Date of Report (Date of earliest event reported):
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October 27, 2011
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THE TIMKEN COMPANY
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(Exact Name of Registrant as Specified in its Charter)
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Ohio
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(State or Other Jurisdiction of Incorporation)
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1-1169
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34-0577130
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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1835 Dueber Avenue, S.W., Canton, Ohio 44706-2798
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(Address of Principal Executive Offices) (Zip Code)
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(330) 438-3000
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(Registrant's Telephone Number, Including Area Code)
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Exhibits.
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99.1
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The Timken Company Press Release dated October 27, 2011, announcing results for the third quarter of 2011.
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THE TIMKEN COMPANY
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By:
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/s/ William R. Burkhart
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William R. Burkhart
Senior Vice President and General Counsel
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Exhibit
Number
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Description of Document
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99.1
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The Timken Company Press Release dated October 27, 2011, announcing results for the third quarter of 2011.
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![]() |
Media Contact: Lorrie Paul Crum
Manager – Global Media and
Strategic Communications
Mail Code: GNW-37
1835 Dueber Avenue, S.W.
Canton, OH 44706 U.S.A.
Office Phone:
(330) 471-3514
Mobile Phone:
(330) 224-5021
lorrie.crum@timken.com
Investor Contact: Steve Tschiegg
Director – Capital Markets and
Investor Relations
Mail Code: GNE-26
1835 Dueber Avenue, S.W.
Canton, OH 44706 U.S.A.
Office Phone:
(330) 471-7446
Facsimile:
(330) 471-2797
steve.tschiegg@timken.com
For Additional Information:
www.timken.com/media
www.timken.com/investors
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-
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Sales up 25% over last year’s third quarter
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-
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Increased earnings driven by strong demand and execution
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-
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Nine-month earnings exceed the company's annual record
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·
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Completed on July 1 its $200 million acquisition of the assets of Philadelphia Gear Corporation, a leading provider of aftermarket services for gear-drive systems in diverse industrial and marine applications;
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·
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Acquired for $92 million Drives LLC, a leading manufacturer of highly engineered drive-chains for mobile and industrial machinery;
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·
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Opened early negotiations for its 2013 labor agreement with the United Steelworkers of America to support a potential $225 million investment at its Faircrest Steel Plant in Canton;
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·
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Broke ground on the Wind Energy Research and Development Center at Stark State College in Canton;
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·
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Announced an open-innovation agreement with The University of Akron to accelerate development of material and surface engineering technologies; and
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·
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Received recognition as a top business technology innovator on the InformationWeek 500 list.
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·
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Mobile Industries sales up 10 to 15 percent, with higher demand in the off-highway, rail and heavy-truck sectors;
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·
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Process Industries sales up 35 to 40 percent, with increased demand from global industrial distribution, continued growth in Asia, acquisitions and rising new-product sales;
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·
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Aerospace and Defense sales down slightly on continued weakness in demand for its defense-related products; and
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·
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Steel sales up 40 to 45 percent, driven by stronger demand in the energy and industrial sectors, as well as capacity increases and surcharges.
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Conference Call: | Thursday, Oct. 27, 2011 |
11:00 a.m. Eastern Time | |
All Callers: |
Live Dial-In: 800-344-0593 or 706-634-0975
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(Call in 10 minutes prior to be included.)
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Conference ID: 15486445 | |
Replay Dial-In through Nov. 3, 2011: | |
800-642-1687 or 706-645-9291 | |
Live Webcast: | www.timken.com/investors |
The Timken Company
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CONDENSED CONSOLIDATED STATEMENT OF INCOME
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||||||||||||||||
(Unaudited)
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||||||||||||||||
Three Months Ended
September 30,
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Nine Months Ended
September 30,
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|||||||||||||||
(Dollars in millions, except share data)
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2011
|
2010
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2011
|
2010
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||||||||||||
Net sales
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$ | 1,321.8 | $ | 1,059.7 | $ | 3,905.5 | $ | 2,984.8 | ||||||||
Cost of products sold
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978.5 | 794.6 | 2,878.4 | 2,228.7 | ||||||||||||
Gross Profit
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343.3 | 265.1 | 1,027.1 | 756.1 | ||||||||||||
Selling, general & administrative expenses (SG&A)
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155.1 | 140.3 | 459.1 | 414.0 | ||||||||||||
Impairment and restructuring
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1.2 | 2.9 | 8.5 | 9.4 | ||||||||||||
Operating Income
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187.0 | 121.9 | 559.5 | 332.7 | ||||||||||||
Other income (expense), net
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2.9 | (2.8 | ) | 1.6 | (0.7 | ) | ||||||||||
Earnings Before Interest and Taxes (EBIT) (1)
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189.9 | 119.1 | 561.1 | 332.0 | ||||||||||||
Interest expense, net
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(7.6 | ) | (8.3 | ) | (23.8 | ) | (26.4 | ) | ||||||||
Income From Continuing Operations
Before Income Taxes
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182.3 | 110.8 | 537.3 | 305.6 | ||||||||||||
Provision for income taxes
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70.1 | 38.6 | 189.0 | 122.7 | ||||||||||||
Income From Continuing Operations
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112.2 | 72.2 | 348.3 | 182.9 | ||||||||||||
Income (Loss) from discontinued operations, net of income taxes (2)
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- | (1.1 | ) | - | 3.4 | |||||||||||
Net Income
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112.2 | 71.1 | 348.3 | 186.3 | ||||||||||||
Less: Net Income Attributable to Noncontrolling Interest
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1.2 | 0.8 | 3.1 | 1.8 | ||||||||||||
Net Income Attributable to The Timken Company
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$ | 111.0 | $ | 70.3 | $ | 345.2 | $ | 184.5 | ||||||||
Net Income per Common Share Attributable to The Timken Company Common Shareholders
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||||||||||||||||
Basic Earnings Per Share - Continuing Operations
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$ | 1.13 | $ | 0.74 | $ | 3.53 | $ | 1.87 | ||||||||
Basic Earnings (Loss) Per Share - Discontinued Operations
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- | (0.01 | ) | - | 0.04 | |||||||||||
Earnings Per Share
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$ | 1.13 | $ | 0.73 | $ | 3.53 | $ | 1.91 | ||||||||
Diluted Earnings Per Share - Continuing Operations
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$ | 1.12 | $ | 0.73 | $ | 3.48 | $ | 1.86 | ||||||||
Diluted Earnings (Loss) Per Share - Discontinued Operations
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- | (0.01 | ) | - | 0.03 | |||||||||||
Earnings Per Share
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$ | 1.12 | $ | 0.72 | $ | 3.48 | $ | 1.89 | ||||||||
Average Shares Outstanding
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97,489,819 | 96,400,593 | 97,509,361 | 96,373,152 | ||||||||||||
Average Shares Outstanding - assuming dilution
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98,485,840 | 97,566,717 | 98,743,586 | 97,167,643 |
BUSINESS SEGMENTS (unaudited)
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||||||||||||||||
Three Months Ended
September 30,
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Nine Months Ended
September 30,
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|||||||||||||||
(Dollars in millions, except share data)
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2011
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2010
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2011
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2010
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||||||||||||
Mobile Industries Segment
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||||||||||||||||
Net sales to external customers
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$ | 441.3 | $ | 404.1 | $ | 1,349.3 | $ | 1,172.0 | ||||||||
Intersegment sales
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0.3 | - | 0.5 | - | ||||||||||||
Total net sales
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$ | 441.6 | $ | 404.1 | $ | 1,349.8 | $ | 1,172.0 | ||||||||
Earnings before interest and taxes (EBIT) (1)
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$ | 65.2 | $ | 57.1 | $ | 200.0 | $ | 165.3 | ||||||||
EBIT Margin (1)
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14.8 | % | 14.1 | % | 14.8 | % | 14.1 | % | ||||||||
Process Industries Segment
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||||||||||||||||
Net sales to external customers
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$ | 328.1 | $ | 233.7 | $ | 919.7 | $ | 650.6 | ||||||||
Intersegment sales
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0.8 | 0.8 | 2.5 | 2.1 | ||||||||||||
Total net sales
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$ | 328.9 | $ | 234.5 | $ | 922.2 | $ | 652.7 | ||||||||
Earnings before interest and taxes (EBIT) (1)
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$ | 77.5 | $ | 36.8 | $ | 214.5 | $ | 89.2 | ||||||||
EBIT Margin (1)
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23.6 | % | 15.7 | % | 23.3 | % | 13.7 | % | ||||||||
Aerospace and Defense Segment
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||||||||||||||||
Net sales to external customers
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$ | 81.8 | $ | 81.0 | $ | 244.4 | $ | 255.8 | ||||||||
(Loss) Earnings before interest and taxes (EBIT) (1)
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$ | (1.5 | ) | $ | 2.5 | $ | 4.0 | $ | 20.5 | |||||||
EBIT Margin (1)
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-1.8 | % | 3.1 | % | 1.6 | % | 8.0 | % | ||||||||
Steel Segment
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||||||||||||||||
Net sales to external customers
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$ | 470.6 | $ | 340.9 | $ | 1,392.1 | $ | 906.4 | ||||||||
Intersegment sales
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30.9 | 30.4 | 96.0 | 73.3 | ||||||||||||
Total net sales
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$ | 501.5 | $ | 371.3 | $ | 1,488.1 | $ | 979.7 | ||||||||
Earnings before interest and taxes (EBIT) (1)
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$ | 67.1 | $ | 41.3 | $ | 199.2 | $ | 104.2 | ||||||||
EBIT Margin (1)
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13.4 | % | 11.1 | % | 13.4 | % | 10.6 | % | ||||||||
Unallocated corporate expense
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$ | (17.5 | ) | $ | (17.6 | ) | $ | (55.9 | ) | $ | (49.8 | ) | ||||
Intersegment eliminations income (expense) (3)
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$ | (0.9 | ) | $ | (1.0 | ) | $ | (0.7 | ) | $ | 2.6 | |||||
Consolidated
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||||||||||||||||
Net sales to external customers
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$ | 1,321.8 | $ | 1,059.7 | $ | 3,905.5 | $ | 2,984.8 | ||||||||
Earnings before interest and taxes (EBIT) (1)
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$ | 189.9 | $ | 119.1 | $ | 561.1 | $ | 332.0 | ||||||||
EBIT Margin (1)
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14.4 | % | 11.2 | % | 14.4 | % | 11.1 | % | ||||||||
(1) |
EBIT is defined as operating income plus other income (expense). EBIT Margin is EBIT as a percentage of net sales. EBIT and EBIT Margin are important financial measures used in the management of the business, including decisions concerning the allocation of resources and assessment of performance. Management believes that reporting EBIT and EBIT Margin best reflect the performance of the company's business segments and EBIT disclosures are useful to investors.
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(2) |
Discontinued Operations relate to the sale of the Needle Roller Bearings (NRB) operations to JTEKT Corporation on December 31, 2009.
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(3) |
Intersegment eliminations represent profit or loss between the Steel segment and the Mobile Industries, Process Industries and Aerospace and Defense segments.
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Reconciliation of GAAP income from continuing operations before income taxes
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|||||||||
This reconciliation is provided as additional relevant information about the company's performance. Management believes consolidated earnings before interest and taxes (EBIT) are representative of the company's performance and therefore useful to investors. Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) are another important measure of financial performance and cash generation of the business and therefore useful to investors. Management also believes that it is appropriate to compare GAAP income from continuing operations before income taxes to consolidated EBIT and EBITDA.
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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|||||||||||||||
2011
|
2010
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2011
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2010
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|||||||||||||
(Dollars in millions) (Unaudited)
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||||||||||||||||
Income from continuing operations before income taxes
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$ | 182.3 | $ | 110.8 | $ | 537.3 | $ | 305.6 | ||||||||
Pre-tax reconciling items:
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||||||||||||||||
Interest expense
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9.1 | 9.1 | 28.2 | 28.7 | ||||||||||||
Interest income
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(1.5 | ) | (0.8 | ) | (4.4 | ) | (2.3 | ) | ||||||||
Consolidated earnings before interest and taxes (EBIT)
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$ | 189.9 | $ | 119.1 | $ | 561.1 | $ | 332.0 | ||||||||
Depreciation and Amortization
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49.1 | 47.0 | 142.9 | 142.2 | ||||||||||||
Consolidated earnings before interest, taxes, depreciation and amortization
(EBITDA)
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$ | 239.0 | $ | 166.1 | $ | 704.0 | $ | 474.2 |
Reconciliation of Total Debt to Net Debt and the Ratio of Net Debt to Capital:
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||||||||
(Dollars in millions) (Unaudited)
|
September 30,
2011
|
December 31,
2010
|
||||||
Short-term debt
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$ | 21.2 | $ | 32.0 | ||||
Long-term debt
|
490.9 | 481.7 | ||||||
Total Debt
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512.1 | 513.7 | ||||||
Less: Cash, cash equivalents and restricted cash
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(406.5 | ) | (877.1 | ) | ||||
Net Debt (Cash)
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$ | 105.6 | $ | (363.4 | ) | |||
Shareholders' equity
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$ | 2,224.7 | $ | 1,941.8 | ||||
Ratio of Total Debt to Capital
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18.7 | % | 20.9 | % | ||||
Ratio of Net Debt (Cash) to Capital (Leverage)
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4.5 | % | (23.0 | %) |
This reconciliation is provided as additional relevant information about The Timken Company's financial position. Capital is defined as total debt plus total shareholders' equity. Restricted cash is $3.6 million at September 30, 2011.
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Management believes Net Debt (Cash) is an important measure of Timken's financial position, due to the amount of cash and cash equivalents.
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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|||||||||||||||
Free cash flow:
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2011
|
2010
|
2011
|
2010
|
||||||||||||
(Dollars in millions) (Unaudited)
|
||||||||||||||||
Net cash provided by operating activities
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$ | 95.5 | $ | 149.4 | $ | (67.4 | ) | $ | 313.4 | |||||||
Less: capital expenditures
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(46.4 | ) | (22.2 | ) | (106.0 | ) | (61.2 | ) | ||||||||
Less: cash dividends paid to shareholders
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(19.5 | ) | (12.5 | ) | (56.6 | ) | (33.8 | ) | ||||||||
Free cash flow
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$ | 29.6 | $ | 114.7 | $ | (230.0 | ) | $ | 218.4 | |||||||
Plus: discretionary pension and postretirement benefit
|
||||||||||||||||
contributions, net of the tax benefit (4)
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63.2 | 9.5 | 256.0 | 72.7 | ||||||||||||
Free cash flow less discretionary contributions
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$ | 92.8 | $ | 124.2 | $ | 26.0 | $ | 291.1 | ||||||||
Management believes that free cash flow and free cash flow less discretionary pension and postretirement contributions are useful to investors because they are meaningful indicators of cash generated from operating activities available for the execution of its business strategy.
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(4)
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The discretionary pension and postretirement benefit contributions for the third quarter of 2011 were $100.0 million, net of a tax benefit of $36.8 million. The discretionary pension and postretirement benefit contributions for the first nine months of 2011 were $401.4 million, net of a tax benefit of $145.4 million. The discretionary pension and postretirement benefit contributions for the third quarter of 2010 were $15.0 million, net of a tax benefit of $5.5 million. The discretionary pension and postretirement benefit contributions for the first nine months of 2010 were $115.0 million, net of a tax benefit of $42.3 million.
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CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions) (Unaudited)
|
September 30,
2011
|
December 31,
2010
|
||||||
ASSETS
|
||||||||
Cash and cash equivalents
|
$ | 402.9 | $ | 877.1 | ||||
Accounts receivable
|
715.9 | 516.6 | ||||||
Inventories, net
|
949.2 | 828.5 | ||||||
Other current assets
|
198.5 | 177.0 | ||||||
Total Current Assets
|
2,266.5 | 2,399.2 | ||||||
Property, Plant and Equipment - Net
|
1,242.5 | 1,267.7 | ||||||
Goodwill
|
283.7 | 224.4 | ||||||
Other assets
|
330.3 | 289.1 | ||||||
Total Assets
|
$ | 4,123.0 | $ | 4,180.4 | ||||
LIABILITIES
|
||||||||
Accounts payable
|
$ | 308.4 | $ | 263.5 | ||||
Short-term debt
|
21.2 | 32.0 | ||||||
Income taxes
|
97.4 | 14.7 | ||||||
Accrued expenses
|
418.7 | 411.0 | ||||||
Total Current Liabilities
|
845.7 | 721.2 | ||||||
Long-term debt
|
490.9 | 481.7 | ||||||
Accrued pension cost
|
89.7 | 394.5 | ||||||
Accrued postretirement benefits cost
|
395.6 | 531.2 | ||||||
Other non-current liabilities
|
76.4 | 110.0 | ||||||
Total Liabilities
|
1,898.3 | 2,238.6 | ||||||
EQUITY
|
||||||||
The Timken Company shareholders' equity
|
2,204.7 | 1,925.0 | ||||||
Noncontrolling Interest
|
20.0 | 16.8 | ||||||
Total Equity
|
2,224.7 | 1,941.8 | ||||||
Total Liabilities and Equity
|
$ | 4,123.0 | $ | 4,180.4 |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|
||||||||||||||||
(Dollars in millions) (Unaudited)
|
||||||||||||||||
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Cash Provided (Used)
|
||||||||||||||||
OPERATING ACTIVITIES
|
||||||||||||||||
Net income attributable to The Timken Company
|
$ | 111.0 | $ | 70.3 | $ | 345.2 | $ | 184.5 | ||||||||
Loss (Income) from discontinued operations
|
- | 1.1 | - | (3.4 | ) | |||||||||||
Net income attributable to noncontrolling interest
|
1.2 | 0.8 | 3.1 | 1.8 | ||||||||||||
Adjustments to reconcile net income to net cash
|
||||||||||||||||
provided (used) by operating activities:
|
||||||||||||||||
Depreciation and amortization
|
49.1 | 47.0 | 142.9 | 142.2 | ||||||||||||
Impairment charges
|
0.1 | 2.0 | 3.3 | 2.0 | ||||||||||||
Pension and other postretirement expense
|
18.6 | 23.1 | 55.8 | 69.0 | ||||||||||||
Pension and other postretirement benefit contributions and payments
|
(113.4 | ) | (30.8 | ) | (445.2 | ) | (164.4 | ) | ||||||||
Changes in operating assets and liabilities:
|
||||||||||||||||
Accounts receivable
|
3.8 | (37.1 | ) | (187.9 | ) | (140.9 | ) | |||||||||
Inventories
|
(35.6 | ) | (49.5 | ) | (122.2 | ) | (95.2 | ) | ||||||||
Accounts payable
|
(7.6 | ) | 32.9 | 39.3 | 100.4 | |||||||||||
Accrued expenses
|
33.0 | 30.4 | (2.3 | ) | 45.8 | |||||||||||
Income taxes
|
39.3 | 63.6 | 101.3 | 146.8 | ||||||||||||
Other - net
|
(4.0 | ) | (3.3 | ) | (0.7 | ) | 21.4 | |||||||||
Net Cash Provided (Used) by Operating Activities - Continuing Operations
|
95.5 | 150.5 | (67.4 | ) | 310.0 | |||||||||||
Net Cash Provided (Used) by Operating Activities - Discontinued Operations
|
- | (1.1 | ) | - | 3.4 | |||||||||||
Net Cash Provided (Used) By Operating Activities
|
95.5 | 149.4 | (67.4 | ) | 313.4 | |||||||||||
INVESTING ACTIVITIES
|
||||||||||||||||
Capital expenditures
|
(46.4 | ) | (22.2 | ) | (106.0 | ) | (61.2 | ) | ||||||||
Acquisitions
|
(198.9 | ) | (16.1 | ) | (198.9 | ) | (16.1 | ) | ||||||||
Investments - net
|
(10.6 | ) | (30.0 | ) | (23.9 | ) | (30.0 | ) | ||||||||
Divestitures
|
- | - | 4.8 | - | ||||||||||||
Other
|
(0.6 | ) | (1.5 | ) | 6.5 | 0.1 | ||||||||||
Net Cash Used by Investing Activities
|
(256.5 | ) | (69.8 | ) | (317.5 | ) | (107.2 | ) | ||||||||
FINANCING ACTIVITIES
|
||||||||||||||||
Cash dividends paid to shareholders
|
(19.5 | ) | (12.5 | ) | (56.6 | ) | (33.8 | ) | ||||||||
Purchase of treasury shares, net
|
(18.5 | ) | - | (43.8 | ) | (29.2 | ) | |||||||||
Net proceeds from common share activity
|
0.2 | 10.1 | 23.4 | 29.5 | ||||||||||||
Net proceeds from credit facilities
|
(8.2 | ) | (0.6 | ) | (2.0 | ) | (19.4 | ) | ||||||||
Other
|
1.8 | (3.5 | ) | (7.1 | ) | (3.5 | ) | |||||||||
Net Cash Used by Financing Activities
|
(44.2 | ) | (6.5 | ) | (86.1 | ) | (56.4 | ) | ||||||||
Effect of exchange rate changes on cash
|
(24.7 | ) | 30.5 | (3.2 | ) | (5.5 | ) | |||||||||
(Decrease) Increase In Cash and Cash Equivalents
|
(229.9 | ) | 103.6 | (474.2 | ) | 144.3 | ||||||||||
Cash and cash equivalents at beginning of period
|
632.8 | 796.2 | 877.1 | 755.5 | ||||||||||||
Cash and Cash Equivalents at End of Period
|
$ | 402.9 | $ | 899.8 | $ | 402.9 | $ | 899.8 |