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 --------------------------- 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: http://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(TM) 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:
http://www.timken.com/mediahttp://www.timken.com/investors
DATASOURCE: The Timken Company CONTACT: Media Contact: Lorrie Paul
Crum, Manager - Global Media and Strategic Communications,
+1-330-471-3514, Mobile: +1-330-224-5021, ; or Investor Contact:
Steve Tschiegg, +1-330-471-7446, Web Site: http://www.timken.com/
Copyright