Timken Company (the) · NYSE:TKR
Timken Company (the) — Investor Day (February 2012)
118 slides from Timken Company (the)'s investor day presentation, Feb 14, 2012
Slide 1: Timken Analysts' Day
St. Regis - NYC Feb. 14, 2012 Exhibit 99.1 T IMKEN A NALYSTS ’ D AY
Slide 2: Timken Analysts' Day
T IMKEN A NALYSTS ’ D AY Steve Tschiegg Director – Capital Markets and Investor Relations Feb. 14, 2012
Slide 3: Forward-looking statements
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 particular, the stat
Slide 4: Agenda
Topic Presenter Time Welcome Steve Tschiegg 1 p.m. Director, Capital Markets & Investor Relations Strategic Update & Review Jim Griffith President and Chief Executive Officer Mobile Industries Rich Kyle President - Mobile Industries and Aerospace & Defense Aerospace & Defense Rich Kyle President - M
Slide 5: Agenda
Topic Presenter Time Break Approx. 2:30 p.m. Steel Sal Miraglia President - Steel Financial Review Glenn Eisenberg Executive VP - Finance & Administration Q&A Presenter Panel Program Concludes 4:30 p.m. A GENDA
Slide 6: Strategic Update & Review
S TRATEGIC U PDATE & R EVIEW T IMKEN A NALYSTS ’ D AY James W. Griffith President and Chief Executive Officer Feb. 14, 2012
Slide 7: Timken Overview
Leader in friction management & mechanical power transmission reliability for diverse markets, including: Established in 1899 Headquartered in Canton, Ohio 2011 sales: $5.2 billion Global footprint with operations in 30 countries 21,000 associates • Aerospace • Mining • Energy / Wind • Rail • Constr
Slide 8: The Timken Company Today
Process Industries Steel Aerospace & Defense Mobile Industries Note: Based on 2011 sales. Steel segment sales includes $120 million inter-segment sales. Process Industries Steel Aerospace & Defense Mobile Industries Aerospace & Defense -- Diversified into transmissions, and aftermarket Sales: $0.3 B
Slide 9: The Timken Company Today
The more extreme the engineering challenge, the more grueling the conditions, the more value we bring to customers. T HE T IMKEN C OMPANY T ODAY
Slide 10: Growing Where End-Markets Connect
G ROWING W HERE E N D -M ARKETS C ONNECT
Slide 11: The Strategy Is Working
Enhance existing products and services Leverage technology to create value Capture lifetime of opportunity Structure portfolio for value creation Fix/Exit under-performing areas Refine lean operating model Improve efficiency and reduce cost structure Increase agility Deliver greater profitability At
Slide 12: Key Accomplishments in 2011
Record Sales Record Profitability Record New Products Record Customer Service Record Safety More Profitable Portfolio Strategic Acquisitions Increased Industrial Aftermarket Growing End-markets Global Expansion K EY A CCOMPLISHMENTS IN
Slide 13: A Multi-Faceted Transformation
Markets Products Geographies People Performance A M ULTI -F ACETED T RANSFORMATION
Slide 14: Markets: Industrial Aftermarket
Reflects $1 billion in Timken aftermarket sales in 2011, up 500% since the year 2000. M ARKETS : I NDUSTRIAL A FTERMARKET A DECADE OF GROWTH
Slide 15: Markets: Energy
Reflects $500 million in Timken energy end-market sales in 2011, up 270% since the year 2000. M ARKETS : E NERGY DECADE OF GROWTH
Slide 16: Products: Diversified Portfolio
P RODUCTS : D IVERSIFIED P ORTFOLIO
Slide 17: Products: Diversified Portfolio
Timken Boring Specialties Timken Boring Specialties Of Timken’s Steel segment, 30% of sales are from new products or new customers introduced within the past 5 years. P RODUCTS : D IVERSIFIED P ORTFOLIO
Slide 18: Geographies: Expanded Asia Growth
G EOGRAPHIES : E A SIA G ROWTH Ballarat Brisbane Melbourne Perth Sydney Calcutta Bejing Hong Kong Seoul Yokohama Yantai Moscow Pune Bangalore New Delhi Shanghai Bombay Jamshedpur Manufacturing Plants Innovation Centers Distribution Centers Offices Singapore XPANDED
Slide 19: Geographies: Expanded Asia Growth
New Delhi Kolkata Gurgaon Nanjing Zhengzhou Xi’an Mysore Chongqing Shenyang Bejing Tianjin Guangzhou Seoul Yokohama Nagoya Chennai Moscow Pune Bangalore Jamshedpur Chengdu Manufacturing Plants Innovation Centers Distribution Centers Offices Bangkok Jakarta Hanoi Ballarat Brisbane Melbourne Perth Syd
Slide 20: People: Knowledge Drives Value
P EOPLE : K NOWLEDGE D RIVES V ALUE
Slide 21: Performance: Delivering for Customers
P ER FORMANCE : D ELIVERING FOR C USTOMERS
Slide 22: Performance: Delivering on Safety
P ERFORMANCE : D ELIVERING ON SAFETY
Slide 23: Record Performance: Sales & Earnings
Earnings Per Share Net Sales ($ in Millions) $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 ($1.00) $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 R ECORD P ERFORMANCE : D ELIVERING ON S ALES & E ARNINGS EPS assumes dilution. 2003 includes Torrington acquisition as acquired February 2003. Historical result
Slide 24: What's Next
W HAT ’ S N EXT
Slide 25: Next: Expanding Products and Services
Philadelphia Gear N EXT : E XPANDING P RODUCTS AND S ERVICES
Slide 26: Next: Expanding Geographies
N EXT : E XPANDING G EOGRAPHIES
Slide 27: Key Takeaways
K EY T AKEAWAYS Delivering on strategy ; more diversified and stronger today Performing at a higher level ; well - positioned for the future Applying knowledge to create substantial value serving growing, global end-markets
Slide 28: Mobile Industries
Rich Kyle President – Mobile Industries and Aerospace Feb. 14, 2012 M OBILE I NDUSTRIES T IMKEN A NALYSTS ’ D AY
Slide 29: Mobile Industries Overview
2011 Sales: $1.8 Billion Aerospace & Defense U.S. 56% Europe 19% Asia 11% Latin America 6% ROW 9% Process Steel Mobile 34% Off- Highway 26% Light Truck 26% Heavy Truck 13% Rail 13% On-Highway Aftermarket 13% Passenger Car 9% Premium bearings, lubricants, seals and aftermarket services for mobile equ
Slide 30: Growing, Diverse Markets
Drivetrain, wheel ends Rebuild kits, wheel ends, services, unit bearings Axles, transmissions, wheel ends Gear drives, axles, wheel ends Drivetrain, wheel ends, services G ROWING , D IVERSE M ARKETS
Slide 31: Differentiated Systems and Components
Bearings Engineered Chains & Augers Seals, Lubricants Services D IFFERENTIATED S YSTEMS AND C OMPONENTS
Slide 32: Record Financial Performance
$1,772 $1,245 $1,561 $1,769 -$86 $208 $243 6.9% 13.3% 13.7% - Sales of $1.8 billion, up 13.7% from 2010 Sales increase driven by higher demand and penetration in the off-highway, rail and heavy truck sectors Achieved EBIT of $243 million, up 17% from 2010 Record EBIT margin of 13.7% Industry leading
Slide 33: Strategy Is Working
Strategy and Approach Strategic Imperatives • Provide high-value power transmission products and services focused on demanding mobile equipment and vehicle applications to OE and aftermarket channels globally • Capitalize on mining, agricultural and commercial transportation demand • Improve mix in
Slide 34: Strategy: Improving the Mix
Off- Highway 16% Light Vehicle Systems 54% Heavy Truck 13% On- Highway Aftermarket 9% Rail 8% Light Vehicle Systems 35% 25% On Highway Aftermarket 14% Heavy Truck 13% Rail 13% - Off- Highway Sales 2011 Sales S TRATEGY : I MPROVING THE M IX
Slide 35: Looking Forward: More Growth
The Future of Mobile Industries • Extensive portfolio of differentiated products for mission critical and demanding applications • Additional capacity for growing markets • Leader in customer service and technical support • Leverage strong demand across global mobile markets • Low to mid double digi
Slide 36: Markets Targeted for Growth
Population Growth Infrastructure Growth Mobile Equipment Growth • Mining • Heavy Truck • Rail • Agriculture • Light Vehicle Mobile Equipment Aftermarket Growth M ARKETS T ARGETED FOR G ROWTH
Slide 37: Focus on Mining
• Demand for mining equipment projected to grow at 8% CAGR; sustained through * • Mining equipment manufacturers investing to support growth • Equipment rebuilds drive large aftermarket * Source: Freedonia Industry study World Mining Equipment Jan. 2012 #2840 F OCUS ON M INING
Slide 38: Lifetime of Revenue Opportunity
Haul Truck Longwall Shearer Electric Shovel Crushing , Screening and Conveying • Equipment Life: 20+ years • Typical Bearings Cycle: 3-5 years • Lifetime Opportunity: ~$500,000 • Equipment Life: 30+ years • Typical Bearings Cycle: 4-8 years • Lifetime Opportunity: ~$2.4 Million • Equipment Life: 20+
Slide 39: Popular Mining Equipment
P OPULAR M INING E QUIPMENT
Slide 40: Mobile Industries: Key Takeaways
What’s Next What’s Different Today • Record financial performance; strong cash generation • Robust market demand across all global mobile markets • Focused on products, applications, and markets where customers value our engineering, manufacturing and service capabilities • Strong growth in rail and
Slide 41: Aerospace & Defense
Rich Kyle President – Mobile Industries and Aerospace Feb. 14, 2012 T IMKEN A NALYSTS ’ D AY
Slide 42: Aerospace and Defense Overview
Aerospace & Defense 6% 2011 Sales: $324 Million U.S. 78% Europe 12% Asia 6% 4% ROW Process Mobile Steel Defense 46% Civil 43% Motion Control 11% Percent of Total Company Sales Market Sales Aerospace & Defense 6% • Flight critical components and services for aircraft engines and transmissions • Preci
Slide 43: Growing, Diverse Markets
Commercial Bearings, replacement parts, bearing repair Guidance Bearings, Sensors Machine Tool Precision bearings, OE and aftermarket Motion & Position Control Bearings, replacement parts Rotorcraft Bearings, engine and drive train, overhaul, replacement parts, bearing repair General Aviation Engine
Slide 44: Differentiated Systems and Components
Bearings Transmissions Encoders and Sensors Complex Parts Services D IFFERENTIATED S YSTEMS A C OMPONENTS ND
Slide 45: Aerospace and Defense Platforms
Top 10 represent 38% of net sales -60 Boeing Apache H PWC PT6 Sikorsky Other 62% Sikorsky S-76 V-22 Bell Boeing 2011 Net Sales: $324M Rolls Royce 250 GE CF6 Boeing Chinook Sikorsky CH-53 GE CF34 Sikorsky Other 62% A EROSPACE AND D EFENSE P LATFORMS
Slide 46: Aerospace & Defense Sales by Channel
Original Equipment MRO 40% Original Equipment 30% Aftermarket 30% 2011 Net Sales: $324M A EROSPACE & D EFENSE S A LES BY C HANNEL
Slide 47: Aerospace and Defense Performance
$412 $418 $338 $324 $45 $65 $17 $8 10.9% 15.7% 4.9% 2.3% Key Accomplishments Positioned business for improvement Executed system and process improvements Strengthened customer service and business relationships Targeted growth to drive mix Performance Update Sales of $324 million slightly lower than
Slide 48: Strategy Is Working
Strategy and Approach Provide a globally diverse portfolio of high-value parts, integrated assemblies and service capabilities focused on growing platforms through OE and aftermarket channels Leverage strong commercial and improving general aviation markets Navigate uncertainty in defense markets Im
Slide 49: Aerospace and Defense: Key Takeaways
What’s Next What’s Different Today Improved execution and service, strong commercial markets, a bottom in defense demand, and growth opportunities focused on profitable products, markets and channels Flat revenue and weak EBIT performance in 2011, due to execution, mix, and a weak defense market Str
Slide 50: Process Industries
Chris Coughlin President – Process Industries Feb. 14, 2012 P ROCESS I NDUSTRIES T IMKEN A NALYSTS ’ D AY
Slide 51: Process Industries Overview
2011 Sales: $1.2 Billion Aerospace & Defense Process 24% Mobile Steel U.S. 43% Asia 26% Europe 18% Latin America 7% ROW 6% Aftermarket 64% Service 9% Metals 8% Machinery 7% Energy 6% Gear Drives 5% Precision-engineered bearings and mechanical power transmission products for diverse markets. Percent
Slide 52: Rapidly Growing, Diverse Markets
Power Gen Coal: Pulverizers, ball mills, pumps Mining: Shovels/draglines, material handling Oil and Gas: Top drives, mud pumps Wind Energy: Main shafts, gear boxes Cement: Vertical rolling mills, crushing, screening Metals: Casters, flat products, long products Gear Drives: Industrial and planetary
Slide 53: Differentiated Systems and Components
Bearings Engineered Chains Gears Services D IFFERENTIATED S YSTEMS AND C OMPONENTS
Slide 54: Record Financial Performance
$1,166 $809 $903 $1,245 $215 $73 $134 $282 18.4% 9.0% 14.8% 22.6% 2011 Performance Update Key Acomplishments Net Sales ($Millions EBIT ) EBIT Margins Record $1.2B sales, up 38% from 2010 Record 22.6% EBIT margin End-user focus leading to aftermarket growth Asia sales growth and geographic expansion
Slide 55: Proven Strategy
Strategy and Approach Strategic Imperatives Focus on end-user value chain and needs Continually penetrate end-user value chain with new products and services Utilize strong distribution channels to maximize lifetime profit Achieve a leading market position in Asia Pacific Compete at original-equipme
Slide 56: Focused Growth in Diverse Markets
Power Gen Coal Mining Oil and Gas Wind Energy Cement Metals Gear Drives Pulp and Paper Food and Beverage 53% 79% Prioritized efforts to serve the most attractive markets to Timken Percent of OE Sales in Target Markets Power Gen Coal Mining Oil and Gas Wind Energy Cement Metals Gear Drives Pulp and P
Slide 57: Expanding Global Presence
61% 43% 25% 15% 17% 7% 5% Percent of Total Sales by Geography $0.40B $1.24B Asia ROW Latin America Europe U.S. 9% 6% 7% $0.0 $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 $1.4 E XPANDING G LOBAL P RESENCE
Slide 58: New Products, New Opportunities
56% TRB 96% TRB Product Sales 2011: $1.24B 2001: $0.40B TRB: Tapered Roller Bearings SRB: Spherical Roller Bearings CRB: Cylindrical Roller Bearings HU: Housed Units Other Bearings Services Non-Bearing Products Non-Bearing Products Services Other Bearings HU CRB SRB Non-Bearing Products Other Bearin
Slide 59: New Acquisitions, New Capabilities
Differentiated performance • Industrial focus • Strong aftermarket • Supply chain synergy Sales/Timing Product Offering Growth Synergies Sales: $85M Purchase date: July ‘11 Sales: $100M Purchase date: Oct. ‘11 2011 Sales: $23M Purchase date: Sept. ‘10 Gear drive repair Engineered chains and augers M
Slide 60: Excellent Customer Service With Working Capital Discipline
70% 87% 8- 12 -6 4 39% 25% Large-bore Bearings On-time Delivery/ Stock-in Rate Right product at the right place, right time= Gains in market share + Premium pricing + Increased inventory turns 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Working Capital (% of Sales) Large-bore Bearings Lead Time (Mon
Slide 61: Looking Forward: More Industrial Growth
The Future of Process Industries Extensive portfolio of differentiated mechanical power transmission products and services Expansive OE installed base to seed the aftermarket Additional capacity for growing markets Leader in customer service in mechanical power transmission Aggressive sales growth >
Slide 62: Expanding Our Market Space
Mechanical Power Transmission Bearings Tapered Roller Bearings NOTE: Based on Timken’s internal projections and analysis of third party source materials. Chains, belts, gear drives, couplings, brakes, sprockets, clutches, services, condition monitoring, rebuild, repair Spherical, cylindrical, housed
Slide 63: Gaining Share: Organic Growth
New product sales: 2011 YOY growth of 40-50% Ample opportunity to gain market share in new products Timken Market Share Based on Timken’s internal projections and analysis of third party source materials. Introduce and globalize products and services Invest in ASEAN, Latin America, Africa, Russia Gr
Slide 64: Unlocking New Spaces: Inorganic Growth
Acquisition strategy NOTE: Based on Timken’s internal projections and analysis of third party source materials. Differentiated mechanical power transmission products and services in demanding applications Products with broad aftermarkets Industrial services that penetrate end-user value chains Lever
Slide 65: Process Industries: Key Takeaways
What’s Next What’s Different Today Record sales and EBIT stemming from a solid strategy and end-user focus in attractive markets. Product line expansion; mechanical power transmission acquisitions; excellent customer service; and greater market and geographic growth/diversification. Aggressive annua
Slide 66: Steel
Sal Miraglia President – Steel Group Feb. 14, 2012 T IMKEN A NALYSTS ’ D AY S TEEL
Slide 67: Steel Group Overview
2011 Sales: $2 Billion Aerospace & Defense Passenger Car 14% Light Truck 11% Oil and Gas Drilling 17% Distribution General 13% Industrial Machinery 10% General Industrial 10% US 93% Outside US 7% Process Mobile Steel 36% S TEEL G ROUP O VERVIEW Percent of Total Company Sales Geographic Sales Market
Slide 68: Differentiated Solutions
Seamless mechanical steel tubing Special bar quality steel Value-added solutions 450 grades of carbon and alloy steels Well suited for power transmission applications D IFFERENTIATED S OLUTIONS
Slide 69: The Strategy Is Working
Steel Applications LOW HIGH Non-Timken Bearings Bearing Races Fuel Injectors Gun Barrels Crankshafts Energy Production CV Joints Transmissions Gears Fasteners Hand Tools Leaf Springs Shopping Carts Table Legs Reinforcing Bar HIGH T HE S TRATEGY IS W ORKING
Slide 70: The Strategy Is Working
We build trust by turning what we know about high performance steels into improved customer performance. What are we best at? What are we passionate about? What powers our economic engine? We build trust by turning what we know about high performance steels into improved customer performance. What a
Slide 71: Record Profitability Track
Note: EBIT is defined as operating income plus other income (expense), net; ROIC is calculated as NOPAT/invested capital. See Appendix for reconciliation of ROIC to the most directly comparable GAAP equivalent. ($ MILS.) Timken’s Average Cost of Capital ~9% Steel Segment P ROFITABILITY T RACK R ECOR
Slide 72: Strong Performance
$1,852 $715 $1,360 $1,954 $281 -$63 $146 $271 14.3% -8.1% 10.8% 13.8% S TRONG P ERFORMANCE 2011 Performance Update Sales of $2 billion, up 44% from 2010 Higher volume, surcharges and pricing High demand from energy and industrial EBIT margin of 13.8% Key Accomplishments 25 percent increase in shippe
Slide 73: Timken Steel Performs
24% 8% 12% 11% 6% 11% 22% 11% 13% 18% 14% 13% Note: ROIC is calculated as NOPAT/invested capital; see Appendix for reconciliation of ROIC to the most directly comparable GAAP equivalent. Steel special peers are a representative group of eight steel companies. The Timken Peers are comprised of 36 ind
Slide 74: Performance Stabilization
Actions/Tactics: Pricing action Cost reductions Tube Finishing Line (IFL) Expected Results: Diversification/flexibility Significantly improved performance in downturn P ERFORMANCE STABILIZATION Forge Press Caster/Refiner Portfolio management Growth in attractive areas Lower break even Product differ
Slide 75: Rapidly Growing, Diverse Markets
Mining Rail Passenger Car Light Truck Drilling Equipment Production Equipment Heavy/Medium Truck Wind Energy Completion Farm Equipment Vocational Truck Horizontal Drilling R APIDLY G ROWING , D IVERSE M ARKETS
Slide 76: The Strategy Is Working – Industrial
Strength Where It Matters For Mining Transportation Motorized Wheel Drive System High performance application Drill bits/hydraulic impact hammers Drivetrains Bearings Internal cleanliness Consistent chemistry Special steel grades Small quantities and diverse sizes T HE S TRATEGY IS W ORKING – I NDUS
Slide 77: The Strategy Is Working – Mobile On-Highway
Planetary Ring Gear Forged Crankshaft Unique rotary forging capability Managed supply chains Conserve capital Unique finishing capability Alloy development capability Improved fuel economy T HE S TRATEGY IS W ORKING – M OBILE O N -H IGHWAY
Slide 78: The Strategy Is Working – Oil and Gas
Stator Tubes Used in horizontal drilling Helps rotor movement More reliable, better product Grade: Impact 7 Quench and temper tube T HE S TRATEGY IS W ORKING – O IL AND G AS
Slide 79: The Strategy Is Working – Oil and Gas
T HE S TRATEGY IS W ORKING – O IL AND G AS
Slide 80: Looking Forward – Strategy Road Map
Organic Growth Value-Add Initiatives Inorganic Growth Operational Excellence Positioning to Serve Attractive Market Segments Large bar ultrasonic Custom heat treat Forge press Capacity and productivity enhancements Value selling & pricing International growth Business portfolio development Timken Bo
Slide 81: Looking Forward – Proposed Faircrest Investment
Extending competitive advantage Defend and Grow Leadership Position in Large Bar Extend differentiation business model Increase capacity for profitable growth Grow international sales Dampen financial impact of economic cycles Deliver cost savings through yield and productivity gains Note: Subject t
Slide 82: Looking Forward – Proposed Faircrest Investment
Investment Overview: Expected productivity improvement and cost savings Increased capacity Extend differentiation Barrier to entry Projected rate of return > 20% Note: Subject to ratification of a new collective bargaining agreement with the United Steelworkers. L OOKING F ORWARD – P ROPOSED F AIRCR
Slide 83: Steel: Key Takeaways
Performing Improving Growing Strong financial performance Capturing value with differentiated offerings Operational excellence Demand for energy (oil, gas, wind) Demand for raw materials New product sales Diversified markets S TEEL : K EY T AKEAWAYS Capital investment program Pricing and continuous
Slide 84: Financial Review
Glenn Eisenberg Executive Vice President – Finance & Administration Feb. 14, 2012 T IMKEN A NALYSTS D AY ’
Slide 85: 2011 Results
Sales of $5.2B, up 28% from prior year Driven primarily by strong demand across the company's diverse industrial sectors, along with favorable pricing, material surcharges and acquisitions EBIT of $728M, or 14.1% of sales Record EPS: $4.59, up 68% from prior year’s $2.73 Note: See Appendix for recon
Slide 86: 2011 Results
2011 R ESULTS Free Cash Flow a use of $70M From operating activities after pension contributions, capital expenditures and dividends Includes $256M discretionary pension and VEBA trust contributions, net of tax Strong Balance Sheet Cash position of $468M, or $47M net debt Pension & postretirement be
Slide 87: 2012 Outlook Estimates
2012 O UTLOOK E STIMATES Sales Growth 5 to 8% Mobile Industries Flat Process Industries 8 to 13% Aerospace & Defense 10 to 15% Steel 5 to 10% EPS (diluted) $4.90 to $5.20 Free Cash Flow $80M CapEx $345M Dividends $90M Pension/VEBA contributions (discretionary) $150M, net of tax Note: Free cash flow
Slide 88: Sales
S ALES ’91 to ’01 Cycle CAGR: 4% ’02 to ‘09 Cycle CAGR: 4% Net Sales ($ Mils.) Outlook 2012 Sales Estimate: +5 to 8% Y-O-Y - improved demand 2014 Sales Target: 3-Year CAGR of +7 to 12% - global GDP recovery/ - includes inorganic 2012 Sales Estimate 2014 Sales Target growth growth in 2013-2014 of 3.5
Slide 89: Earnings Per Share
E ARNINGS P ER S HARE Earnings Per Share Net Sales ($ Mils.) 2014 EPS Target 2012 EPS Estimate Outlook EPS Estimate: $4.90 to $5.20 per diluted share EPS Target: $6.50 to $7.00 per diluted share - redeployment of capital including inorganic growth - reflecting improved operating performance Note: Ea
Slide 90: Free Cash Flow
F REE C ASH F LOW Free Cash Flow ($ Mils.) ’91-’01 Cycle Avg: $16M ’02-’09 Cycle Avg: $87M Outlook 2012 FCF Estimate: $80M after, - CapEx of $345M - dividends of $90M - discretionary 2014 FCF Target: $250 to $300M - CapEx above 2012 FCF Estimate 2014 FCF Target targeted range, increased dividends an
Slide 91: Capital Spending
C APITAL S PENDING Outlook 2012 CapEx Estimate: $345M - driven by global - targeted +20% IRR - ~$80M maintenance 2013-2014 CapEx above long term target Estimate Long-term Target: 4% of Sales Capital Spending ($ Mils.) Cap Ex % of Sales 0% 1% 2% 3% 4% 5% 6% 7% $0 $50 $100 $150 $200 $250 $300 $350 $40
Slide 92: Pension
P ENSION Note: Discount rate noted is for Timken’s domestic pension fund which represents the majority of the company’s global pension assets. PBO funded percent denotes the Company’s pension benefit obligation (PBO) funded status. Outlook 2012: - discretionary pension 2013 – 2014: - discretionary p
Slide 93: Net Debt
N ET D EBT Net Debt /Capital Net Debt ($ Mils.) Note: -30% -20% -10% 0% 10% 20% 30% 40% 50% -$600 -$400 -$200 $0 $200 $400 $600 $800 $1,000 Long-term Leverage Target: 30% - 35% 2003 includes Torrington acquisition as acquired February 2003. Net debt is not a GAAP measure. Management believes Net Deb
Slide 94: Liquidity and Debt Maturity
L IQUIDITY AND D EBT M ATURITY ($ Mils.) Dec. 31, 2011 Cash $ U.S. Senior Credit Facility U.S. Accounts Receivable Securitization Foreign Facilities Sub-total credit availability $ Total (including cash) 1,313 $ Dec. 31 Less than 2015 & 1 Year After Short-Term Debt + CPLTD $36 $36 $500M Senior Credi
Slide 95: Return on Invested Capital
R ETURN ON I NVESTED C APITAL Note: The company uses NOPAT/Average Invested Capital as a type of ratio that indicates return on capital (ROIC). See Appendix for reconciliation of ROIC to the most directly comparable GAAP equivalent. Cost of Capital Return on Invested Capital ’91–’01 Cycle Avg. : 6.2
Slide 96: 2011 Capital Allocation Highlights
2011 C APITAL A LLOCATION H IGHLIGHTS • Returning cash to shareholders • consecutive quarterly dividend paid in December 2011 • Discretionary contributions as capital structure and cash flow permit • Industrial & aftermarket focus • International • Accretive to earnings in year 1 • Earn cost of capi
Slide 97: 2012 Capital Allocation Highlights
• Returning cash to shareholders • 90 years of consecutive quarterly dividends • Industrial & aftermarket focus • International • Accretive to earnings in year 1 • Earn cost of capital in 3 years • Discretionary contributions as capital structure and cash flow permit • Target spend in industrial sec
Slide 98: Incentive Compensation
I NCENTIVE C OMPENSATION Annual Long-Term Objective Short-term operational business priorities 3 year strategic business priorities Long-term shareholder value creation 6,000 Associates globally 160 General Managers & above 265 Senior Managers 160 General Managers & above Participants Time Horizon 1
Slide 99: The Strategy Is Working
T HE S TRATEGY IS W ORKING • Enhance existing products and services • Leverage technology to create value • Capture lifetime of opportunity • Structure portfolio for value creation • Fix/Exit under-performing areas • Refine lean operating model • Improve efficiency and reduce cost structure • Increa
Slide 100: Appendix
A PPENDIX T IMKEN A NALYSTS ’ D AY Feb. 14,
Slide 101: Reconciliation to GAAP
R ECONCILIATION TO GAAP 159.5 $ 99.9 $ 696.8 $ 405.5 $ 8.6 9.5 36.8 38.2 (1.2) (1.4) (5.6) (3.7) 166.9 $ 108.0 $ 728.0 $ 440.0 $ 49.6 47.5 192.5 189.7 216.5 $ 155.5 $ 920.5 $ 629.7 $ Interest expense Interest income (Dollars in millions) (Unaudited) Reconciliation of GAAP income from continuing oper
Slide 102: Reconciliation to GAAP
Total Debt (a) Less: Cash Net Debt Equity 1,019 1,032 1,056 1,046 1,005 Total Debt to Capital 21.1% 24.5% 28.7% 27.6% 20.5% 24.7% 25.8% 30.8% 30.1% 33.8% Net Debt to Capital 21.0% 24.1% 28.4% 26.7% 19.9% 24.4% 25.3% 30.8% 29.7% 33.4% Total Debt (a) Less: Cash Net Debt (243) (363) Equity 1,090 1,270
Slide 103: Reconciliation to GAAP
R ECONCILIATION TO GAAP ($ Mils.) GAAP Operating Income (1) (9) GAAP Other Income / (Expenses) (8) (2) (6) (5) (5) (16) (10) (7) Earnings Before Interest and Taxes (EBIT) (2) (17) Provision for income taxes (6) Adjusted tax rate 37.6% 37.6% 37.6% 37.6% 36.9% 38.3% 35.7% 38.2% 36.8% 35.0% Net Operati
Slide 104: Reconciliation to GAAP
R ECONCILIATION TO GAAP (1) Free cash flow is defined as net cash provided by operating activities (including pension contributions) minus capital expenditures and dividends. Results include discontinued operations until divested. Management believes that free cash flow is useful to investors becaus
Slide 105: Reconciliation to GAAP – Steel
R ECONCILIATION TO GAAP - S TEEL Steel Segment Earnings Before Interest and Taxes (EBIT) (1) (51) (63) Provision for income taxes (21) (23) Net Operating Profit After Taxes (NOPAT) (2) (31) (41) Average Beginning Invested Capital ROIC: NOPAT / Average Beginning Invested Capital (3) 4% -7% 7% 26% 37%
Slide 106: Corporate Bios
T IMKEN A NALYSTS ’ D AY Feb. 14, 2012 C ORPORATE B IOS
Slide 107: James W. Griffith
James W. Griffith President and Chief Executive Officer James W. Griffith is president and chief executive officer of The Timken Company and a member of the company’s board of directors. Since being named president in 1999, Griffith has led a transformation of The Timken Company focused on creating
Slide 108: Glenn A. Eisenberg
Glenn A. Eisenberg Executive Vice President – Finance and Administration Glenn A. Eisenberg is executive vice president – finance and administration and chief financial officer of The Timken Company. He also is an officer of the company. Eisenberg is responsible for the executive leadership of the c
Slide 109: Salvatore J. Miraglia, Jr.
Salvatore J. Miraglia, Jr. President – Steel Group Salvatore J. Miraglia, Jr. is president – Steel Group at The Timken Company and an officer of the company. Since his appointment in August 2005, the Steel Group has surpassed previous records for production, shipments and profitability. The Group ha
Slide 110: Christopher A. Coughlin
Christopher A. Coughlin President – Process Industries ® Christopher A. Coughlin is president of Process Industries and Supply Chain within the Bearings and Power Transmission Group at The Timken Company. The Process Industries segment provides bearings and related products and services for heavy in
Slide 111: Richard G. Kyle
Richard G. Kyle President – Mobile Industries and Aerospace Richard G. Kyle is president of Mobile Industries and Aerospace segments of The Timken Company. In 2010, Kyle expanded his role to include responsibility for the company's high-growth aerospace segment. That segment includes Timken's global
Slide 112: Philip D. Fracassa
Philip D. Fracassa Senior Vice President and Controller - Bearings and Power Transmission Philip D. Fracassa is senior vice president and group controller for the Bearings and Power Transmission (B&PT) Group at The Timken Company. Named to this newly created position in 2010, Fracassa leads the fina
Slide 113: Christopher J. Holding
Christopher J. Holding Senior Vice President – Tax and Treasury Christopher J. Holding is senior vice president of tax and treasury for The Timken Company. Named to this position in 2010, he leads the company’s global tax and treasury activities, including cash and liquidity management, pension fund
Slide 114: J. Ted Mihaila
J. Ted Mihaila Senior Vice President – Controller J. Ted Mihaila is senior vice president – controller and an officer of The Timken Company. Mihaila directs the company’s finance and corporate shared services teams. His oversight of the two teams enables leverage of the services the company provides
Slide 115: Kari Groh
Kari Groh Vice President – Communications and Public Relations Kari Groh is vice president – communications and public relations for The Timken Company. Named to the position in 2009, she is responsible for worldwide communications, directing the development of Timken messaging with customers, media
Slide 116: Steve D. Tschiegg
Steve D. Tschiegg Director – Capital Markets and Investor Relations Steve D. Tschiegg is director – capital markets and investor relations at The Timken Company. Tschiegg has responsibility for communicating the company's financial results, performance and strategies to the financial community, as w
Slide 117: Jack Gecovich
Jack Gecovich Capital Markets and Investor Relations Specialist Jack Gecovich is capital markets and investor relations specialist within the Treasury Corporate Center for the Timken Company. Gecovich is responsible for analytical work across a broad range of areas to expand the company's overall in
Slide 118: Lorrie Paul Crum
Lorrie Paul Crum Manager – Global Media and Strategic Communications Lorrie Paul Crum is manager – global media and strategic communications at The Timken Company. Named to the position in December 2008, Crum is responsible for leading Timken’s global reputation and media relations efforts, while al