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 /PRNewswire-FirstCall/ --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).
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;
- 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.
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.
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.
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 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 |
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The company will host a conference call for investors and analysts today to discuss financial results. |
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Conference Call: |
Tuesday, Feb. 2, 2010 |
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11:00 a.m. Eastern Time |
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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: 68493687 |
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Replay Dial-In through Feb. 12, 2010: |
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800-642-1687 or 706-645-9291 |
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Live Webcast: |
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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.
(Unaudited)
CONDENSED CONSOLIDATED
STATEMENT OF INCOME AS REPORTED
---------------------- ------------------------------------------------
(Dollars in
thousands,
except share Full Year Full Year
data) Q4 2009 Q4 2008 2009 2008
------------- ------- ------- --------- ---------
Net sales $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
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
Selling, administrative
& general expenses
(SG&A) 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
Other income (expense) (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
Interest expense, net (14,045) (9,528) (39,979) (38,609)
----------------- ------- ------ ------- -------
(Loss) Income
From Continuing
Operations Before
Income Taxes (38,390) 3,827 (94,230) 439,587
Provision
(benefit) for
income taxes (31,093) 1,984 (28,193) 157,062
-------------- ------- ----- ------- -------
(Loss) Income
From Continuing
Operations $(7,297) $1,843 $(66,037) $282,525
(Loss) Income
from discontinued
operations net
of income taxes (3) (12,677) (37,372) (72,589) (11,273)
---------------- ------- ------- ------- -------
Net (Loss) Income $(19,974) $(35,529) $(138,626) $271,252
Less: Net Income
(Loss)
Attributable to
Noncontrolling
Interest 212 622 (4,665) 3,582
---------------- --- --- ------ -----
Net (Loss) Income
Attributable to
The Timken Company $(20,186) $(36,151) $(133,961) $267,670
================= ======== ======== ========= ========
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
(Loss) Earnings
Per Share -
Discontinued
Operations (0.13) (0.38) (0.75) (0.12)
----- ----- ----- -----
Earnings Per
Share $(0.21) $(0.37) $(1.39) $2.78
Diluted (Loss)
Earnings Per
Share -
Continuing
Operations $(0.08) $0.01 $(0.64) $2.89
Diluted (Loss)
Earnings Per
Share -
Discontinued
Operations (0.13) (0.38) (0.75) (0.12)
----- ----- ----- -----
Earnings Per
Share $(0.21) $(0.37) $(1.39) $2.77
Average Shares
Outstanding 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
============== ========== ========== ========== ==========
Adjusted(1)
-------------------------------------------------
(Dollars in
thousands,
except share Full Year Full Year
data) Q4 2009 Q4 2008 2009 2008
------------- ------- ------- --------- ---------
Net sales $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
Manufacturing
rationalization
/reorganization
expenses -cost
of products sold - - - -
----------------- --- --- --- ---
Gross Profit $177,842 $179,469 $590,980 $1,155,260
Selling, administrative
& general expenses
(SG&A) 112,807 139,729 469,868 655,610
Rationalization /
reorganization
expenses -SG&A - - - -
Impairment and
restructuring - - - -
-------------- --- --- --- ---
Operating (Loss)
Income $65,035 $39,740 $121,112 $499,650
Other income (expense) (2,058) (7,823) 1,869 (11,990)
Special items -
other income
(expense) - - - -
--------------- --- --- --- ---
(Loss) Earnings
Before Interest
and Taxes (EBIT)(2) $62,977 $31,917 $122,981 $487,660
Interest expense, net (14,045) (9,528) (39,979) (38,609)
----------------- ------- ------ ------- -------
(Loss) Income
From Continuing
Operations Before
Income Taxes 48,932 22,389 83,002 449,051
Provision (benefit)
for income taxes 19,157 7,500 30,570 150,432
-------------- ------ ----- ------ -------
(Loss) Income
From Continuing
Operations $29,775 $14,889 $52,432 $298,619
(Loss) Income
from discontinued
operations net
of income taxes(3) 9,373 (7,937) (20,233) 18,388
---------------- ----- ------ ------- ------
Net (Loss) Income $39,148 $6,952 $32,199 $317,007
Less: Net Income
(Loss) Attributable
to Noncontrolling
Interest 248 622 1,520 3,582
---------------- --- --- ----- -----
Net (Loss) Income
Attributable to
The Timken Company $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 $0.31 $0.15 $0.53 $3.06
(Loss) Earnings
Per Share -
Discontinued
Operations 0.09 (0.08) (0.21) 0.20
---- ----- ----- ----
Earnings Per
Share $0.40 $0.07 $0.32 $3.26
Diluted (Loss)
Earnings Per
Share -
Continuing
Operations $0.31 $0.15 $0.53 $3.06
Diluted (Loss)
Earnings Per
Share -
Discontinued
Operations 0.09 (0.08) (0.21) 0.19
---- ----- ----- ----
Earnings Per
Share $0.40 $0.07 $0.32 $3.25
Average Shares
Outstanding 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
============== ========== ========== ========== ==========
BUSINESS SEGMENTS
(Dollars in
thousands) Full Year Full Year
(Unaudited) Q4 2009 Q4 2008 2009 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 investors 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 For the three months For the twelve months
FLOWS ended 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
======== ======== ======== ========
The Timken Company |
|
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. |
|
Telephone: (330) 471-3514 |
|
Mobile: (330) 224-5021 |
|
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. |
|
Telephone: (330) 471-7446 |
|
For Additional Information: |
|
www.timken.com/media |
|
www.timken.com/investors |
|
SOURCE The Timken Company
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