Timken Company (the) · NYSE:TKR

Timken Company (the) — The Timken Company — Investor Presentation (August 2011)

42 slides from Timken Company (the)'s investor presentation, August 2011

  1. Slide 1: The Timken Company Investor Presentation

    The Timken Company Investor Presentation August 2011

  2. Slide 2: Emerging with Higher Value

    Emerging with Higher Value INVESTOR RELATIONS CONTACT: Steve Tschiegg, Director - Capital Markets & Investor Relations PH: (330) 471-7446 E-mail: steve.tschiegg@timken.com

  3. 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 particul

  4. 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 / Wind  Automotive  Rail  Distribution • Established in 1899 • Headquartered in Canton, Ohio • 2010 sales: $4.1

  5. Slide 5: Diverse Global Portfolio

    Diverse Global Portfolio Portfolio Diversification 2010 Sales: $4.1 Billion  Broad-based end markets Agriculture Other and customers Mining Industrial Construction Machinery  Increased sales from Heavy / demanding applications Medium Truck  Expanded channels into the Metals aftermarket Rail Globa

  6. Slide 6: Timken Position in Asia

    Timken Position in Asia  2010 Sales: $470 million, 12% of Timken  Employment: 4,500  Industrial market focus:  Infrastructure  Energy  Aftermarket  Services  China and India “home markets”  Expanding in ASEAN – Indonesia  Growing brand reputation  Broader product range  Significant indus

  7. Slide 7: The Strategy is Working

    The Strategy is Working • Enhance existing products • Attractive industrial markets and services • Developing geographies • Leverage technology to create value • Channels, services, distribution • Capture lifetime of opportunity • Structure portfolio for • Refine lean operating model value creation

  8. Slide 8: Strategic Accomplishments

    Strategic Accomplishments Improved leverage  Reduced asset intensity  SAP investment  Working capital improvement  Reduced structural S&A costs Increased productivity Less cycle vulnerability  Lean performance: sustaining flexible force  Each business better positioned to earn cost of capital

  9. Slide 9: Strategic Accomplishments

    Strategic Accomplishments Record New Products New steel Spherical roller Type-E Integrated Systems (bearing, seal, products bearings Housed lubrication) for Multi-megawatt (wear-resistant type shown) Units Wind Turbines Attractive Markets Focused Acquisitions  Expanding in diverse industries,  Pow

  10. Slide 10: Philadelphia Gear Acquisition

    Philadelphia Gear Acquisition Gearbox Repair & Manufacturing Key Terms  Purchase Price: $200 million  Sales (LTM 3/31/11): $85 million  Expected to be accretive to 2012 earnings & exceed cost of capital in 2014  To be integrated into Process Industries segment  Closed: July 1, 2011 Service & Pr

  11. Slide 11: Mobile Industries

    Mobile Industries Segment Overview Sector Profile  Bearings, power transmission components 2010 Sales: $1.6 billion and related products and services Off Highway  Serves diverse market sectors Light Truck 21%  Light Vehicle  Auto Aftermarket 29%  Off Highway  Heavy Truck  Rail Auto & Truck Af

  12. Slide 12: Process Industries

    Process Industries Segment Overview Sector Profile  Bearings and power transmission products 2010 Sales: $903 million Service and related services for broad industrial 4% Industrial markets Energy Machinery 22% 29%  Diverse and global customer base  ~65% aftermarket; consistent, profitable busine

  13. Slide 13: Aerospace and Defense

    Aerospace and Defense Segment Overview Sector Profile 2010 Sales: $338 million  Power transmission systems and flight- Health & critical components for civil and military Position'g Commer- aircraft: Control cial Aero.  Helicopter transmissions  Bearings 18% 24%  Rotor head assemblies  Gears 

  14. Slide 14: Steel Group

    Steel Group Segment Overview Sector Profile  Market leadership position in high quality 2010 Sales: $1.4 billion Aero. & air-melted alloy steel bars, tubes, precision Defense 5% Rail 3% components and value-added services Off-Highway  Bars: 1” to 16”  Tubes: 2” to 13” 12% Light Vehicles  Serving

  15. Slide 15: The Path Forward

    The Path Forward  Build on the momentum  Execute for results: superior returns  Advance the portfolio: diversified, balanced  Accelerate growth: organic investments + acquisitions that fit  Strengthen the team: global breadth & depth 14

  16. Slide 16: Financial Review

    Financial Review TIMKEN

  17. Slide 17: 2010 Results

    2010 Results  Sales of $4.1 billion, up 29% from prior year  EBIT of $440 million, or 10.8% of sales  EPS of $2.73 –versus a loss of $0.64 from prior year  Free cash flow of $146 million  Strong balance sheet Note: EBIT and EPS reflect continuing operations and include the impact of special ite

  18. Slide 18: 2011 Results – 1st Half

    2011 Results – 1st Half  Sales of $2.6 billion, up 34% from prior year  Driven primarily by stronger demand across the company's industrial sectors, along with favorable surcharges, pricing and currency  EBIT up 74% to $371 million, or 14.4% of sales  Earnings benefited from improved demand, mix

  19. Slide 19: Sales

    Sales Net Sales ($ in Millions) 2013 Target* 10-15% CAGR including organic & inorganic growth $7,000 6 $6,000 5 CAGR 2002-2009: 4% $5,000 4 $4,000 CAGR 1991-2001: 4% 3 $3,000 2 $2,000 1 $1,000 $0 0 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Note: 2003 includes Torrington acquisition

  20. Slide 20: Earnings Per Share (GAAP)

    Earnings Per Share (GAAP) Net Sales Earnings Per ($ in Millions) Share 2013 EPS Target* $4.75-$5.25 including organic & inorganic growth $7,000 $6.00 $6,000 $5.00 $5,000 $4.00 $4,000 $3.00 $3,000 $2.00 $2,000 $1.00 $1,000 $0.00 $0 ($1.00) 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 N

  21. Slide 21: Free Cash Flow

    Free Cash Flow Free Cash Flow ($ in Millions) $500 $400 2013 Target* $300 $200M-$250M ’02-’09 Avg: $87M $200 ’91-’01 Avg: $16M $100 $0 -$100 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Note: Free cash flow defined as net cash provided by operating activities (includes pension contrib

  22. Slide 22: Net Debt

    Net Debt Net Debt Net Debt ($ in Millions) /Capital $1,000 50% $800 40% $600 Target leverage of 30% - 35% 30% $400 20% $200 10% $0 0% -$200 -10% -$400 -20% -$600 -30% 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Note: 2003 includes Torrington acquisition as acquired February 2003. Net Debt / Ca

  23. Slide 23: Return on Invested Capital

    Return on Invested Capital Return on Invested Cost of Capital Capital 2013 Target* 16% 13-15% ’91–’01 Avg. : 6.2% ’02–’09 Avg. : 7.8% 14% 12% 10% Cost of Capital ~ 9% 8% 6% 4% 2% 0% -2% 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Note: The company uses NOPAT/Average Invested Capital

  24. Slide 24: Capital Allocation

    Capital Allocation  Organic growth and performance improvement initiatives • Targeted in industrial market sectors; wind, aerospace, heavy industries, oil & gas • Asia Growth  Acquisitions • Industrial and aftermarket focus • Market-leading position • Strong management team • International focus •

  25. Slide 25: Incentive Compensation

    Incentive Compensation Short-Term Intermediate Long-Term (Cash) (Cash) (Equity) Program Annual Performance Award Intermediate Incentive Restricted Non Qualified Plan (APA) Plan (IIP) Shares Stock Options Mid-term strategic business Long-term shareholder Objective Short-term operational business prio

  26. Slide 26: The Strategy is Working

    The Strategy is Working • Enhance existing products • Attractive industrial markets and services • Developing geographies • Leverage technology to create value • Channels, services, distribution • Capture lifetime of opportunity • Structure portfolio for • Refine lean operating model value creation

  27. Slide 27: The Timken Company

    The Timken Company Investor Presentation August 2011

  28. Slide 28: Appendix

    Appendix TIMKEN

  29. Slide 29: Geographic Sales Profile

    Geographic Sales Profile  Diversified global scope, growing 2010 Sales: $4.1 Billion faster outside the U.S. Latin America 4% Rest  34% of sales are outside the U.S. of World 6% • Excluding Steel Group, sales Asia abroad represent nearly 50% 12% United States of the portfolio 66% Europe 12% 28

  30. Slide 30: Mobile Industries 2010 Performance Summary

    Mobile Industries 2010 Performance Summary Performance Update Key Accomplishments  Sales up 25% to $1.6 billion  Completed portfolio re-pricing  Growth drivers: Market recoveries in light  Effectively managed OE attrition vehicles, off highway, heavy truck and automotive aftermarket  Penetratio

  31. Slide 31: Process Industries 2010 Performance Summary

    Process Industries 2010 Performance Summary Performance Update Key Accomplishments Metrics • Double digit growth • Accelerated growth in new products: spherical, • Margin expansion YOY cylindrical and housed units • Strong working capital management • QM acquisition Business drivers • Distribution r

  32. Slide 32: Aerospace & Defense 2010 Performance Summary

    Aerospace & Defense 2010 Performance Summary Performance Update Key Accomplishments  Late-cycle weakness in civil and  Implemented business systems defense markets infrastructure  Inventory destocking  Rationalized footprint  Earned 6% adjusted margin for the  Qualified over 150 new parts full

  33. Slide 33: Steel 2010 Performance Summary

    Steel 2010 Performance Summary Performance Update Key Accomplishments  Sales up 90% to $1.4 billion  Pricing  Growth drivers: Demand recovery, inventory  Secure iron source restocking  Accelerated ramp up  Improved capacity utilization  Daido steel source  Strong earnings rebound; 2x cost of

  34. Slide 34: Reconciliation to GAAP 2010

    Reconciliation to GAAP 2010 (continued next page) (Unaudited) CONDENSED CONSOLIDATED STATEMENT OF INCOME AS REPORTED AS ADJUSTED (1) Full Year Full Year Full Year Full Year 2010 (Dollars in millions, except share data) 2009 2010 2009 Net sales $ 4,055.5 $ 3,141.6 $ 4,055.5 $ 3,141.6 Cost of products

  35. Slide 35: Reconciliation to GAAP 2010

    Reconciliation to GAAP 2010 (Unaudited) CONDENSED CONSOLIDATED STATEMENT OF INCOME AS REPORTED AS ADJUSTED (1) Full Year Full Year Full Year Full Year 2010 (Dollars in millions, except share data) 2009 2010 2009 Net Income (Loss) per Common Share Attributable to The Timken Company Common Shareholder

  36. Slide 36: Reconciliation to GAAP 2010

    Reconciliation to GAAP 2010 Reconciliation of net income (loss) 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 com

  37. Slide 37: Reconciliation to GAAP 1st half 2011

    Reconciliation to GAAP 1 st half 2011 36

  38. Slide 38: Reconciliation to GAAP 1st half 2011

    Reconciliation to GAAP 1 st half 2011 37

  39. Slide 39: Reconciliation to GAAP (Dollars in millions)

    Reconciliation to GAAP (Dollars in millions) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Total Debt (a) 273 321 277 280 211 303 359 469 450 514 Less: Cash 2 8 5 12 7 5 10 0 8 11 Net Debt 271 313 271 267 204 297 350 469 442 503 Equity 1,019 985 685 733 821 922 1,032 1,056 1,046 1,005 Total Debt

  40. Slide 40: Reconciliation to GAAP (Dollars in millions)

    Reconciliation to GAAP (Dollars in millions) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 GAAP Operating Income(1) (9) 42 14 132 203 247 280 225 133 106 GAAP Other Income / (Expenses) (8) (2) (6) 2 (5) (5) 7 (16) (10) (7) Earnings Before Interest and Taxes (EBIT)(2) (17) 41 8 135 198 242 2

  41. Slide 41: Reconciliation to GAAP (Dollars in millions)

    Reconciliation to GAAP (Dollars in millions) Non GAAP Disclosure Reconciliations US$ Million 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 GAAP Net Cash Provided by Operating Activities 140 116 154 147 224 186 312 292 277 157 GAAP Capital expenditures (140) (136) (89) (114) (129) (151) (233) (23

  42. Slide 42: Reconciliation to GAAP

    Reconciliation to GAAP Revised Segment Results 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year Year Year (Dollars in millions) (Dollars in millions) 2010 2010 2010 2010 2010 2009 2008 Net sales to Mobile Industries $ 367.5 $ 400.4 $ 404.1 $ 388.3 $ 1,560.3 $ 1,245.0 $ 1,771.9 external customers: Process Indust

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