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Manager
– Global Media and Strategic Communications
Mail
Code: GNW-37
1835
Dueber Avenue, S.W.
Canton,
OH 44706 U.S.A.
Telephone:
(330) 471-3514
Mobile: (330)
224-5021
lorrie.crum@timken.com
Director
– Capital Markets and Investor
Relations
Mail
Code: GNE-26
1835
Dueber Avenue, S.W.
Canton,
OH 44706 U.S.A.
Telephone:
(330) 471-7446
steve.tschiegg@timken.com
www.timken.com/media
www.timken.com/investors
|
|
|
NEWS
RELEASE
Timken Reports 2009 Results and 2010
Outlook
·
Strong
execution delivers record free cash flow
·
Strategic
sale of Needle Roller Bearings business completed
·
Improved
markets and results expected in 2010
CANTON,
Ohio: Feb. 2, 2010 — The Timken Company (NYSE: TKR) today reported sales
of $3.1 billion for 2009, a decrease of 38 percent from a year ago. The
sales comparison, which excludes for both periods the results of the
Needle Roller Bearings business sold in December (accounted for as
“discontinued operations”), reflects weak demand and lower surcharges,
partially offset by improved pricing.
In
2009, the company incurred a full-year loss of $134.0 million, or $1.39
per share, including a loss of $72.6 million, or $0.75 per share, from the
Needle Roller Bearings business. Net of non-controlling interest, the
company’s continuing operations incurred a loss of $61.4 million, or $0.64
per share for the year, compared with income of $278.9 million, or $2.89
per diluted share, a year ago.
Excluding
special items, full-year net income in 2009 was $30.7 million, or $0.32
per diluted share, including a loss of $20.2 million, or $0.21 per share,
from discontinued operations. Net of non-controlling interest, income from
the company’s continuing operations for 2009 was $50.9 million, or $0.53
per diluted share, excluding special items, compared with $295.0 million,
or $3.06 per diluted share, in the prior year. The change in full-year
earnings reflects lower sales volume, surcharges and manufacturing
utilization, partially offset by pricing, cost reductions, lower material
costs and LIFO income (last-in, first-out inventory
accounting).
|
- 2 -
Special
items for 2009, net of tax, amounted to $164.6 million of expense, compared with
$45.8 million in the prior year. The items in 2009 include asset impairment
charges of $49.7 million in Mobile Industries; a loss on the sale of the Needle
Roller Bearings business of $37.8 million; impairment charges of $20.8 million
in Process Industries for consolidation of bearing operations; and severance
costs of $56.4 million associated with the company’s cost-reduction efforts.
Special items in the prior year consisted primarily of a goodwill impairment
charge in the Mobile Industries segment.
Table 1: 2009 Net
(Loss) Income and Diluted Earnings Per Share (a)
|
Net
(Loss) Income
|
Earnings
Per Share
|
|||||||||||||||
|
As Reported
|
Adjusted
|
As Reported
|
Adjusted
|
|||||||||||||
|
Continuing
Operations
|
$ | (61.4 | ) | $ | 50.9 | $ | (0.64 | ) | $ | 0.53 | ||||||
|
Discontinued
Operations
|
$ | (72.6 | ) | $ | (20.2 | ) | (0.75 | ) | (0.21 | ) | ||||||
|
Total
|
$ | (134.0 | ) | $ | 30.7 | $ | (1.39 | ) | $ | 0.32 | ||||||
|
(a)
|
Dollars
in millions, except per-share data. “Adjusted” earnings per share exclude
the impact of impairment and restructuring, manufacturing
rationalization/reorganization and special charges and
credits.
|
“The
global economic environment made 2009 an extremely challenging year for The
Timken Company, which is reflected in the reduction in our sales and earnings,”
said James W. Griffith, Timken president and chief executive officer. “However,
we responded quickly to the downturn, taking actions that helped generate record
free cash flow. We continued shifting our portfolio towards attractive markets,
strengthening our
balance sheet and improving our operating capabilities. Today we are better
positioned to leverage an economic recovery.”
During
2009, the company took actions in response to the global economic recession
while executing its portfolio management initiatives. The company:
|
·
|
Realigned
the organization to improve focus on target markets, right-sized the
company through structural cost reductions and limited discretionary
spending;
|
|
·
|
Enhanced
customer service capabilities and drove supply-chain efficiencies with
further deployment of its “Project ONE” enterprise initiative to
standardize and streamline systems and processes;
|
|
·
|
Completed
the sale of its Needle Roller Bearings business, for which Timken received
approximately $330 million, including retained
receivables;
|
The
Timken Company
- 3 -
|
·
|
Generated
$577 million of net cash provided by operating activities and record free
cash flow of $419 million; and
|
|
·
|
Strengthened
its balance sheet and liquidity, completing three financings, including
a $500-million unsecured Senior Credit Facility; a $100-million
accounts-receivable securitization facility; and a $250-million public
offering of 6.00% unsecured Senior Notes, due
2014.
|
Fourth-Quarter
Results
For the
quarter ended Dec. 31, 2009, sales were $774.6 million, a decrease of 29 percent
from the same period a year ago. The reduction reflects weaker demand across
most of the company’s end markets and lower surcharges, while favorable pricing
and currency partially offset the sales decline.
The
company incurred a loss of $0.21 per share in the fourth quarter, which included
a loss of $0.13 per share from discontinued operations. Special items recorded
in the fourth quarter totaled $0.61 per share, including an after-tax asset
impairment charge in the company’s Mobile Industries segment of $55.9 million,
or $0.58 per share.
Excluding
special items, fourth-quarter 2009 income was $0.40 per diluted share, including
$0.09 per diluted share from discontinued operations. Net of non-controlling
interest, income from continuing operations, excluding special items, was $0.31
per diluted share in the fourth quarter of 2009, compared with $0.15 for the
same period last year. Benefits from pricing, cost reductions, lower material
costs and LIFO income were partially offset by lower sales volume, manufacturing
underutilization and reduced surcharges.
Table
2: Fourth-Quarter 2009 Net (Loss) Income and Diluted Earnings Per
Share (a)
|
Net
(Loss) Income
|
Earnings
Per Share
|
|||||||||||||||
|
As Reported
|
Adjusted
|
As Reported
|
Adjusted
|
|||||||||||||
|
Continuing
Operations
|
$ | (7.5 | ) | $ | 29.5 | $ | (0.08 | ) | $ | 0.31 | ||||||
|
Discontinued
Operations
|
$ | (12.7 | ) | $ | 9.4 | (0.13 | ) | 0.09 | ||||||||
|
Total
|
$ | (20.2 | ) | $ | 38.9 | $ | (0.21 | ) | $ | 0.40 | ||||||
|
(a)
|
Dollars
in millions, except per-share data. “Adjusted” earnings per share exclude
the impact of impairment and restructuring, manufacturing
rationalization/reorganization and special charges and
credits.
|
The
Timken Company
- 4 -
Total
debt was $513 million as of Dec. 31, 2009, or 24.3 percent of capital. At
year-end, the company’s cash position was $756 million, or $243 million in
excess of total debt. This compares with net debt of $490 million as of Dec. 31,
2008. The improvement reflects strong free cash flow of $419 million driven
primarily by working capital reductions as well as proceeds from the sale of the
Needle Roller Bearings business.
The
following business results for all periods reflect continuing operations,
excluding special items:
Bearings and Power
Transmission Group Results
Full-year
sales in 2009 for the Bearings and Power Transmission Group were $2.5 billion,
down 26 percent compared with the prior year. Earnings before interest and taxes
(EBIT) for 2009 were $221.4 million, a decrease of 25 percent from
2008.
Sales in
the fourth quarter of 2009 were $613.2 million, down 18 percent from the fourth
quarter of 2008. EBIT in the fourth quarter was $71.5 million, an increase of 50
percent from the prior-year period.
Mobile Industries Segment
Results
Mobile
Industries sales were $1.25 billion in 2009, down 30 percent from $1.77 billion
a year ago. The sales results reflect weaker demand among its market sectors and
currency, partially offset by favorable pricing.
EBIT for
the year was $30.5 million, down 15 percent from $35.8 million in 2008, as
benefits from pricing, cost-reduction initiatives and lower material costs were
partially offset by lower demand.
Fourth-quarter
sales for the Mobile Industries segment in 2009 were $324.6 million, compared
with $374.3 million in the same period last year. The 13-percent decrease
reflected lower unit volume in most market sectors, partially offset by
favorable pricing and currency. EBIT in the fourth quarter was $31.1 million, up
from a loss of $7.6 million in the fourth quarter of 2008. Cost-reduction
initiatives, increased pricing, lower material costs and LIFO income more than
offset the decline in demand. The company also resolved a pricing dispute and
certain non-income tax matters during the quarter, which together added
approximately $15 million to EBIT.
The
Timken Company
- 5 -
Process Industries Segment
Results
Sales for
the Process Industries segment were $808.7 million in 2009, down 31 percent from
$1.17 billion a year ago. Lower demand across most industrial market sectors and
currency more than offset favorable pricing. Sales declines were most prominent
in the industrial distribution channel.
EBIT for
the year decreased to $118.5 million, down 46 percent from $218.7 million in
2008. Lower EBIT primarily resulted from volume and currency, partially offset
by pricing and cost-reduction initiatives.
Sales in
the fourth quarter of 2009 were $189.6 million, a decline of 29 percent from
$268.3 million in the same period a year ago. The decline in sales reflects a
broad-based drop in industrial demand, especially in the power-transmission
sector and across the industrial distribution channel. This was partially offset
by favorable pricing and currency. EBIT in the fourth quarter was $23.9 million,
down 37 percent from $37.7 million in the same period of 2008. The decline in
volume was partially offset by cost-reduction initiatives, pricing, lower
material costs, and LIFO income.
Aerospace and Defense
Segment Results
Sales for
the Aerospace and Defense segment were $417.7 million in 2009, up one percent
from $412.0 million a year ago. The increase was driven primarily by pricing and
an acquisition, partially offset by reduced demand across commercial and general
aviation markets.
EBIT for
the year increased to $72.4 million, up 75 percent from $41.5 million in 2008.
The benefits from cost-reduction initiatives, LIFO income and pricing were
partially offset by the impact of lower demand.
Sales in
the fourth quarter of 2009 were $98.9 million, versus $109.7 million in the
prior-year period. The 10-percent decline reflects reduced demand in the
commercial and general aviation markets. EBIT in the fourth quarter was $16.5
million, down 5 percent from the same period in the prior year, as benefits from
cost-reduction initiatives, LIFO income and favorable pricing were offset by
lower demand.
The
Timken Company
- 6 -
Steel Group
Results
Sales for
the Steel Group, including inter-group sales, were $714.9 million in 2009, a
decrease of 61 percent from $1.85 billion last year, with 50 percent fewer
shipped tons. The greatest market declines were from the industrial and energy
sectors. Surcharges declined approximately $555 million from a year
ago.
The Steel
Group incurred a loss of $57.9 million in 2009, compared with EBIT of $264.0
million in 2008. The decline resulted from lower demand and underutilization of
manufacturing capacity. Benefits from cost-reduction actions, lower material
costs and an approximate $70-million change in LIFO reserve were offset by lower
surcharges. The change in LIFO reserve was due to lower year-end inventory
quantities and material costs.
Sales in
the fourth quarter, including inter-segment sales, were $173.6 million, a
decrease of 53 percent from $371.5 million for the same period a year ago, with
approximately 40 percent fewer shipped tons. Weaker end-market demand in the
industrial and energy sectors was partially offset by stronger demand in the
light-vehicle sector compared with a year ago due to consumer stimulus programs
in the U.S. and continued market strengthening in general. Surcharges declined
approximately $80 million from the fourth quarter last year. EBIT in the fourth
quarter was $2.6 million, up from a loss of $3.5 million in the same period a
year ago. Lower material costs, a favorable change in LIFO of approximately $30
million and cost-reduction initiatives more than offset the impact of lower
demand.
Outlook
Overall, the company expects the global economy
to grow modestly in 2010 following 2009’s retraction. Timken anticipates an
increase in sales of approximately 5 to 10 percent over 2009, driven primarily
by stronger shipments in the Steel Group, as customers rebuild inventory levels.
The Mobile Industries segment is expected to be up slightly, as increased demand
is largely offset by the company’s initiatives to exit low-margin business.
Sales in the Process Industries segment are expected to be up slightly, as
growth initiatives in energy and Asia more than offset declines in other areas.
Aerospace segment sales are expected to decline slightly due to decreases in
commercial and general aviation.
The
Timken Company
- 7 -
The
company expects 2010 earnings, excluding special items, to range from $0.85 to
$1.15 per diluted share for the year, compared with $0.53 per diluted share from
continuing operations in 2009.
Conference Call
Information
The
company will host a conference call for investors and analysts today to discuss
financial results.
|
Conference
Call:
|
Tuesday,
Feb. 2, 2010
|
|
11:00
a.m. Eastern Time
|
|
|
All
Callers:
|
Live Dial-In: 800-344-0593 or
706-634-0975
|
|
(Call in 10 minutes prior to be
included.)
|
|
|
Conference ID:
68493687
|
|
|
Replay Dial-In through Feb. 12,
2010:
|
|
|
800-642-1687 or
706-645-9291
|
|
|
Live
Webcast:
|
www.timken.com/investors
|
About The Timken
Company
The
Timken Company keeps the world turning, with innovative friction management and
power transmission products and services, enabling our customers’ machinery to
perform more efficiently and reliably. With sales of $3.1 billion in 2009,
operations in 26 countries and approximately 17,000 employees, Timken is Where
You Turn™ for better performance.
Certain
statements in this news 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 2009; 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 and their
impact on the operation of the company’s surcharge mechanisms; the impact of the
company’s last-in first-out accounting; continued weakness in global economic
conditions and financial markets; changes in the expected costs associated with
product warranty claims; the impact on operations of general economic
conditions, higher or lower raw-material and energy costs, fluctuations in
customer demand, and the company’s ability to achieve the benefits of its
ongoing programs and initiatives, including, without limitation, the initiative
to reduce its employment levels and other costs, the implementation of its
Mobile Industries Segment restructuring program and initiatives and the
rationalization of the company’s Canton bearing operations. These and additional
factors are described in greater detail in the company’s Annual Report on Form
10-K for the year ended Dec. 31, 2008, page 44 and in the company’s Form 10-Q
for the quarter ended Sept. 30, 2009. The company undertakes no obligation to
update or revise any forward-looking statement.
###
The
Timken Company
|
(Unaudited)
|
||||||||||||||||||||||||||||||||
|
CONDENSED
CONSOLIDATED STATEMENT OF INCOME
|
AS
REPORTED
|
ADJUSTED
(1)
|
||||||||||||||||||||||||||||||
|
(Dollars
in thousands, except share data)
|
Q4 2009 | Q4 2008 |
Full
Year 2009
|
Full
Year 2008
|
Q4 2009 | Q4 2008 |
Full
Year 2009
|
Full
Year 2008
|
||||||||||||||||||||||||
|
Net
sales
|
$ | 774,606 | $ | 1,097,952 | $ | 3,141,627 | $ | 5,040,800 | $ | 774,606 | $ | 1,097,952 | $ | 3,141,627 | $ | 5,040,800 | ||||||||||||||||
|
Cost
of products sold
|
596,764 | 918,483 | 2,550,647 | 3,885,540 | 596,764 | 918,483 | 2,550,647 | 3,885,540 | ||||||||||||||||||||||||
|
Manufacturing
rationalization / reorganization
expenses
- cost of products sold
|
4,643 | 1,647 | 8,233 | 3,407 | - | - | - | - | ||||||||||||||||||||||||
|
Gross
Profit
|
$ | 173,199 | $ | 177,822 | $ | 582,747 | $ | 1,151,853 | $ | 177,842 | $ | 179,469 | $ | 590,980 | $ | 1,155,260 | ||||||||||||||||
|
Selling,
administrative & general expenses (SG&A)
|
112,807 | 139,729 | 469,868 | 655,610 | 112,807 | 139,729 | 469,868 | 655,610 | ||||||||||||||||||||||||
|
Rationalization
/ reorganization expenses - SG&A
|
1,226 | (166 | ) | 2,864 | 1,521 | - | - | - | - | |||||||||||||||||||||||
|
Impairment
and restructuring
|
80,052 | 25,341 | 164,126 | 32,783 | - | - | - | - | ||||||||||||||||||||||||
|
Operating
(Loss) Income
|
$ | (20,886 | ) | $ | 12,918 | $ | (54,111 | ) | $ | 461,939 | $ | 65,035 | $ | 39,740 | $ | 121,112 | $ | 499,650 | ||||||||||||||
|
Other
income (expense)
|
(2,058 | ) | (7,823 | ) | 1,869 | (11,990 | ) | (2,058 | ) | (7,823 | ) | 1,869 | (11,990 | ) | ||||||||||||||||||
|
Special
items - other income (expense)
|
(1,401 | ) | 8,260 | (2,009 | ) | 28,247 | - | - | - | - | ||||||||||||||||||||||
|
(Loss)
Earnings Before Interest and Taxes (EBIT) (2)
|
$ | (24,345 | ) | $ | 13,355 | $ | (54,251 | ) | $ | 478,196 | $ | 62,977 | $ | 31,917 | $ | 122,981 | $ | 487,660 | ||||||||||||||
|
Interest
expense, net
|
(14,045 | ) | (9,528 | ) | (39,979 | ) | (38,609 | ) | (14,045 | ) | (9,528 | ) | (39,979 | ) | (38,609 | ) | ||||||||||||||||
|
(Loss)
Income From Continuing Operations
Before
Income Taxes
|
(38,390 | ) | 3,827 | (94,230 | ) | 439,587 | 48,932 | 22,389 | 83,002 | 449,051 | ||||||||||||||||||||||
|
Provision
(benefit) for income taxes
|
(31,093 | ) | 1,984 | (28,193 | ) | 157,062 | 19,157 | 7,500 | 30,570 | 150,432 | ||||||||||||||||||||||
|
(Loss)
Income From Continuing Operations
|
$ | (7,297 | ) | $ | 1,843 | $ | (66,037 | ) | $ | 282,525 | $ | 29,775 | $ | 14,889 | $ | 52,432 | $ | 298,619 | ||||||||||||||
|
(Loss)
Income from discontinued operations
net
of income taxes (3)
|
(12,677 | ) | (37,372 | ) | (72,589 | ) | (11,273 | ) | 9,373 | (7,937 | ) | (20,233 | ) | 18,388 | ||||||||||||||||||
|
Net
(Loss) Income
|
$ | (19,974 | ) | $ | (35,529 | ) | $ | (138,626 | ) | $ | 271,252 | $ | 39,148 | $ | 6,952 | $ | 32,199 | $ | 317,007 | |||||||||||||
|
Less:
Net Income (Loss) Attributable to Noncontrolling Interest
|
212 | 622 | (4,665 | ) | 3,582 | 248 | 622 | 1,520 | 3,582 | |||||||||||||||||||||||
|
Net
(Loss) Income Attributable to The Timken Company
|
$ | (20,186 | ) | $ | (36,151 | ) | $ | (133,961 | ) | $ | 267,670 | $ | 38,900 | $ | 6,330 | $ | 30,679 | $ | 313,425 | |||||||||||||
|
Net
Income per Common Share Attributable to The Timken Company
Common Shareholders:
|
||||||||||||||||||||||||||||||||
|
(Loss) Earnings Per Share -
Continuing Operations
|
$ | (0.08 | ) | $ | 0.01 | $ | (0.64 | ) | $ | 2.90 | $ | 0.31 | $ | 0.15 | $ | 0.53 | $ | 3.06 | ||||||||||||||
|
(Loss) Earnings Per Share -
Discontinued Operations
|
(0.13 | ) | (0.38 | ) | (0.75 | ) | (0.12 | ) | 0.09 | (0.08 | ) | (0.21 | ) | 0.20 | ||||||||||||||||||
|
Earnings
Per Share
|
$ | (0.21 | ) | $ | (0.37 | ) | $ | (1.39 | ) | $ | 2.78 | $ | 0.40 | $ | 0.07 | $ | 0.32 | $ | 3.26 | |||||||||||||
|
Diluted (Loss) Earnings Per
Share - Continuing Operations
|
$ | (0.08 | ) | $ | 0.01 | $ | (0.64 | ) | $ | 2.89 | $ | 0.31 | $ | 0.15 | $ | 0.53 | $ | 3.06 | ||||||||||||||
|
Diluted (Loss) Earnings Per
Share - Discontinued Operations
|
(0.13 | ) | (0.38 | ) | (0.75 | ) | (0.12 | ) | 0.09 | (0.08 | ) | (0.21 | ) | 0.19 | ||||||||||||||||||
|
Earnings
Per Share
|
$ | (0.21 | ) | $ | (0.37 | ) | $ | (1.39 | ) | $ | 2.77 | $ | 0.40 | $ | 0.07 | $ | 0.32 | $ | 3.25 | |||||||||||||
|
Average
Shares Outstanding
|
96,212,813 | 95,902,494 | 96,135,783 | 95,650,104 | 96,212,813 | 95,902,494 | 96,135,783 | 95,650,104 | ||||||||||||||||||||||||
|
Average
Shares Outstanding - assuming dilution
|
96,212,813 | 95,909,934 | 96,135,783 | 95,947,643 | 96,212,813 | 95,909,934 | 96,135,783 | 95,947,643 | ||||||||||||||||||||||||
BUSINESS
SEGMENTS
|
(Dollars in thousands) (Unaudited)
|
Q4 2009
|
Q4 2008
|
Full Year 2009
|
Full Year 2008
|
||||||||||||
|
Mobile
Industries Segment
|
||||||||||||||||
|
Net
sales to external customers
|
$ | 324,628 | $ | 374,298 | $ | 1,245,012 | $ | 1,771,863 | ||||||||
|
Adjusted
(loss) earnings before interest and taxes (EBIT) (2)
|
$ | 31,097 | $ | (7,623 | ) | $ | 30,496 | $ | 35,764 | |||||||
|
Adjusted
EBIT Margin (2)
|
9.6 | % | -2.0 | % | 2.4 | % | 2.0 | % | ||||||||
|
Process
Industries Segment
|
||||||||||||||||
|
Net
sales to external customers
|
$ | 189,115 | $ | 267,390 | $ | 806,000 | $ | 1,163,012 | ||||||||
|
Intergroup
sales
|
520 | 902 | 2,719 | 3,154 | ||||||||||||
|
Total
net sales
|
$ | 189,635 | $ | 268,292 | $ | 808,719 | $ | 1,166,166 | ||||||||
|
Adjusted
earnings before interest and taxes (EBIT) (2)
|
$ | 23,878 | $ | 37,738 | $ | 118,504 | $ | 218,667 | ||||||||
|
Adjusted
EBIT Margin (2)
|
12.6 | % | 14.1 | % | 14.7 | % | 18.8 | % | ||||||||
|
Aerospace
and Defense Segment
|
||||||||||||||||
|
Net
sales to external customers
|
$ | 98,929 | $ | 109,746 | $ | 417,696 | $ | 411,954 | ||||||||
|
Adjusted
earnings before interest and taxes (EBIT) (2)
|
$ | 16,489 | $ | 17,423 | $ | 72,444 | $ | 41,459 | ||||||||
|
Adjusted
EBIT Margin (2)
|
16.7 | % | 15.9 | % | 17.3 | % | 10.1 | % | ||||||||
|
Total
Bearings and Power Transmission Group
|
||||||||||||||||
|
Net
sales to external customers
|
$ | 612,672 | $ | 751,434 | $ | 2,468,708 | $ | 3,346,829 | ||||||||
|
Intergroup
sales
|
520 | 902 | 2,719 | 3,154 | ||||||||||||
|
Total
net sales
|
$ | 613,192 | $ | 752,336 | $ | 2,471,427 | $ | 3,349,983 | ||||||||
|
Adjusted
earnings before interest and taxes (EBIT) (2)
|
$ | 71,464 | $ | 47,538 | $ | 221,444 | $ | 295,890 | ||||||||
|
Adjusted
EBIT Margin (2)
|
11.7 | % | 6.3 | % | 9.0 | % | 8.8 | % | ||||||||
|
Steel
Group
|
||||||||||||||||
|
Net
sales to external customers
|
$ | 161,934 | $ | 346,518 | $ | 672,919 | $ | 1,693,971 | ||||||||
|
Intergroup
sales
|
11,628 | 24,980 | 41,993 | 157,982 | ||||||||||||
|
Total
net sales
|
$ | 173,562 | $ | 371,498 | $ | 714,912 | $ | 1,851,953 | ||||||||
|
Adjusted
(loss) earnings before interest and taxes (EBIT) (2)
|
$ | 2,555 | $ | (3,493 | ) | $ | (57,880 | ) | $ | 264,006 | ||||||
|
Adjusted
EBIT Margin (2)
|
1.5 | % | -0.9 | % | -8.1 | % | 14.3 | % | ||||||||
|
Unallocated
corporate expense
|
$ | (12,913 | ) | $ | (13,633 | ) | $ | (48,715 | ) | $ | (68,357 | ) | ||||
|
Intergroup
eliminations income (expense) (4)
|
$ | 1,871 | $ | 1,505 | $ | 8,132 | $ | (3,879 | ) | |||||||
|
Consolidated
|
||||||||||||||||
|
Net
sales to external customers
|
$ | 774,606 | $ | 1,097,952 | $ | 3,141,627 | $ | 5,040,800 | ||||||||
|
Adjusted
earnings before interest and taxes (EBIT) (2)
|
$ | 62,977 | $ | 31,917 | $ | 122,981 | $ | 487,660 | ||||||||
|
Adjusted
EBIT Margin (2)
|
8.1 | % | 2.9 | % | 3.9 | % | 9.7 | % | ||||||||
(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 relate to the sale of the Needle Roller Bearings (NRB)
operations to JTEKT Corporation that closed in December 2009.
(4)
Intergroup eliminations represent intergroup profit or loss between the Steel
Group and the Bearings and Power Transmission Group.
Reconciliation
of net (loss) income attributable to The Timken Company and EPS -
diluted.
This
reconciliation is provided as additional relevant information about the
company's performance.Management believes 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.
|
Fourth Quarter
|
||||||||||||||||
|
2009
|
2008
|
|||||||||||||||
|
(Dollars in thousands, except per share data) (Unaudited)
|
$
|
EPS (5)
|
$
|
EPS (5)
|
||||||||||||
|
Net
(loss) income attributable to The Timken Company
|
$ | (20,186 | ) | $ | (0.21 | ) | $ | (36,151 | ) | $ | (0.37 | ) | ||||
|
Less:
loss from discontinued operations, net of income taxes
|
(12,677 | ) | (0.13 | ) | (37,372 | ) | (0.38 | ) | ||||||||
|
Net
(loss) income from continuing operations
|
||||||||||||||||
|
attributable
to The Timken Company
|
$ | (7,509 | ) | $ | (0.08 | ) | $ | 1,221 | $ | 0.01 | ||||||
|
Pre-tax
special items:
|
||||||||||||||||
|
Manufacturing
rationalization/reorganization expenses -
cost
of products sold
|
4,643 | 0.05 | 1,647 | 0.02 | ||||||||||||
|
Rationalization/reorganization
expenses - SG&A
|
1,226 | 0.01 | (166 | ) | - | |||||||||||
|
Impairment
and restructuring
|
80,052 | 0.83 | 25,341 | 0.26 | ||||||||||||
|
Special
items - other expense (income)
|
1,401 | 0.01 | (8,260 | ) | (0.09 | ) | ||||||||||
|
Provision
for income taxes (6)
|
(50,250 | ) | (0.52 | ) | (5,516 | ) | (0.06 | ) | ||||||||
|
Special
items attributable to noncontrolling interests
|
(36 | ) | - | - | - | |||||||||||
|
Adjusted
net income from continuing operations
|
||||||||||||||||
|
attributable
to The Timken Company
|
29,527 | 0.31 | 14,267 | 0.15 | ||||||||||||
|
Add:
adjusted (loss) income from discontinued operations
|
9,373 | 0.09 | (7,937 | ) | (0.08 | ) | ||||||||||
|
Adjusted
net income attributable to The Timken Company
|
$ | 38,900 | $ | 0.40 | $ | 6,330 | $ | 0.07 | ||||||||
|
(Loss)
income from continuing operations
|
$ | (7,297 | ) | $ | (0.08 | ) | $ | 1,843 | $ | 0.03 | ||||||
|
Less:
Net income (loss) attributable to noncontrolling interest
|
212 | - | 622 | 0.02 | ||||||||||||
|
Net
(loss) income from continuing operations
|
||||||||||||||||
|
attributable
to The Timken Company
|
$ | (7,509 | ) | $ | (0.08 | ) | $ | 1,221 | $ | 0.01 | ||||||
|
Loss
from discontinued operations, net of income taxes
|
$ | (12,677 | ) | $ | (0.13 | ) | $ | (37,372 | ) | $ | (0.38 | ) | ||||
|
Special
items, discontinued operations
|
22,050 | 0.22 | 29,435 | 0.30 | ||||||||||||
|
Adjusted
(loss) income from discontinued operations,
|
||||||||||||||||
|
net
of income taxes
|
$ | 9,373 | $ | 0.09 | $ | (7,937 | ) | $ | (0.08 | ) | ||||||
|
Twelve Months
|
||||||||||||||||
|
2009
|
2008
|
|||||||||||||||
|
(Dollars in thousands, except per share data) (Unaudited)
|
$
|
EPS (5)
|
$
|
EPS (5)
|
||||||||||||
|
Net
(loss) income attributable to The Timken Company
|
$ | (133,961 | ) | $ | (1.39 | ) | $ | 267,670 | $ | 2.77 | ||||||
|
Less:
loss from discontinued operations, net of income taxes
|
(72,589 | ) | (0.75 | ) | (11,273 | ) | (0.12 | ) | ||||||||
|
Net
(loss) income from continuing operations
|
||||||||||||||||
|
attributable
to The Timken Company
|
$ | (61,372 | ) | $ | (0.64 | ) | $ | 278,943 | $ | 2.89 | ||||||
|
Pre-tax
special items:
|
||||||||||||||||
|
Manufacturing
rationalization/reorganization expenses -
cost
of products sold
|
8,233 | 0.09 | 3,407 | 0.04 | ||||||||||||
|
Rationalization/reorganization
expenses - SG&A
|
2,864 | 0.03 | 1,521 | 0.02 | ||||||||||||
|
Impairment
and restructuring
|
164,126 | 1.71 | 32,783 | 0.34 | ||||||||||||
|
Special
items - other expense (income)
|
2,009 | 0.02 | (28,247 | ) | (0.29 | ) | ||||||||||
|
Provision
for income taxes (6)
|
(58,763 | ) | (0.61 | ) | 6,630 | 0.07 | ||||||||||
|
Special
items attributable to noncontrolling interests
|
(6,185 | ) | (0.06 | ) | - | - | ||||||||||
|
Adjusted
net income from continuing operations
|
||||||||||||||||
|
attributable
to The Timken Company
|
50,912 | 0.53 | 295,037 | 3.06 | ||||||||||||
|
Add:
adjusted (loss) income from discontinued operations
|
(20,233 | ) | (0.21 | ) | 18,388 | 0.19 | ||||||||||
|
Adjusted
net income attributable to The Timken Company
|
$ | 30,679 | $ | 0.32 | $ | 313,425 | $ | 3.25 | ||||||||
|
(Loss)
income from continuing operations
|
$ | (66,037 | ) | $ | (0.69 | ) | $ | 282,525 | $ | 2.92 | ||||||
|
Less:
Net income (loss) attributable to noncontrolling interest
|
(4,665 | ) | (0.05 | ) | 3,582 | 0.03 | ||||||||||
|
Net
(loss) income from continuing operations
|
||||||||||||||||
|
attributable
to The Timken Company
|
$ | (61,372 | ) | $ | (0.64 | ) | $ | 278,943 | $ | 2.89 | ||||||
|
Loss
from discontinued operations, net of income taxes
|
(72,589 | ) | $ | (0.75 | ) | (11,273 | ) | $ | (0.12 | ) | ||||||
|
Special
items, discontinued operations
|
52,356 | 0.54 | 29,661 | 0.31 | ||||||||||||
|
Adjusted
(loss) income from discontinued operations,
|
||||||||||||||||
|
net
of income taxes
|
$ | (20,233 | ) | $ | (0.21 | ) | $ | 18,388 | $ | 0.19 | ||||||
(5) EPS
amounts may not sum due to rounding differences.
(6)
Provision for income taxes includes the tax impact on pre-tax special items, the
impact of discrete tax items recorded during the respective period, as well as
adjustments to reflect the use of one overall effective tax rate on Adjusted
pre-tax income in interim periods.
Reconciliation
of GAAP income from continuing operations before income taxes
This
reconciliation is provided as additional relevant information about the
company's performance.Management believes Consolidated adjusted earnings before
interest and taxes (EBIT) and Total Bearings and Power Transmission Group
adjusted EBIT 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 before Income Taxes to Consolidated
adjusted EBIT 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.
|
Fourth
Quarter
|
Twelve
Months
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
(Thousands of U.S. dollars)
(Unaudited)
|
$
|
$
|
$
|
$
|
||||||||||||
|
(Loss)
Income from continuing operations before income taxes
|
$ | (38,390 | ) | $ | 3,827 | $ | (94,230 | ) | $ | 439,587 | ||||||
|
Pre-tax
reconciling items:
|
||||||||||||||||
|
Interest
expense
|
14,696 | 11,026 | 41,883 | 44,401 | ||||||||||||
|
Interest
income
|
(651 | ) | (1,498 | ) | (1,904 | ) | (5,792 | ) | ||||||||
|
Manufacturing
rationalization/reorganization expenses - cost
of products sold
|
4,643 | 1,647 | 8,233 | 3,407 | ||||||||||||
|
Manufacturing
rationalization/reorganization expenses - SG&A
|
1,226 | (166 | ) | 2,864 | 1,521 | |||||||||||
|
Impairment
and restructuring
|
80,052 | 25,341 | 164,126 | 32,783 | ||||||||||||
|
Special
items - other income
|
1,401 | (8,260 | ) | 2,009 | (28,247 | ) | ||||||||||
|
Consolidated
adjusted earnings before interest and taxes (EBIT)
|
$ | 62,977 | $ | 31,917 | $ | 122,981 | $ | 487,660 | ||||||||
|
Steel
Group adjusted earnings (loss) before interest and taxes
(EBIT)
|
(2,555 | ) | 3,493 | 57,880 | (264,006 | ) | ||||||||||
|
Unallocated
corporate expense
|
12,913 | 13,633 | 48,715 | 68,357 | ||||||||||||
|
Intergroup
eliminations expense
|
(1,871 | ) | (1,505 | ) | (8,132 | ) | 3,879 | |||||||||
|
Total
Bearings and Power Transmission Group adjusted earnings before
interest and taxes (EBIT)
|
$ | 71,464 | $ | 47,538 | $ | 221,444 | $ | 295,890 | ||||||||
| Reconciliation of Total Debt to Net Debt and the Ratio of Net Debt to Capital: | ||||||||
|
(Dollars
in thousands) (Unaudited)
|
Dec.
31, 2009
|
Dec.
31, 2008
|
||||||
|
Short-term
debt
|
$ | 43,380 | $ | 108,590 | ||||
|
Long-term
debt
|
469,287 | 515,250 | ||||||
|
Total
Debt
|
512,667 | 623,840 | ||||||
|
Less:Cash
and cash equivalents
|
(755,545 | ) | (133,383 | ) | ||||
|
Net
Debt
|
$ | (242,878 | ) | $ | 490,457 | |||
|
Shareholders'
equity
|
$ | 1,595,568 | $ | 1,663,038 | ||||
|
Ratio
of Total Debt to Capital
|
24.3 | % | 27.3 | % | ||||
|
Ratio
of Net Debt to Capital (Leverage)
|
-18.0 | % | 22.8 | % | ||||
This
reconciliation is provided as additional relevant information about The Timken
Company's financial position.Capital is defined as total debt plus
shareholders' equity.
Management
believes Net Debt is more indicative of Timken's financial position, due to the
amount of cash and cash equivalents.
| Free cash flow: | ||||||||
|
(Dollars
in thousands) (Unaudited)
|
Dec.
31, 2009
|
Dec.
31, 2008
|
||||||
|
Net
cash provided by operating activities
|
$ | 576,854 | $ | 577,620 | ||||
|
Less:
capital expenditures
|
(114,150 | ) | (258,147 | ) | ||||
|
Less:
cash dividends paid to shareholders
|
(43,268 | ) | (67,462 | ) | ||||
|
Free
cash flow
|
$ | 419,436 | $ | 252,011 | ||||
Management
believes that free cash flow is useful to investers because it is a meaningful
indicator of cash generated from operating activities that is available for the
execution of its business strategy.
|
CONDENSED
CONSOLIDATED BALANCE SHEET
|
Dec
31,
|
Dec
31,
|
||||||
|
(Dollars
in thousands) (Unaudited)
|
2009
|
2008
|
||||||
|
ASSETS
|
||||||||
|
Cash
& cash equivalents
|
$ | 755,545 | $ | 133,383 | ||||
|
Accounts
receivable
|
411,226 | 575,915 | ||||||
|
Inventories
|
671,236 | 1,000,493 | ||||||
|
Current
assets, discontinued operations
|
- | 182,861 | ||||||
|
Other
current assets
|
225,131 | 140,813 | ||||||
|
Total
Current Assets
|
2,063,138 | 2,033,465 | ||||||
|
Property,
plant & equipment
|
1,335,228 | 1,516,972 | ||||||
|
Goodwill
|
221,734 | 221,435 | ||||||
|
Non-current
assets, discontinued operations
|
- | 269,625 | ||||||
|
Other
assets
|
386,793 | 494,553 | ||||||
|
Total
Assets
|
$ | 4,006,893 | $ | 4,536,050 | ||||
|
LIABILITIES
|
||||||||
|
Accounts
payable & other liabilities
|
$ | 355,228 | $ | 423,523 | ||||
|
Short-term
debt
|
43,380 | 108,590 | ||||||
|
Income
taxes
|
9,233 | 27,598 | ||||||
|
Current
liabilities, discontinued operations
|
- | 21,512 | ||||||
|
Accrued
expenses
|
132,592 | 217,090 | ||||||
|
Total
Current Liabilities
|
540,433 | 798,313 | ||||||
|
Long-term
debt
|
469,287 | 515,250 | ||||||
|
Accrued
pension cost
|
690,889 | 823,550 | ||||||
|
Accrued
postretirement benefits cost
|
604,250 | 613,045 | ||||||
|
Non-current
liabilities, discontinued operations
|
- | 30,329 | ||||||
|
Other
non-current liabilities
|
106,466 | 92,525 | ||||||
|
Total
Liabilities
|
2,411,325 | 2,873,012 | ||||||
|
EQUITY
|
||||||||
|
Timken
Company shareholders' equity
|
1,577,584 | 1,640,244 | ||||||
|
Noncontrolling
interest
|
17,984 | 22,794 | ||||||
|
Total
Equity
|
1,595,568 | 1,663,038 | ||||||
|
Total
Liabilities and Equity
|
$ | 4,006,893 | $ | 4,536,050 | ||||
|
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
|
For
the three months ended
|
For
the twelve months ended
|
||||||||||||||
|
Dec
31,
|
Dec
31,
|
Dec
31,
|
Dec
31,
|
|||||||||||||
|
(Dollars
in thousands) (Unaudited)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
|
Cash
Provided (Used)
|
||||||||||||||||
|
OPERATING
ACTIVITIES
|
||||||||||||||||
|
Net
(loss) income attributable to the Timken Company
|
$ | (20,186 | ) | $ | (36,151 | ) | $ | (133,961 | ) | $ | 267,670 | |||||
|
Net
loss from discontinued operations
|
12,677 | 37,372 | 72,589 | 11,273 | ||||||||||||
|
Net
(loss) income attributable to noncontrolling interest
|
212 | 622 | (4,665 | ) | 3,582 | |||||||||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||||||
|
Depreciation
and amortization
|
50,650 | 45,834 | 201,486 | 200,799 | ||||||||||||
|
Impairment
|
77,529 | 20,029 | 113,671 | 20,081 | ||||||||||||
|
Pension
and other postretirement expense
|
19,608 | 22,380 | 96,700 | 84,722 | ||||||||||||
|
Pension
and other postretirement benefit payments
|
(24,246 | ) | (14,677 | ) | (113,462 | ) | (70,459 | ) | ||||||||
|
Accounts
receivable
|
46,123 | 188,849 | 174,482 | 107,601 | ||||||||||||
|
Inventories
|
44,636 | 115,705 | 356,154 | (97,679 | ) | |||||||||||
|
Accounts
payable and accrued expenses
|
(76,844 | ) | (108,608 | ) | (209,880 | ) | (19,029 | ) | ||||||||
|
Other
|
30,916 | (7,044 | ) | 30,943 | (3,633 | ) | ||||||||||
|
Net
Cash Provided by Operating Activities - Continuing
Operations
|
161,075 | 264,311 | 584,057 | 504,928 | ||||||||||||
|
Net
Cash (Used) Provided by Operating Activities - Discontinued
Operations
|
(8,536 | ) | 4,451 | (7,203 | ) | 72,692 | ||||||||||
|
Net
Cash Provided by Operating Activities
|
152,539 | 268,762 | 576,854 | 577,620 | ||||||||||||
|
INVESTING
ACTIVITIES
|
||||||||||||||||
|
Capital
expenditures
|
(33,197 | ) | (81,896 | ) | (114,150 | ) | (258,147 | ) | ||||||||
|
Other
|
336 | 2,865 | 7,510 | 36,943 | ||||||||||||
|
Divestments
|
303,617 | - | 303,617 | - | ||||||||||||
|
Acquisitions
|
- | (28,846 | ) | (353 | ) | (86,024 | ) | |||||||||
|
Net
Cash Provided (Used) by Investing Activities - Continuing
Operations
|
270,756 | (107,877 | ) | 196,624 | (307,228 | ) | ||||||||||
|
Net
Cash (Used) by Investing Activities - Discontinued
Operations
|
(819 | ) | (3,405 | ) | (2,353 | ) | (13,468 | ) | ||||||||
|
Net
Cash Provided (Used) by Investing Activities
|
269,937 | (111,282 | ) | 194,271 | (320,696 | ) | ||||||||||
|
FINANCING
ACTIVITIES
|
||||||||||||||||
|
Cash
dividends paid to shareholders
|
(8,660 | ) | (17,379 | ) | (43,268 | ) | (67,462 | ) | ||||||||
|
Net
proceeds from common share activity
|
264 | 30 | 918 | 16,909 | ||||||||||||
|
Net
(payments) on debt
|
(288,512 | ) | (115,830 | ) | (124,878 | ) | (95,368 | ) | ||||||||
|
Decrease
in restricted cash
|
248,158 | - | - | - | ||||||||||||
|
Net
Cash Used by Financing Activities
|
(48,750 | ) | (133,179 | ) | (167,228 | ) | (145,921 | ) | ||||||||
|
Effect
of exchange rate changes on cash
|
(1,060 | ) | (6,021 | ) | 18,265 | (20,504 | ) | |||||||||
|
Increase
in Cash and Cash Equivalents
|
372,666 | 18,280 | 622,162 | 90,499 | ||||||||||||
|
Cash
and Cash Equivalents at Beginning of Period
|
382,879 | 115,103 | 133,383 | 42,884 | ||||||||||||
|
Cash
and Cash Equivalents at End of Period
|
$ | 755,545 | $ | 133,383 | $ | 755,545 | $ | 133,383 | ||||||||