Timken Reports Third-Quarter Results
- Maintains double-digit operating margins
- Lowers full-year sales and earnings outlook to reflect weaker global demand, but expects second-highest annual earnings in 2012
- Expects to generate strong cash from operations in 2012
CANTON, Ohio, Oct. 25, 2012 /PRNewswire/ -- The Timken Company (NYSE: TKR) today reported sales of $1.1 billion in the third quarter of 2012, a decrease of 14 percent from the same period a year ago. The sales decline reflects weaker demand in many of the company's end markets, lower surcharges and the impact of currency, partially offset by improved pricing and the favorable impact of the Drives acquisition.
(Logo: http://photos.prnewswire.com/prnh/20100210/TIMKENLOGO )
Timken generated income in the third quarter of $80.9 million, or $0.83 per diluted share, compared with $111.0 million, or $1.12 per diluted share during the same period a year ago. The decrease in earnings reflects lower sales volume, material surcharges and mix, partially offset by lower material costs, favorable pricing and lower manufacturing costs. Included in the third quarter 2012 results were expenses of $8.4 million, or $0.09 per diluted share, related to the previously announced closure of the St. Thomas plant in Ontario, Canada.
"As the quarter unfolded, the fragile global economy and declining market sector demand began to impact our business," said James W. Griffith, Timken president and chief executive officer. "End users are increasingly cautious, which translates into inventory adjustments and decreased short-term opportunity. Despite these challenges, we expect full-year 2012 earnings to be the second highest in the company's history, excluding the benefit of the CDSOA (Continued Dumping and Subsidy Offset Act) receipts recorded this year.
"Looking ahead, we are well-positioned to manage through the downturn and expect to leverage well," Griffith said. "We are making appropriate adjustments, including curtailing production schedules and carefully managing cash and expenses."
During the quarter, the company:
- Continued to align its manufacturing footprint with market needs, progressing on previously announced plans to close the St. Thomas bearing plant and refocusing its Tyger River plant in Union, S.C., on large bore bearing production;
- Progressed with planned investments to bring the intermediate steel bar finishing line on-stream, start up the in-line forge press to produce new large-diameter sound-center bars, as well as prepare the site for the new vertical continuous caster;
- Returned $83 million in capital to shareholders through quarterly dividends and the repurchase of 1.5 million shares of company stock in the quarter; and
- Announced the appointment of Christopher A. Coughlin and Richard G. Kyle as group presidents. Coughlin assumes leadership of the Mobile and Process Industries segments while Kyle oversees the Aerospace and Steel segments.
Nine Months' Results
Timken posted sales of $3.9 billion in the first nine months of 2012, up slightly from the same period in 2011. The increase primarily reflects the favorable impact of acquisitions, pricing and mix, which were partially offset by lower sales volume, surcharges and the impact of currency.
In the first nine months of 2012, the company generated income of $420.2 million, or $4.28 per diluted share. That compares with $345.2 million, or $3.48 per diluted share, earned in the same period last year. Earnings during the first nine months of 2012 benefited from pricing, lower material costs and acquisitions, partially offset by lower volume, lower material surcharges and higher selling and administrative expenses. Included in the first nine months of 2012 (reference Table 1) were CDSOA receipts of $68.4 million, net of tax, and charges of $26.1 million, net of tax, due to the announced closure of the St. Thomas plant.
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Table 1: Year to Date 2012 Net Income and Diluted Earnings | ||
|
($ in Millions) |
EPS | |
|
Net Income attributable to The Timken Company |
$420.2 |
$4.28 |
|
Less: CDSOA receipts, net of tax |
$ 68.4 |
$0.70 |
|
Add: Charges due to plant closure, net of tax |
$ 26.1 |
$0.27 |
|
Net Income, after adjustments |
$377.9 |
$3.85 |
Total debt as of September 30, 2012, was $488.9 million, or 17.2 percent of capital. The company had cash of $485.5 million, or $3.4 million net debt, at the end of the third quarter compared with net debt of $46.7 million at the end of 2011.
In the first nine months of 2012, the company generated $366.5 million in cash from operating activities with strong earnings and CDSOA receipts partially offset by discretionary pension contributions. Excluding discretionary pension and VEBA trust contributions of $245 million, net of tax, and the benefit of CDSOA receipts, free cash flow (operating cash after capital expenditures and dividends) was $289 million. In addition, the company used $112 million of cash to purchase 2.5 million shares of the company's stock. The company continues to maintain a strong balance sheet and ended the quarter with $1.4 billion of available liquidity.
Mobile Industries Segment Results
In the third quarter, Mobile Industries' sales were $396.9 million, down 10 percent from last year's third-quarter sales of $441.6 million. The benefit of the Drives acquisition and the strength of rail markets were more than offset by lower light vehicle and heavy truck market demand as well as currency.
EBIT for the segment was $37.9 million in the third quarter, or 9.5 percent of sales. This represents a 46 percent decrease from $69.5 million, or 15.7 percent of sales, in the same period a year ago, and was primarily driven by lower volume and charges of approximately $13 million related to the previously announced plant closures in St. Thomas and Sao Paulo, Brazil.
For the first nine months of 2012, Mobile Industries' sales were $1.3 billion, down 3 percent relative to the same period a year ago. EBIT for the first nine months of 2012 was $173.4 million, or 13.2 percent of sales, compared with $213 million, or 15.8 percent of sales, the prior year.
Process Industries Segment Results
Process Industries' third-quarter sales were $311.1 million, down 5 percent from $328.9 million for the same period a year ago. Lower demand across broad markets, primarily served through industrial distribution, and the negative effect of currency more than offset favorable pricing and the benefit of the Drives acquisition.
The segment's third-quarter EBIT was $60.1 million, or 19.3 percent of sales, down 21 percent from $75.6 million, or 23 percent of sales, for the same period a year ago. The decline in EBIT primarily resulted from lower volume and unfavorable mix, partially offset by pricing.
For the first nine months of 2012, Process Industries' sales were $1 billion, up 9 percent from the same period a year ago. The increase reflects the impact of acquisitions and pricing, partially offset by weaker demand as well as currency. EBIT for the first nine months of 2012 was $213.7 million, or 21.3 percent of sales, up 2 percent from the prior year's EBIT of $209.6 million, or 22.7 percent of sales. Pricing and acquisitions led to the increase, partially offset by lower volume and currency.
Aerospace and Defense Segment Results
Aerospace and Defense had third-quarter sales of $84 million, up 3 percent from $81.8 million for the same period last year. The increase reflects continued strength in defense markets, partially offset by weak civil aerospace and motion control market sectors.
Third-quarter EBIT was $7.7 million, or 9.2 percent of sales, up from a loss of $1.7 million, for the same period a year ago. The change reflects improved pricing and mix. The prior year also included a $5 million charge related to warranty reserves.
For the first nine months of 2012, Aerospace and Defense sales were $262.5 million, up 7 percent from the same period a year ago. The increase reflects higher volume, led by the defense sector, as well as favorable pricing and mix. EBIT for the first nine months of 2012 was $26.3 million, or 10 percent of sales, compared with EBIT of $2.4 million, or 1 percent of sales, in the same period a year ago, reflecting higher volume and favorable pricing and mix. The prior year included inventory write downs and warranty reserves totaling approximately $8 million.
Steel Segment Results
Sales for Steel, including inter-segment sales, were $377 million in the third quarter, down 25 percent from $501.5 million for the same period last year. The results reflect reduced shipments to the industrial and oil and gas market sectors and lower raw-material surcharges of approximately $70 million, partially offset by favorable pricing.
Third-quarter EBIT was $49.7 million, or 13.2 percent of sales, down 25 percent from $66.2 million, or 13.2 percent of sales, for the same period a year ago. EBIT benefited from pricing and lower material and manufacturing costs, which were more than offset by lower volume, mix and surcharges.
For the first nine months of 2012, Steel segment sales were $1.4 billion, down 5 percent from the same period last year. Raw-material surcharges decreased approximately $95 million from the same period a year ago. Lower shipments across all market sectors were partially offset by improved pricing. EBIT for the first nine months of 2012 was $226.6 million, or 16 percent of sales, compared with $196.8 million, or 13.2 percent of sales, for the same period a year ago. EBIT benefited from pricing and lower material costs, partially offset by lower volume and material surcharges.
Outlook
The company expects lower shipments to customers in many of its global markets in the fourth quarter. As a result, Timken now expects 2012 sales to be down 3 to 5 percent compared to 2011 with:
- Mobile Industries' sales down 4 to 6 percent for the year reflecting the impact of exited business due to the company's market strategy as well as year-end customer inventory adjustments;
- Process Industries' sales up 6 to 8 percent, driven by the full-year impact of acquisitions;
- Aerospace and Defense sales up 8 to 10 percent, driven by increased demand across most end markets, led by the defense sector; and
- Steel sales down 11 to 13 percent, driven by lower industrial end-market demand and surcharges, partially offset by improved pricing.
Timken now projects 2012 annual earnings to range from $4.75 to $4.95 per diluted share, which includes the one-time benefit of CDSOA receipts totaling $0.70 per share and the St. Thomas plant closure costs totaling approximately $0.30 per share.
Timken expects to generate strong cash from operations of approximately $535 million in 2012. Free cash flow is projected to be $145 million after making capital expenditures of about $300 million and paying about $90 million in dividends. Excluding discretionary pension and VEBA trust contributions of approximately $245 million, net of tax, and CDSOA receipts of approximately $70 million, net of tax, the company forecasts free cash flow of approximately $320 million in 2012.
Conference Call Information
Timken will host a conference call today at 11:00 a.m. to review its financial results. Presentation materials will be available online in advance of the call for interested investors and securities analysts.
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Conference Call: |
Thursday, Oct. 25, 2012 |
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11:00 a.m. Eastern Time | |
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All Callers: |
Live Dial-In: 888-259-8843 or 913-312-0838 |
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(Call in 10 minutes prior to be included.) | |
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Conference Call ID: Timken Earnings Call | |
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Replay Dial-In available through Nov. 8, 2012: | |
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888-203-1112 or 719-457-0820 | |
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Replay Passcode: 7216302 | |
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Live Webcast: |
About The Timken Company
The Timken Company (NYSE: TKR; www.timken.com), a global industrial technology leader, applies its deep knowledge of materials, friction management and power transmission to improve the reliability and efficiency of industrial machinery and equipment all around the world. The company engineers, manufactures and markets mechanical components and high-performance steel. Its bearings, engineered steel bars and tubes—as well as transmissions, gearboxes, chain, related products and services—support diversified markets worldwide. With sales of $5.2 billion in 2011 and approximately 21,000 people operating from 30 countries, Timken makes the world more productive and keeps industry in motion.
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 third quarter of 2012; 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; weakness in global or regional economic conditions and financial markets; changes in the expected costs associated with product warranty claims; the ability to achieve satisfactory operating results in the integration of acquired companies; the impact on operations of general economic conditions; higher or lower raw material and energy costs; fluctuations in customer demand; the company's ability to achieve the benefits of announced programs, initiatives, and capital investments; and retention of CDSOA distributions. Additional factors are discussed in the company's filings with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K for the year ended Dec. 31, 2011, quarterly reports on Form 10-Q and current reports on Form 8-K. Except as required by the federal securities laws, the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
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The Timken Company | ||||||
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CONDENSED CONSOLIDATED STATEMENT OF INCOME | ||||||
|
(Unaudited) | ||||||
|
Three Months Ended |
Nine Months Ended | |||||
|
(Dollars in millions, except share data) |
2012 |
2011 |
2012 |
2011 | ||
|
Net sales |
$ 1,142.5 |
$ 1,321.8 |
$ 3,906.7 |
$ 3,905.5 | ||
|
Cost of products sold |
843.6 |
978.5 |
2,818.9 |
2,878.4 | ||
|
Gross Profit |
298.9 |
343.3 |
1,087.8 |
1,027.1 | ||
|
Selling, general & administrative expenses (SG&A) |
152.7 |
155.1 |
480.4 |
459.1 | ||
|
Impairment and restructuring |
11.9 |
1.2 |
28.8 |
8.5 | ||
|
Operating Income |
134.3 |
187.0 |
578.6 |
559.5 | ||
|
Other income, net |
0.5 |
2.9 |
104.9 |
1.6 | ||
|
Earnings Before Interest and Taxes (EBIT) (1) |
134.8 |
189.9 |
683.5 |
561.1 | ||
|
Interest expense, net |
(6.7) |
(7.6) |
(22.0) |
(23.8) | ||
|
Income Before Income Taxes |
128.1 |
182.3 |
661.5 |
537.3 | ||
|
Provision for income taxes |
47.0 |
70.1 |
241.0 |
189.0 | ||
|
Net Income |
81.1 |
112.2 |
420.5 |
348.3 | ||
|
Less: Net Income Attributable to Noncontrolling Interest |
0.2 |
1.2 |
0.3 |
3.1 | ||
|
Net Income Attributable to The Timken Company |
$ 80.9 |
$ 111.0 |
$ 420.2 |
$ 345.2 | ||
|
Net Income per Common Share Attributable to The Timken Company Common Shareholders |
||||||
|
Basic Earnings Per Share |
$ 0.84 |
$ 1.13 |
$ 4.32 |
$ 3.53 | ||
|
Diluted Earnings Per Share |
$ 0.83 |
$ 1.12 |
$ 4.28 |
$ 3.48 | ||
|
Average Shares Outstanding |
96,356,772 |
97,489,819 |
96,981,922 |
97,509,361 | ||
|
Average Shares Outstanding - assuming dilution |
97,123,173 |
98,485,840 |
97,915,800 |
98,743,586 | ||
|
BUSINESS SEGMENTS (unaudited) |
||||||||||
|
Three Months Ended |
Nine Months Ended |
|||||||||
|
(Dollars in millions, except share data) |
2012 |
2011 |
2012 |
2011 |
||||||
|
Mobile Industries Segment |
||||||||||
|
Net sales to external customers |
$ 396.7 |
$ 441.3 |
$ 1,314.0 |
$ 1,349.3 |
||||||
|
Intersegment sales |
0.2 |
0.3 |
0.4 |
0.5 |
||||||
|
Total net sales |
$ 396.9 |
$ 441.6 |
$ 1,314.4 |
$ 1,349.8 |
||||||
|
Earnings before interest and taxes (EBIT) (1) (2) |
$ 37.9 |
$ 69.5 |
$ 173.4 |
$ 213.0 |
||||||
|
EBIT Margin (1) |
9.5% |
15.7% |
13.2% |
15.8% |
||||||
|
Process Industries Segment |
||||||||||
|
Net sales to external customers |
$ 309.8 |
$ 328.1 |
$ 1,000.5 |
$ 919.7 |
||||||
|
Intersegment sales |
1.3 |
0.8 |
3.9 |
2.5 |
||||||
|
Total net sales |
$ 311.1 |
$ 328.9 |
$ 1,004.4 |
$ 922.2 |
||||||
|
Earnings before interest and taxes (EBIT) (1) (2) |
$ 60.1 |
$ 75.6 |
$ 213.7 |
$ 209.6 |
||||||
|
EBIT Margin (1) |
19.3% |
23.0% |
21.3% |
22.7% |
||||||
|
Aerospace and Defense Segment |
||||||||||
|
Net sales to external customers |
$ 84.0 |
$ 81.8 |
$ 262.5 |
$ 244.4 |
||||||
|
Earnings (loss) before interest and taxes (EBIT) (1) (2) |
$ 7.7 |
$ (1.7) |
$ 26.3 |
$ 2.4 |
||||||
|
EBIT Margin (1) |
9.2% |
-2.1% |
10.0% |
1.0% |
||||||
|
Steel Segment |
||||||||||
|
Net sales to external customers |
$ 352.0 |
$ 470.6 |
$ 1,329.7 |
$ 1,392.1 |
||||||
|
Intersegment sales |
25.0 |
30.9 |
82.6 |
96.0 |
||||||
|
Total net sales |
$ 377.0 |
$ 501.5 |
$ 1,412.3 |
$ 1,488.1 |
||||||
|
Earnings before interest and taxes (EBIT) (1) (2) |
$ 49.7 |
$ 66.2 |
$ 226.6 |
$ 196.8 |
||||||
|
EBIT Margin (1) |
13.2% |
13.2% |
16.0% |
13.2% |
||||||
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Unallocated corporate expense (2) |
$ (20.1) |
$ (18.8) |
$ (63.8) |
$ (59.9) |
||||||
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Receipt of CDSOA distributions (3) |
$ (0.9) |
$ - |
$ 108.6 |
$ - |
||||||
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Intersegment eliminations income (expense) (2) (4) |
$ 0.4 |
$ (0.9) |
$ (1.3) |
$ (0.8) |
||||||
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Consolidated |
||||||||||
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Net sales to external customers |
$ 1,142.5 |
$ 1,321.8 |
$ 3,906.7 |
$ 3,905.5 |
||||||
|
Earnings before interest and taxes (EBIT) (1) (2) |
$ 134.8 |
$ 189.9 |
$ 683.5 |
$ 561.1 |
||||||
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EBIT Margin (1) |
11.8% |
14.4% |
17.5% |
14.4% |
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(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 are useful to investors as these measures are representative of the Company's performance and cash generation. |
|||||||||
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(2) |
As of January 1, 2012, the Company modified the way in which certain selling, general and administrative expenses are allocated among business segments. Prior year amounts have been revised to be consistent with the new allocations. |
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(3) |
Receipt of the U.S. Continued Dumping and Subsidy Offset Act distributions, net of expenses (CDSOA), represents the amount of funds received by the Company for distribution of monies collected by U.S. Customs from antidumping cases to qualifying domestic producers. |
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(4) |
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 EBIT and EBITDA to GAAP Net Income: | ||||
|
This reconciliation is provided as additional relevant information about the Company's performance. Management believes consolidated earnings before interest and taxes (EBIT) 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 net income to consolidated EBIT and EBITDA. | ||||
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Three Months Ended |
Nine Months Ended | |||
|
2012 |
2011 |
2012 |
2011 | |
|
(Dollars in millions) (Unaudited) |
||||
|
Net Income |
$ 81.1 |
$ 112.2 |
$ 420.5 |
$ 348.3 |
|
Provision for income taxes |
47.0 |
70.1 |
241.0 |
189.0 |
|
Interest expense |
7.3 |
9.1 |
24.0 |
28.2 |
|
Interest income |
(0.6) |
(1.5) |
(2.0) |
(4.4) |
|
Consolidated earnings before interest and taxes (EBIT) |
$ 134.8 |
$ 189.9 |
$ 683.5 |
$ 561.1 |
|
Depreciation and Amortization |
49.0 |
49.1 |
148.8 |
142.9 |
|
Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) |
$ 183.8 |
$ 239.0 |
$ 832.3 |
$ 704.0 |
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Reconciliation of Net Income Attributable to The Timken Company, After Adjustments, to GAAP Net Income Attributable to The Timken Company: | |||||||||
|
This reconciliation is provided as additional relevant information about the Company's performance. Management believes that net income attributable to the Company, after adjustments, and diluted earnings per share, after adjustments, are representative of the Company's core operations and therefore useful to investors. | |||||||||
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(Dollars in millions, except share data) (Unaudited) |
Three Months |
EPS |
Nine Months |
EPS | |||||
|
Net Income Attributable to The Timken Company |
$ 80.9 |
$0.83 |
$ 420.2 |
$ 4.28 | |||||
|
CDSOA receipts, net of tax expense (1) |
0.6 |
- |
(68.4) |
(0.70) | |||||
|
Charges due to plant closure (2) |
8.4 |
0.09 |
26.1 |
0.27 | |||||
|
Net Income Attributable to The Timken Company, after adjustments |
$ 89.9 |
$0.92 |
$ 377.9 |
$ 3.85 | |||||
|
(1) CDSOA receipts for the first nine months of 2012 were $108.6 million, net of tax expense of $40.2 million. | |||||||||
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(2) On May 24, 2012, the Company announced the closure of its manufacturing plant in St. Thomas, Ontario, Canada. In the third quarter of 2012, the Company recorded $6.7 million of restructuring charges and $1.7 million of reorganization charges included in cost of products sold. In the first nine months of 2012, the Company recorded $23.2 million of restructuring charges and $2.9 million of reorganization charges included in cost of products sold. No tax benefits related to these restructuring charges were recorded. | |||||||||
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Reconciliation of EBIT Margin, After Adjustments, to Net Income as a Percentage of Sales and EBIT, After Adjustments, to Net Income: | ||||||
|
The following reconciliation is provided as additional relevant information about the Company's performance. Management believes that EBIT, after adjustments, and EBIT margin, after adjustments, are representative of the Company's core operations and therefore useful to investors. | ||||||
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(Dollars in millions) (Unaudited) |
Three Months |
Percentage |
Nine Months |
Percentage | ||
|
Net Income |
$ 81.1 |
7.1% |
$ 420.5 |
10.8% | ||
|
Provision for income taxes |
47.0 |
4.1% |
241.0 |
6.2% | ||
|
Interest expense |
7.3 |
0.6% |
24.0 |
0.6% | ||
|
Interest income |
(0.6) |
(0.1%) |
(2.0) |
(0.1%) | ||
|
Consolidated earnings before interest and taxes (EBIT) |
$ 134.8 |
11.8% |
$ 683.5 |
17.5% | ||
|
CDSOA receipts (1) |
0.9 |
0.1% |
(108.6) |
(2.8%) | ||
|
Charges due to plant closure (2) |
8.4 |
0.7% |
26.1 |
0.7% | ||
|
Consolidated earnings before interest and taxes (EBIT), after adjustments |
$ 144.1 |
12.6% |
$ 601.0 |
15.4% | ||
|
(1) CDSOA receipts for the first nine months of 2012 were $108.6 million. | ||||||
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(2) On May 24, 2012, the Company announced the closure of its manufacturing plant in St. Thomas, Ontario, Canada. In the third quarter of 2012, the Company recorded $6.7 million of restructuring charges and $1.7 million of reorganization charges included in cost of products sold. In the first nine months of 2012, the Company recorded $23.2 million of restructuring charges and $2.9 million of reorganization charges included in cost of products sold. No tax benefits related to these restructuring charges were recorded. | ||||||
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Reconciliation of Total Debt to Net Debt and the Ratio of Net Debt to Capital: | |||||||||||
|
This reconciliation is provided as additional relevant information about The Timken Company's financial position. Capital is defined as total debt plus total shareholders' equity. Management believes Net Debt is an important measure of Timken's financial position, due to the amount of cash and cash equivalents. | |||||||||||
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(Dollars in millions) (Unaudited) |
September 30, |
December 31, | |||||||||
|
Short-term debt |
$ 27.5 |
$ 36.3 | |||||||||
|
Long-term debt |
461.4 |
478.8 | |||||||||
|
Total Debt |
488.9 |
515.1 | |||||||||
|
Less: Cash, cash equivalents and restricted cash |
(485.5) |
(468.4) | |||||||||
|
Net Debt |
$ 3.4 |
$ 46.7 | |||||||||
|
Total equity |
$ 2,345.8 |
$ 2,042.5 | |||||||||
|
Ratio of Total Debt to Capital |
17.2% |
20.1% | |||||||||
|
Ratio of Net Debt to Capital |
0.1% |
2.2% | |||||||||
|
Reconciliation of Free Cash Flow to GAAP Net Cash Provided (Used) by Operating Activities: | |||||||||||
|
Management believes that free cash flow and free cash flow less discretionary pension and postretirement contributions and CDSOA receipts are useful to investors because they are meaningful indicators of cash generated from operating activities available for the execution of its business strategy. | |||||||||||
|
Three Months Ended |
Nine Months Ended | ||||||||||
|
2012 |
2011 |
2012 |
2011 | ||||||||
|
(Dollars in millions) (Unaudited) |
|||||||||||
|
Net cash provided (used) by operating activities |
$ 130.1 |
$ 95.5 |
$ 366.5 |
$ (67.4) | |||||||
|
Less: capital expenditures |
(72.0) |
(46.4) |
(187.3) |
(106.0) | |||||||
|
Less: cash dividends paid to shareholders |
(21.9) |
(19.5) |
(66.8) |
(56.6) | |||||||
|
Free cash flow |
$ 36.2 |
$ 29.6 |
$ 112.4 |
$ (230.0) | |||||||
|
Plus: discretionary pension and postretirement benefit |
|||||||||||
|
contributions, net of the tax benefit (1) |
113.0 |
63.2 |
245.0 |
256.0 | |||||||
|
Less: CDSOA receipts, net of tax expense (2) |
0.6 |
- |
(68.4) |
- | |||||||
|
Free cash flow less discretionary pension and |
|||||||||||
|
postretirement contributions and CDSOA |
$ 149.8 |
$ 92.8 |
$ 289.0 |
$ 26.0 | |||||||
|
(1) The discretionary pension and postretirement benefit contributions for the third quarter of 2012 were $160.3 million with a tax benefit of $47.3 million. The discretionary pension and postretirement benefit contributions for the first nine months of 2012 were $364.1 million with a tax benefit of $119.1 million. The discretionary pension and postretirement benefit contributions for the third quarter of 2011 were $100.0 million with 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 with a tax benefit of $145.4 million. | |||||||||||
|
(2) CDSOA receipts for the first nine months of 2012 were $108.6 million, net of tax expense of $40.2 million. | |||||||||||
|
CONDENSED CONSOLIDATED BALANCE SHEET |
September 30, |
December 31, | |||
|
(Dollars in millions) (Unaudited) | |||||
|
ASSETS | |||||
|
Cash and cash equivalents |
$ 485.5 |
$ 464.8 | |||
|
Accounts receivable |
629.8 |
645.5 | |||
|
Inventories, net |
928.1 |
964.4 | |||
|
Other current assets |
190.3 |
218.2 | |||
|
Total Current Assets |
2,233.7 |
2,292.9 | |||
|
Property, Plant and Equipment - Net |
1,344.3 |
1,308.9 | |||
|
Goodwill |
332.1 |
332.7 | |||
|
Other assets |
308.4 |
392.9 | |||
|
Total Assets |
$ 4,218.5 |
$ 4,327.4 | |||
|
LIABILITIES |
|||||
|
Accounts payable |
$ 270.0 |
$ 287.3 | |||
|
Short-term debt |
27.5 |
36.3 | |||
|
Income taxes |
116.3 |
48.6 | |||
|
Accrued expenses |
384.1 |
447.7 | |||
|
Total Current Liabilities |
797.9 |
819.9 | |||
|
Long-term debt |
461.4 |
478.8 | |||
|
Accrued pension cost |
158.3 |
491.0 | |||
|
Accrued postretirement benefits cost |
333.9 |
395.9 | |||
|
Other non-current liabilities |
121.2 |
99.3 | |||
|
Total Liabilities |
1,872.7 |
2,284.9 | |||
|
EQUITY |
|||||
|
The Timken Company shareholders' equity |
2,331.4 |
2,028.3 | |||
|
Noncontrolling Interest |
14.4 |
14.2 | |||
|
Total Equity |
2,345.8 |
2,042.5 | |||
|
Total Liabilities and Equity |
$ 4,218.5 |
$ 4,327.4 | |||
|
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS |
|||||||||
|
(Dollars in millions) (Unaudited) | |||||||||
|
Three months ended |
Nine months ended | ||||||||
|
2012 |
2011 |
2012 |
2011 | ||||||
|
Cash Provided (Used) |
|||||||||
|
OPERATING ACTIVITIES |
|||||||||
|
Net income attributable to The Timken Company |
$ 80.9 |
$ 111.0 |
$ 420.2 |
$ 345.2 | |||||
|
Net income attributable to noncontrolling interest |
0.2 |
1.2 |
0.3 |
3.1 | |||||
|
Adjustments to reconcile net income to net cash |
|||||||||
|
provided (used) by operating activities: |
|||||||||
|
Depreciation and amortization |
49.0 |
49.1 |
148.8 |
142.9 | |||||
|
Impairment charges |
6.4 |
0.1 |
6.4 |
3.3 | |||||
|
Pension and other postretirement expense |
19.7 |
18.6 |
70.1 |
55.8 | |||||
|
Pension and other postretirement benefit contributions and payments |
(173.9) |
(113.4) |
(399.8) |
(445.2) | |||||
|
Changes in operating assets and liabilities: |
|||||||||
|
Accounts receivable |
88.3 |
3.8 |
13.8 |
(187.9) | |||||
|
Inventories |
20.1 |
(35.6) |
35.2 |
(122.2) | |||||
|
Accounts payable |
(14.9) |
(7.6) |
(17.0) |
39.3 | |||||
|
Accrued expenses |
2.7 |
33.0 |
(74.5) |
(2.3) | |||||
|
Income taxes |
36.8 |
39.3 |
143.9 |
101.3 | |||||
|
Other - net |
14.8 |
(4.0) |
19.1 |
(0.7) | |||||
|
Net Cash Provided (Used) By Operating Activities |
130.1 |
95.5 |
366.5 |
(67.4) | |||||
|
INVESTING ACTIVITIES |
|||||||||
|
Capital expenditures |
(72.0) |
(46.4) |
(187.3) |
(106.0) | |||||
|
Acquisitions |
- |
(198.9) |
(0.2) |
(198.9) | |||||
|
Investments - net |
(1.0) |
(10.6) |
17.2 |
(23.9) | |||||
|
Divestitures |
- |
- |
- |
4.8 | |||||
|
Other |
1.3 |
(0.6) |
5.3 |
6.5 | |||||
|
Net Cash Used by Investing Activities |
(71.7) |
(256.5) |
(165.0) |
(317.5) | |||||
|
FINANCING ACTIVITIES |
|||||||||
|
Cash dividends paid to shareholders |
(21.9) |
(19.5) |
(66.8) |
(56.6) | |||||
|
Purchase of treasury shares, net |
(60.6) |
(18.5) |
(112.3) |
(43.8) | |||||
|
Net proceeds from common share activity |
0.4 |
0.2 |
20.2 |
23.4 | |||||
|
Net proceeds from credit facilities |
(5.9) |
(8.2) |
(26.5) |
(2.0) | |||||
|
Other |
- |
1.8 |
3.6 |
(7.1) | |||||
|
Net Cash Used by Financing Activities |
(88.0) |
(44.2) |
(181.8) |
(86.1) | |||||
|
Effect of exchange rate changes on cash |
5.2 |
(24.7) |
1.0 |
(3.2) | |||||
|
(Decrease) Increase In Cash and Cash Equivalents |
(24.4) |
(229.9) |
20.7 |
(474.2) | |||||
|
Cash and cash equivalents at beginning of period |
509.9 |
632.8 |
464.8 |
877.1 | |||||
|
Cash and Cash Equivalents at End of Period |
$ 485.5 |
$ 402.9 |
$ 485.5 |
$ 402.9 | |||||
The Timken Company
Media Contact: Pat Carlson
Global Media Relations
Mail Code: GNW-37
1835 Dueber Avenue, S.W.
Canton, OH 44706 U.S.A.
Telephone: (330) 471- 3514
pat.carlson@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
SOURCE The Timken Company
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