Slide 1: 1Q 2016 Earnings Investor Presentation
1Q 2016 Earnings Investor Presentation April 27, 2016
Slide 2: 1Q 2016 Earnings Conference Call Detail
2 1Q 2016 EARNINGS CONFERENCE CALL DETAIL Conference Call: Wednesday, Apr. 27, 2016 10:00 a.m. Eastern Time Live Dial-In: 800-500-0920 or 719-457-2731 (Call in 10 minutes prior to be included) Conference ID: Timken’s 1Q Earnings Call Conference Call Replay: Replay Dial-In available through May 11, 2
Slide 3: Forward-Looking Statements, Safe Harbor and Non-GAAP Financial Information
3 FORWARD-LOOKING STATEMENTS SAFE HARBOR AND NON-GAAP FINANCIAL INFORMATION 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 t
Slide 4: 1Q 2016 Summary
4 1Q 2016 SUMMARY • Sales of $684 million decreased approximately 5% from prior year, or down 2.5% excluding currency Mobile Industries sales down 2%; roughly flat excluding currency Process Industries sales down 9%; down 6% excluding currency • GAAP net income per share of $0.78 versus net loss
Slide 5: 2016 Market Outlook and Drivers
5 Markets Market Drivers/Timken Dynamics Timken Automotive l Gaining share in NA Light Truck l Wind l Market flat; share gains l General Industrial l l Heavy Truck l US OE down; ROW more stable l Defense l Military Marine strong; Aero down l Agriculture l Belts acquisition adds revenue l Constructio
Slide 6: Executing our Strategy
6 Outgrowing our Markets • Be the technical leader in solving customers’ friction and power transmission challenges • Expand both our product portfolio and geographic presence • Deliver an exceptional customer service experience including a differentiated technical sales model Operating with Excelle
Slide 7: Update on Timken Belts Acquisition
7 UPDATE ON TIMKEN BELTS ACQUISITION • Integration of business largely complete • Broadens our mechanical power transmission products portfolio • Pursuing channel synergies • Driving Operational Excellence − Inventory −SG&A A 100-year-old supplier of power transmission belts for industrial, commerci
Slide 8: 2016 Outlook Update
8 2016 OUTLOOK UPDATE Net Sales -4 to -5% -5% Organic -5 to -6% -6% • Weaker end-market demand Acquisitions (net) +3% +3% Currency -2% -2% • Impact of slightly weaker US dollar FY GAAP EPS $1.35 to $1.45 $1.65 to $1.75 • CDSOA income, net of related expenses FY Adjusted EPS $1.90 to $2.00 $1.90 to $
Slide 9: Financial Review
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Slide 10: 1Q 2016 Financial Highlights - Sales
10 1Q-15 Organic Currency Acquisitions/ Divestitures 1Q-16 1Q 2016 FINANCIAL HIGHLIGHTS - SALES • Sales of $684 million, down 5.3% from a year ago Excluding currency impact of 2.8%, sales declined 2.5% Decline driven by market weakness across most sectors partially offset by growth in automotive
Slide 11: 1Q 2016 Financial Highlights - Adjusted EBIT
11 1Q 2016 FINANCIAL HIGHLIGHTS - ADJUSTED EBIT 180.9 202.5 Gross Profit 118.3 128.5 SG&A 6.2 Impairment & restructuring $(148.8) EBIT % of sales 17.3% 17.8% % of sales 26.4% 28.0% (160) bps 50 bps See Appendix for reconciliation of EBIT, adjusted EBIT, and EBIT and adjusted EBIT margins to their mo
Slide 12: 1Q 2016 Earnings Comparison
12 1Q 2016 EARNINGS COMPARISON • Adjusted EBIT of $61.4 million or 9.0% of sales compares with $73.0 million or 10.1% of sales in the same period a year ago Driven by the impact of lower volume, unfavorable price/mix and currency, partially offset by the impact of lower raw material and operating
Slide 13: 1Q 2016 Net Income and Diluted EPS
13 1Q 2016 NET INCOME AND DILUTED EPS 1Q-16 $63.0 $0.78 Net Income (Loss) Net Income, after adjustments $36.9 $0.46 $M EPS 1Q-15 $(135.2) $(1.54) $44.2 $0.50 EPS Adjusted tax rate: Quarter 31% 32% - Pension settlement charges 1.2 215.2 0.02 • Adjusted EPS of $0.46, versus $0.50 in the same period la
Slide 14: Mobile Industries
14 MOBILE INDUSTRIES Heavy Truck Automotive Aerospace Rail ($M) 2016 2015 Change Sales $383.2 $393.0 $(9.8) EBIT $30.2 $35.4 $(5.2) Margin 7.9% 9.0% (110) bps Adjusted(1): EBIT $35.9 $36.4 $(0.5) Margin 9.4% 9.3% 10 bps 1Q YOY Commentary 1Q Performance • Sales down 2.5%; excluding currency, sales we
Slide 15: Process Industries
15 PROCESS INDUSTRIES Original Equipment Aftermarket ($M) 2016 2015 Change Sales $300.8 $329.5 $(28.7) EBIT $32.6 $45.2 $(12.6) Margin 10.8% 13.7% (290) bps Adjusted(1): EBIT $36.2 $50.8 $(14.6) Margin 12.0% 15.4% (340) bps 1Q YOY Commentary 1Q Performance • Sales down 8.7%; excluding currency, sale
Slide 16: Cash Flow, Balance Sheet & Capital Allocation
16 Capital Expenditures Dividend Share Repurchases Acquisitions Capital Structure Cash $138 Debt 689 Net Debt 551 Equity 1,376 Net Capital $1,927 Leverage Total Debt/Capital 33% Net Debt/Capital 29% ($M) Balance Sheet (3/31/16) See Appendix for reconciliations of Adjusted Net Income, Net Debt and Ne
Slide 17: 2016 Full-Year Outlook
17 2016 FULL-YEAR OUTLOOK (1) Free cash flow divided by adjusted net income. Free cash flow is defined as net cash provided by operating activities (includes pension contributions) minus capital expenditures. Adjusted net income excludes pension settlement charges, restructuring charges and CDSOA in
Slide 18: Appendix
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Slide 19: GAAP Reconciliation: Net Income & EPS
19 GAAP RECONCILIATION: NET INCOME & EPS (Unaudited) (Dollars in millions, except share data) 2016 EPS 2015 EPS Income (Loss) from The Timken Company 62.9$ (134.8)$ Less: Net (loss) income attributable to noncontrolling interest (0.1) 0.4 Net Income (Loss) Attributable to The Timken Company 63.0$ 0.
Slide 20: GAAP Reconciliation: Consolidated EBIT & EBIT Margin
20 GAAP RECONCILIATION: CONSOLIDATED EBIT & EBIT MARGIN Adjustments, to Net Income (Loss): (Unaudited) (Dollars in millions, except share data) 2016 Percentage to Net Sales 2015 Percentage to Net Sales Net Income (Loss) 62.9$ 9.2 % (134.8)$ (18.7)% Provision (benefits) for income taxes 27.6 4.0 % (2
Slide 21: GAAP Reconciliation: Net Debt and Free Cash Flow
21 GAAP RECONCILIATION: NET DEBT AND FREE CASH FLOW (Dollars in millions) March 31, 2016 December 31, 2015 Short-term debt, including current portion of long-term debt 15.3$ 77.1$ Long-term debt 673.4 579.4 Total Debt 688.7$ 656.5$ Less: Cash, cash equivalents and restricted cash (137.5) (129.8) Net
Slide 22: GAAP Reconciliation: Segment EBIT & EBIT Margin
22 GAAP RECONCILIATION: SEGMENT EBIT & EBIT MARGIN (Unaudited) Mobile Industries (Dollars in millions) Three Months Ended March 31, 2016 Percentage to Net Sales Three Months Ended March 31, 2015 Percentage to Net Sales Earnings before interest and taxes (EBIT) 30.2$ 7.9 % 35.4$ 9.0% Impairment and r