859       6,731       33,239       8,846       9,803       7,859       6,731       33,239  
     
Net Income
   $ 65,940     $ 74,691     $ 46,547     $ 35,349     $ 222,527     $ 67,016     $ 84,794     $ 54,231     $ 27,992     $ 234,033  
     
 
                                                                                
Earnings Per Share — Continuing Operations
   $ 0.61     $ 0.70     $ 0.41     $ 0.17     $ 1.89     $ 0.63     $ 0.80     $ 0.50     $ 0.23     $ 2.15  
Earnings Per Share — Discontinued Operations — Other
     0.10       0.10       0.09       0.21       0.49       0.09       0.11       0.08       0.07       0.36  
         
Earnings Per Share
   $ 0.71     $ 0.80     $ 0.50     $ 0.38     $ 2.38     $ 0.72     $ 0.91     $ 0.58     $ 0.30     $ 2.51  
 
                                                                                
Diluted Earnings Per Share — Continuing Operations
   $ 0.61     $ 0.69     $ 0.41     $ 0.17     $ 1.87     $ 0.62     $ 0.80     $ 0.49     $ 0.23     $ 2.13  
Diluted Earnings Per Share — Discontinued Operations — Other
     0.09       0.10       0.08       0.20       0.49       0.09       0.10       0.08       0.07       0.35  
         
Diluted Earnings Per Share
   $ 0.70     $ 0.79     $ 0.49     $ 0.37     $ 2.36     $ 0.71     $ 0.90     $ 0.57     $ 0.30     $ 2.48  
 
                                                                                
Average Shares Outstanding
     92,942,082       93,261,154       93,500,491       93,605,048       93,325,729       92,942,082       93,261,154       93,500,491       93,605,048       93,325,729  
Average Shares Outstanding-assuming dilution
     94,010,483       94,313,670       94,376,937       94,483,631       94,294,716       94,010,483       94,313,670       94,376,937       94,483,631       94,294,716  
     

 

 

BUSINESS SEGMENTS
                                         
(Thousands of U.S. dollars) (Unaudited)   Q1 2006   Q2 2006   Q3 2006   Q4 2006 Year 2006
 
Industrial Group
                                        
Net sales to external customers
   $ 503,444     $ 528,605     $ 501,347     $ 539,099     $ 2,072,495  
Intersegment sales
     435       462       469       632       1,998  
     
Total net sales
   $ 503,879     $ 529,067     $ 501,816     $ 539,731     $ 2,074,493  
Adjusted earnings before interest and taxes (EBIT) * (2)
   $ 45,885     $ 63,492     $ 48,180     $ 43,777     $ 201,334  
Adjusted EBIT Margin (2)
     9.1 %     12.0 %     9.6 %     8.1 %     9.7 %
 
                                        
Automotive Group
                                        
Net sales to external customers
   $ 420,984     $ 426,714     $ 363,585     $ 361,751     $ 1,573,034  
Adjusted (loss) earnings before interest and taxes (EBIT) * (2)
   $ (3,141 )   $ (1,960 )   $ (26,276 )   $ (42,319 )   $ (73,696 )
Adjusted EBIT (Loss) Margin (2)
     -0.7 %     -0.5 %     -7.2 %     -11.7 %     -4.7 %
 
                                        
Steel Group
                                        
Net sales to external customers
   $ 329,880     $ 346,855     $ 321,030     $ 330,071     $ 1,327,836  
Intersegment sales
     45,530       36,441       34,584       27,869       144,424  
     
Total net sales
   $ 375,410     $ 383,296     $ 355,614     $ 357,940     $ 1,472,260  
Adjusted earnings before interest and taxes (EBIT) * (2)
   $ 56,983     $ 59,749     $ 50,436     $ 39,523     $ 206,691  
Adjusted EBIT Margin (2)
     15.2 %     15.6 %     14.2 %     11.0 %     14.0 %
 
*   Industrial Group, Automotive Group and Steel Group EBIT do not equal Consolidated EBIT due to intersegment adjustments which are eliminated upon consolidation.
 
(1)   “Adjusted” statements exclude the impact of impairment and restructuring, manufacturing rationalization/reorganization and special charges and credits for all periods shown.
 
(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 on a segment basis exclude certain special items set forth above. 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 best reflect the performance of the company’s business segments and EBIT disclosures are responsive to investors.
 
(3)   Discontinued Operations reflects the December 8, 2006 sale of Timken Latrobe Steel. Steel Group Net sales and Adjusted EBIT have been changed to exclude Timken Latrobe Steel for all periods. Income From Discontinued Operations Net of Income Taxes, Special Items includes the gain on sale.
 
Income From Discontinued Operations Net of Income Taxes, Other includes prior activity of Timken Latrobe Steel in accordance with the sales agreement.

 

 

Reconciliation of GAAP net income and EPS — diluted.
This reconciliation is provided as additional relevant information about the company’s performance. Management believes adjusted net income and adjusted earnings per share are more representative of the company’s performance and therefore useful to investors. Management also believes that it is appropriate to compare GAAP net income to adjusted net income in light of special items related to impairment and restructuring and manufacturing rationalization/reorganization costs, Continued Dumping and Subsidy Offset Act (CDSOA) receipts, and gain/loss on the sale of non-strategic assets.
                                                                                 
    Q1 2006   Q2 2006   Q3 2006   Q4 2006   Year 2006
     
(Thousands of U.S. dollars, except share data) (Unaudited)   $   EPS (2)   $   EPS (2)   $   EPS (2)   $   EPS (2)   $   EPS (2)
 
Net income
   $ 65,940     $ 0.70     $ 74,691     $ 0.79     $ 46,547     $ 0.49     $ 35,349     $ 0.37     $ 222,527     $ 2.36  
 
                                                                                
Pre-tax special items:
                                                                                
Manufacturing rationalization/reorganization expenses — cost of products sold
     3,036       0.03       4,945       0.05       3,419       0.04       7,076       0.07       18,476       0.20  
Manufacturing rationalization/reorganization expenses — SG&A
     377       —       1,316       0.01       1,044       0.01       3,180       0.03       5,917       0.06  
Loss on Divestiture
     —       —       9,971       0.11       —       —       54,300       0.57       64,271       0.68  
Impairment and restructuring
     1,040       0.01       7,469       0.08       2,682       0.03       33,690       0.36       44,881       0.48  
Special items — other expense (income):
     308       —       (2,662 )     (0.03 )     (76 )     —       (92,220 )     (0.98 )     (94,650 )     (1.00 )
Provision for income taxes
     (3,685 )     (0.04 )     (10,936 )     (0.12 )     615       0.01       (534 )     (0.01 )     (14,540 )     (0.15 )
Income From Discontinued Operations
                                                                                
Net of Income Taxes, Special Items (1)
     —       —       —       —       —       —       (12,849 )     (0.14 )     (12,849 )     (0.14 )
 
                                                                                
     
Adjusted net income
   $ 67,016     $ 0.71     $ 84,794     $ 0.90     $ 54,231     $ 0.57     $ 27,992     $ 0.30     $ 234,033     $ 2.48  
     
 
(1)   Discontinued Operations relates to the sale of Latrobe Specialty Steel Unit in November of 2006.
 
(2)   EPS amounts will not sum due to rounding differences.

 

 

Reconciliation of GAAP income from continuing operations and EPS — diluted.
This reconciliation is provided as additional relevant information about the company’s performance. Management believes adjusted income from continuing operations and adjusted earnings per share are more representative of the company’s performance and therefore useful to investors. Management also believes that it is appropriate to compare GAAP income from continuing operations to adjusted income from continuing operations in light of special items related to impairment and restructuring and manufacturing rationalization/reorganization costs, Continued Dumping and Subsidy Offset Act (CDSOA) receipts, and gain/loss on the sale of non-strategic assets.
                                                                                 
    Q1 2006   Q2 2006   Q3 2006   Q4 2006   Year 2006
(Thousands of U.S. dollars, except share data) (Unaudited)   $   EPS (2)   $   EPS (2)   $   EPS (2)   $   EPS (2)   $   EPS (2)
 
Income from continuing operations
   $ 57,094     $ 0.61     $ 64,888     $ 0.69     $ 38,688     $ 0.41     $ 15,769     $ 0.17     $ 176,439     $ 1.87  
 
                                                                                
Pre-tax special items:
                                                                                
Manufacturing rationalization/reorganization expenses — cost of products sold
     3,036       0.03       4,945       0.05       3,419       0.04       7,076       0.07       18,476       0.20  
Manufacturing rationalization/reorganization expenses — SG&A
     377       —       1,316       0.01       1,044       0.01       3,180       0.03       5,917       0.06  
Loss on Divestiture
     —       —       9,971       0.11       —       —       54,300       0.57       64,271       0.68  
Impairment and restructuring
     1,040       0.01       7,469       0.08       2,682       0.03       33,690       0.36       44,881       0.48  
Special items — other expense (income):
     308       —       (2,662 )     (0.03 )     (76 )     —       (92,220 )     (0.98 )     (94,650 )     (1.00 )
Provision for income taxes
     (3,685 )     (0.04 )     (10,936 )     (0.12 )     615       0.01       (534 )     (0.01 )     (14,540 )     (0.15 )
 
                                                                                
     
Adjusted income from continuing operations
   $ 58,170     $ 0.62     $ 74,991     $ 0.80     $ 46,372     $ 0.49     $ 21,261     $ 0.23     $ 200,794     $ 2.13  
     
(2)   EPS amounts will not sum due to rounding differences.