Timken Company (the) · NYSE:TKR
Timken Company (the) — The Timken Company — Investor Presentation (August 2007)
39 slides from Timken Company (the)'s investor presentation, August 2007
Slide 1: Charting the Course for Profitable Growth
Charting the Course for Profitable Growth Investor Presentation August 2007
Slide 2: Investor Relations
Investor Relations The Timken Company Mail Code: GNE-26 1835 Dueber Avenue, S.W. Where You Turn | ?.0.80x6927 Canton, OH 44706-0927 U.S.A. Telephone: (330) 471-7446 Facsimile: (330) 471-2797 steve.tschiegg@timken.com Steve D. Tschiegg Manager - Investor Relations Where You Turn
Slide 3: Safe Harbor
Safe Harbor Certain statements in this presentation (including statements regarding the company's forecasts, beliefs, 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 particu
Slide 4: The Timken Company
The Timken Company • Industrial technology company • A leading provider of friction management and power transmission solutions to diverse markets, including: – Aerospace, Mining, Energy, Rail, Construction, Truck, Auto and Distribution • Established in 1899 • $5 billion in sales in 2006 • 25,000 as
Slide 5: The Timken Company
The Timken Company • Known for: – Brand / reputation – Market-leading positions – Knowledge – technology – Strong customer relationships Where You Turn 4
Slide 6: Our Vision
Our Vision We are dedicated to improving our customers’ performance by applying our knowledge of friction management and power transmission to deliver unparalleled value and innovation all around the world. 5
Slide 7: Charting the Course to Our New Enterprise: O.N.E. Timken
Charting the Course to Our New Enterprise: O.N.E. Timken Our Strategy – Innovation to create customer value – Execution to deliver value Innovation + Execution = Profitable Growth 6
Slide 8: Innovation – Reinventing Our Portfolio
Innovation – Reinventing Our Portfolio • Major Portfolio Shift Exit or Fix Under- Extend Performing Differentiation Business Expand Market Segments: Key Industrial Sectors, Geographic Targets Charting the Course to O.N.E. Timken 7
Slide 9: Exit Underperforming Business
Major Portfolio Shift Charting the Course Exit Exit Differentiation Exit Underperforming Business Or Or Fix Fix 2005-2006 Expand Markets Exited / Divested – Divested $480M of non-strategic businesses • Latrobe specialty steel • Automotive steering • European precision components – Exited Automotive
Slide 10: Fix Underperforming Business
Major Portfolio Shift Charting the Course Exit Exit Differentiation Fix Underperforming Business Or Or Fix Fix 2005-2006 Expand Markets Restructured – Dramatic changes in Automotive • Reduced 2,500 Automotive Estimated Annualized Benefits Timing positions (500 more in 2007) Automotive Group • 2 site
Slide 11: Differentiation: Products & Channels
Major Portfolio Shift Charting the Course Exit Differentiation Differentiation Differentiation: Products & Channels Or Fix Expand Markets Creating Customer Value Through Differentiation 10
Slide 12: Expanding Our Market Scope
Major Portfolio Shift Charting the Course Exit Differentiation Expanding Our Market Scope Or Fix Expand Expand Markets Markets • $500 billion friction management and power transmission market $500 billion • $40 billion antifriction bearing and North Targeting growth American alloy market segments: s
Slide 13: Ramping Up Industrial Capacity
Major Portfolio Shift Charting the Course Exit Differentiation Ramping Up Industrial Capacity Or Fix Expand Expand Markets Markets • Nine active plant projects 2006-2008 – Six in heavy industrial products – Three in aerospace parts and services – $270 million in sales opportunity – $195 million capi
Slide 14: Positioning for Growth – Asia
Major Portfolio Shift Charting the Course Exit Differentiation Positioning for Growth – Asia Or Fix Expand Expand Markets Markets • Last 5 years – Sales increased 300% -- now $330 million – Employment up from 1,600 to 4,400 today – Three new plants under construction – Distribution/engineering cente
Slide 15: Focused Inorganic Investments
Major Portfolio Shift Charting the Course Exit Differentiation Focused Inorganic Investments Or Fix Expand Expand Markets Markets • Since 2004 – Five industrial acquisitions • Four aerospace • One industrial service – Extending distribution product line • Industrial seals • Lubrication • Products an
Slide 16: Timken Aerospace…More Than Bearings
Charting the Course Timken Aerospace…More Than Bearings Repaired / overhauled parts Engine & accessory overhaul • Game-changing opportunities Bearing repair & – Total lifecycle care new PMA bearings Seals – IP + Aftermarket = value creation Airfoil • Aftermarket solution – Turbo shaft & APU engine o
Slide 17: Our Strategy: Innovation and Execution
Our Strategy Exit or Fix • Innovation to create Under- Extend customer value Performing Differentiation T I ON Business – Major portfolio shift EXECU Expand Market Segments: Key Industrial Sectors, Geographic Targets • Execution to deliver value – Restructuring supply chain – Adding low-cost manufac
Slide 18: Charting the Course to Profitable Growth
Charting the Course to Profitable Growth • Our New Enterprise: O.N.E. Timken – Lower cyclicality – Higher profits Our Measure of Success: Top Quartile Shareholder Returns 17
Slide 19: Financial Overview
Where You Turn Financial Overview
Slide 20: 2006 – Year In Review
2006 – Year In Review (a) • Sales of $5 billion, up 3% from prior year • EBIT(b) margin of 6.8%, down 50 bps • EPS(b) of $2.13 --($2.48 including discontinued operations) • ROIC(c) of 12.3%, exceeds cost of capital • Free cash flow(d) use of $62 million – from operating activities after pension cont
Slide 21: Timken Business Groups
Timken Business Groups Industrial Automotive Steel $2.1 billion(a) $1.6 billion(a) $1.5 billion(a) External customers 35 plants 20 plants $144M – Intersegment alloy steel for bearings 6 plants • Engineering/R&D • Supply Chain • Application Knowledge • Administration Leverage Synergies Across the Com
Slide 22: Industrial Group
Industrial Group Industrial ($ Millions) 2006 2005 Distribution Aerospace Products Sales $2,074 $1,927 5% Power & Defense Transmission 9% EBIT $201 $200 14% Health & Positioning Margin 9.7% 10.4% Control 5% • Broad range of bearing Rail products and services 11% • Strong and growing distribution cha
Slide 23: Automotive Group
Automotive Group ($ Millions) 2006 2005 Heavy & Medium Truck Sales $1,573 $1,661 20% EBIT $(74) $(20) Margin (4.7)% (1.2)% • Cost reduction / restructuring initiatives on target • Portfolio management / customer diversification Passenger Car Light • Focus on innovative products 32% Truck 48% Committ
Slide 24: Steel Group
Steel Group ($ Millions) 2006 2005 Energy 12% Sales $1,472 $1,415 Automotive 23% EBIT $207 $176 Margin 14.0% 12.4% Distribution 21% • Leader in high quality air- melted alloy steel bars & tubes Bearing • Product differentiation 24% • Strong markets Industrial 20% • Effective pricing and surcharge me
Slide 25: Timken Historical Sales
Timken Historical Sales(a) Continuing Operations ($ Millions) $6,000 CAGR 1991 - 2001: 4% $5,000 $4,000 $3,000 $2,000 $1,000 $0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 24 (a) 2003 includes Torrington acquisition as acquired February 2003.
Slide 26: Timken Historical Operating Income
Timken Historical Operating Income(a) Continuing Operations Operating Income % to ($ Millions) CAGR 1991 - 2001: 5% Net Sales $500 12% $400 10% 8% $300 6% $200 4% $100 2% $0 0% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Operating Income % to Net Sales (a) Exclude
Slide 27: Timken Historical EPS
Timken Historical EPS(a) Continuing Operations Net Sales ($ Millions) EPS $6,000 $3.00 $5,000 $2.50 $4,000 $2.00 $3,000 $1.50 $2,000 $1.00 $1,000 $0.50 $0 $0.00 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Net Sales EPS (a) Excludes special items, such as restructu
Slide 28: Timken Historical Net Debt
Timken Historical Net Debt (a) ($ Millions) Net Debt / Net Debt Capital $800 45% $700 40% $600 35% $500 30% $400 25% $300 20% $200 15% $100 10% $0 5% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Net Debt Net Debt / Capital (a) 2003 includes Torrington acquisition a
Slide 29: Growth by Acquisition into Complementary Businesses
Growth by Acquisition into Complementary Businesses • General Criteria: – Industrial focus – Market-leading position – Strong management team – International focus – Accretive to earnings / cash in year one – Earn cost of capital within three years Acquisitions Are Accelerating Our Growth 28
Slide 30: O.N.E. Timken - Conclusion
O.N.E. Timken - Conclusion • A market-leading industrial technology company – Continued strong and diverse markets – Innovation to create customer value – Execution to deliver value • 2007 Key Initiatives – Project O.N.E. – Asia growth – Capacity additions – Restructuring – Portfolio management Char
Slide 31: Appendix
Where You Turn Appendix
Slide 32: Reconciliation to GAAP
Reconciliation to GAAP ($ millions, except per share amounts) Non GAAP Disclosure Reconciliations US$ Million 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 GAAP Operating Income (9) 42 14 132 203 247 280 225 133 106 (18) 86 102 235 327 219 Reorganization Expense in
Slide 33: Reconciliation to GAAP
Reconciliation to GAAP Non GAAP Disclosure Reconciliations US$ Million 2006 GAAP Operating Income 219 Other expense (15) Manufacturing rationalization/integration/reorganization expenses - COGS 18 Manufacturing rationalization/integration/reorganization expenses - SG&A 6 Impairment and restructuring
Slide 34: Reconciliation to GAAP
Reconciliation to GAAP Non GAAP Disclosure Reconciliations Year Ended December 31 2006 (Thousands of dollars) CASH PROVIDED (USED) Operating Activities Net income $ 222,527 Net (income) from discontinued operations $ (46,088) Adjustments to reconcile net income to net cash provided by operating acti
Slide 35: Reconciliation to GAAP
Reconciliation to GAAP (Unaudited) CONDENSED CONSOLIDATED STATEMENT OF INCOME AS REPORTED ADJUSTED (1) (Thousands of U.S. dollars, except share data) Q4 2006 Q4 2005 Year 2006 Year 2005 Q4 2006 Q4 2005 Year 2006 Year 2005 Net sales $1,230,921 $1,189,631 $4,973,365 $4,823,167 $1,230,921 $1,189,631 $4
Slide 36: Reconciliation to GAAP
Reconciliation to GAAP (Unaudited) BUSINESS SEGMENTS (Thousands of U.S. dollars) (Unaudited) Q4 2006 Q4 2005 Year 2006 Year 2005 Industrial Group Net sales to external customers $539,099 $491,465 $2,072,495 $1,925,211 Intersegment sales 632 386 1,998 1,847 Total net sales $539,731 $491,851 $2,074,49
Slide 37: Reconciliation to GAAP
Reconciliation to GAAP Reconciliation of Total Debt to Net Debt and the Ratio of Net Debt to Capital: (Thousands of U.S. Dollars) (Unaudited) Dec 31, 2006 Sept 30, 2006 Dec 31, 2005 Short-term debt $50,453 $204,166 $159,279 Long-term debt 547,390 548,611 561,747 Total Debt $597,843 $752,777 $721,026
Slide 38: Reconciliation to GAAP
Reconciliation to GAAP Reconciliation of GAAP net income and EPS - diluted. This reconciliation is provided as additional relevant information about the company's performance. Management believes adjusted net income and adjusted earnings per share are more representative of the company's performance
Slide 39: TIMKEN
TIMKEN
The Timken Company — Investor Presentation (August 2007) on 6ix