Timken Company (the) · NYSE:TKR
Timken Company (the) — Investor Presentation (February 2010)
31 slides from Timken Company (the)'s investor presentation, Feb 17, 2010
Slide 1: Investor Presentation February 2010
Investor PresentationFebruary, 2010
Slide 2: Investor Relations Contact
Investor Relations Contact:Steve Tschiegg, Director - Capital Markets & Investor RelationsPH: (330) 471-7446E-mail: steve.tschiegg@timken.com
Slide 3: Safe Harbor Statement
SAFE HARBOR STATEMENT: 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.
Slide 4: About The Timken Company
About The Timken Company A leading provider of friction management and power transmission solutions to diverse markets, including:- Aerospace - Construction - Mining - Truck- Energy - Automotive- Rail - DistributionEstablished in 1899Headquartered in Canton, Ohio2009 sales: $3.1 billionGlobal manufa
Slide 5: Diverse Global Industrial Portfolio
Diverse Global Industrial Portfolio Our strategy:Grow with differentiated products and services in attractive marketsIncreased sales from demanding applications in industrial markets, including:EnergyAerospaceHeavy IndustriesExpand channels into the aftermarket Broad-Based End Markets and Customers
Slide 6: Geographic Sales Diversification and Asia Growth Initiative
Our strategy:Diversify global scope, growing disproportionately outside the U.S. Geographic Sales Diversification Restof World9% 2009 Sales: $3.1 Billion Asia12% Europe17% United States62% Sales Outside United States: 38% Asia Growth Initiative2009 sales of $370 million, or 12% of total companyEmplo
Slide 7: Our Strategy Model
Our Strategy Model GROWOPTIMIZE Enhance existing products and servicesLeverage technology to create valueCapture lifetime of opportunity Structure portfolio for value creationFix/Exit under- performing sectors Industrial marketsGeographiesChannels Improve efficiencyLower cost structureIncrease agili
Slide 8: Our New Enterprise
(CHART) Our New Enterprise Leveraging our Capabilities in New Ways Aerospace & Defense: $418M Diversified growth in defense, commercial and the aftermarket... beyond bearings Steel Group: $673M Enhancing market leadership position where performance demands are high Process Industries: $806M Global g
Slide 9: Mobile Industries Segment Overview
Mobile Industries Segment OverviewBearings, power transmission components and related products and servicesServes diverse market sectors - Light Vehicle - Auto Aftermarket - Off Highway - Heavy Truck - RailCustomers: OEM's and aftermarket distributorsAchievementsExited non-strategic / unprofitable b
Slide 10: Process Industries Segment Overview
Process Industries Segment OverviewBearings and power transmission products and related services for broad industrial markets Diverse and global customer base~65% aftermarket; consistent, profitable businessAchievementsCost reductions to align with demand declineAligned capacity footprint to support
Slide 11: Aerospace and Defense Segment Overview
Segment OverviewPower transmission systems and flight-critical components for civil and military aircraft: - Helicopter transmissions - Rotor head assemblies - Bearings - Turbine engine components - Gears - HousingsAftermarket engine overhaul, replacement parts, bearing and component repair Health a
Slide 12: Steel Group Segment Overview
Steel Group Segment OverviewHigh quality air-melted alloy steel bars, tubes, precision components and value-added servicesHigh-end applications where demands on performance are significantContributor of steel technology to Timken Bearings & Power Transmission GroupAchievementsAggressively cut costs
Slide 13: Our Priorities
Our Priorities Positioned for Improved Performance OPTIMIZEDrive performance improvements while continuing to implement our strategyMobile - transform through fix / exit strategySteel - rebound profitability and balance portfolioComplete Project O.N.E., achieve further working capital improvementsGR
Slide 14: Financial Review
Financial Review _—
Slide 15: 2009 - Year In Review
2009 - Year In Review Sales of $3.1 billion, down 38% from prior yearEPS of $0.32 (excluding special items)Continuing operations EPS of $0.53; loss of $0.21 from Needle Roller Bearings business, divested at year-endResults impacted by lower volumes and higher manufacturing costs partially offset by
Slide 16: Net Sales and 2012 Target
2012 Net Sales(in Millions) Sales CAGR 1991-2001: 4% CAGR 2002-2009: 4% Top-Line Growth Driven by Global Industrial Markets 2012 Target15-20% CAGR including organic & inorganic growth Note: 2003 includes Torrington acquisition as acquired February 2003. Historical results exclude the discontinued op
Slide 17: Earnings Per Share
Earnings Per Share Earnings Per Share Earnings Should Rebound Faster than Prior Cycles 2012 EPS Target$3.25-$3.75 including organic & inorganic growth Net Sales(in Millions) 2012 Note: Earnings exclude special items, such as restructuring and reorganization expenses, CDO payments and goodwill amorti
Slide 18: Free Cash Flow
Free Cash Flow 2009 Record Driven by Working Capital Management Free Cash Flow(in Millions) (CHART) 2012 Target$150M-$250M '91-'01 Avg: $16M '02-'09 Avg: $86M Note: Free cash flow defined as net cash provided by operating activities (includes pension contributions) minus capital expenditures and div
Slide 19: Net Debt Position of Financial Strength
Target leverage of 30% - 35% Net Debt Position of Financial Strength Net Debt/Capital (CHART) Net Debt(in Millions) 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Note: 2003 includes Torrington acquisition as acquired February 2003. Net Debt / Capital (leverage) defined as Net Debt / (Net Debt +
Slide 20: Return on Invested Capital
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2012 Return on Invested Capital Cost of Capital Objective to Exceed Cost of Capital through Cycle Note: The company uses NOPAT/Average Invested Capital as a type of ratio that indicates return on capital (ROIC). A reconciliation to GAAP and descripti
Slide 21: Capital Allocation
Capital Allocation Organic growth and performance improvement initiativesTargeted in industrial market sectors; wind, aerospace, heavy industriesAsia GrowthProject O.N.E. (business processes & systems)AcquisitionsCriteria:Industrial and aftermarket focusMarket-leading positionStrong management teamI
Slide 22: Incentive Compensation Aligned with Shareholder Value Creation
Incentive Compensation Aligned with Long-term Shareholder Value Creation Program Restricted Non Qualified Shares Stock Options Objective Time Horizon 4 Years 10 Years 40% Corporate EBIT/BIC 30% Business Unit EBIT/BIC 15% BU working capital % sales Intermediate Incentive 50% EPS 50% ROIC Intermediate
Slide 23: Our Strategy Model
Our Strategy Model GROWOPTIMIZE Enhance existing products and servicesLeverage technology to create valueCapture lifetime of opportunity Structure portfolio for value creationFix/Exit under- performing sectors Industrial marketsGeographiesChannels Improve efficiencyLower cost structureIncrease agili
Slide 24: Appendix
Appendix ~~
Slide 25: Reconciliation to GAAP
Reconciliation to GAAP (continued next page)
Slide 26: Condensed Consolidated Statement of Income
(Unaueited) CONDENSED CONSOLIDATED STATEMENT OF INCOME. AS REPORTED ADJUSTED (1) (Dollars in thousands, except share data) Full Year 2009 Full Year2008 Full Year 2008 Full Year 2008 ‘Net Income per Common Share Attributable to The Timken ‘Company Common Shareholders: (Loss) Earnings Per Share - Cont
Slide 27: Reconciliation of Total Debt to Net Debt
ion 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 490,457 Shareh
Slide 28: Reconciliation of Net Income and EPS
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Slide 31: Non GAAP Disclosure Reconciliations
Non GAAP Disclosure Reconeiliations USS Million ‘expenditures and dividends. Results include discontinued operations until divested. ‘operating activities that is available for the execution ofits business strategy. (1) Free cash flow defined as net cash provided by operating activities (incid. pens