Timken Company (the) · NYSE:TKR
Timken Company (the) — The Timken Company — Investor Presentation (June 2015)
37 slides from Timken Company (the)'s investor presentation, June 2015
Slide 1: Investor Presentation June, 2015
Investor Presentation June, 2015
Slide 2: Forward-Looking Statements
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 19
Slide 3: Company Overview and Direction
Company Overview and Direction
Slide 4: Timken at a Glance
Timken at a Glance Ticker NYSE: TKR Legacy c. 1899 2014 Sales $3.1B Employees 14,000 worldwide Global Footprint Headquarters in North Canton, OH Operations in 28 countries Dividend Payout every quarter since IPO in 1922 A Leader in Bearings, Power Transmission and Related Services 4
Slide 5: An Attractive Business Profile
An Attractive Business Profile End-Market Sectors Product Offering Channel Overview Industrial Machinery 19% Power Transmission Automotive 15% Products Distribution/ Rail 11% 9% End User Heavy Truck 8% Services Energy 7% 9% Defense 7% Agriculture 6% 49% 51% Industrial Services 5% Metals 5% Mining 5%
Slide 6: Mobile Industries Overview
Mobile Industries Overview Snapshot 2014 Financial Results Sales $1.7B EBIT Margin* 3.9% Adj. EBIT Margin 10.5% (* Includes Aerospace impairment and restructuring charges of $122 million) 2014 Business Mix – Market Sector Sales By Geography Heavy LatAm Truck Automotive 9% 14% APAC 25% 12% Aerospace/
Slide 7: Process Industries Overview
Process Industries Overview Snapshot 2014 Financial Results Sales $1.4B EBIT Margin 19.2% Adj. EBIT Margin 19.4% 2014 Business Mix – Channel Sales By Geography LatAm Distribution/ 7% Services APAC 33% OEM 23% NA 54% 67% 16% EMEA Note: Business mix and sales by geography are based on 2014 sales of $1
Slide 8: Competitive Differentiators for Attractive Opportunities
The Timken Business Model Growth Markets Challenging Driven by Strong Technology & Applications Macros Know How for Attractive Opportunities Competitive Differentiators Disciplined Filter Aftermarket Business & Rebuild Capabilities Value Timken Creation Operational Fragmentation Excellence High Serv
Slide 9: The Growth Plan: What You Can Expect
The Growth Plan: What You Can Expect Capture Share and 1. Outgrow Our End Markets Market Growth Grow International Sales and 2. Win Globally Focus on Emerging Markets Leverage Technology and 3. Accelerate Product Development Rate Know How to Grow Organically Pursue Strategic, Focus on: 4. Bolt-on Be
Slide 10: Capture Share and Market Growth: Apply Timken Business Model
1. Capture Share and Market Growth Apply Timken Business Model Focus on Markets with Challenging Applications Strong Macro Fundamentals High costs of failure Mission-Critical, Demanding High costs of substitution Applications Harsh environments Reliability System Energy efficiency Urbanization Infra
Slide 11: Capture Share and Market Growth: Outgrowth Initiatives
1. Capture Share and Market Growth Outgrowth Initiatives Wheel Hub Bearings: Launching new Light truck hub bearing for auto OE Timken Power Systems: New high-speed gear drive manufacturing facility in Houston Housed Units: Introduced at Hannover Fair our newest housed unit bearing line, which includ
Slide 12: A Rapidly Developing Portfolio of Industrial Services
1. Capture Share and Market Growth A Rapidly Developing Portfolio of Industrial Services Bearing Repair & Gearbox repair & Electric motor & Remanufacturing on-site services generator repair and controls Timken Power Systems Provides Service Solutions to Energy, Water, Mining, Cement and Defense, Gen
Slide 13: Win Globally: A Growing International Footprint
2. Win Globally A Growing International Footprint EMEA 18% Russia Canada U.K. Germany Poland NA Czech Republic France Japan 57% Spain ItalyRomania China U.S. Turkey LatAm South Korea India Mexico 8% U.A.E. Taiwan APAC Thailand Vietnam 17% Singapore Brazil Indonesia Australia Plants/Service Centers |
Slide 14: Accelerate Product Development Rate
3. Leverage Technology and Know How to Grow Organically Accelerate Product Development Rate Potential for Continued Penetration of ~$60B Bearings Market Still Very High Current: Global Leader in Tapered Roller Bearings Aspiration: Leverage TRB position and organic / Billion Billio inorganic tactics
Slide 15: Bearing Housed Unit Portfolio Transformation
3. Leverage Technology and Know How to Grow Organically Bearing Housed Unit Portfolio Transformation UC Series Ball Bearing Type E Ball bearing Split roller housed units SNT Plummer housed units Spherical roller bearing steel housed unit Feb February July February July November 2003 2010 2010 2013 2
Slide 16: Pursue Strategic Bolt-On Acquisitions
4. Pursue Strategic Bolt-On Acquisitions Market and Product Expansion Our Market Space is Broader than Bearings Adjacent Products & Services Chains, belts, gear drives, couplings, brakes, sprockets, clutches, lubrication, condition Mechanical monitoring, rebuild and repair services Power Transmissio
Slide 17: Investment Summary – Why Own Timken
Investment Summary – Why Own Timken • Differentiated Business Model delivers strong financial results ‒ Fragmented, diverse end-markets and customers ‒ Attractive mix drives margins ‒ Global growth opportunity • Strong, results-oriented management team • Shifted focus from transformation to: ‒ Profi
Slide 18: Financial Review
Financial Review 18
Slide 19: 2014 Financial Accomplishments
2014 Financial Accomplishments Revenue Adj. EBIT Margin Adj. EPS ($ in Billions) Other Highlights Up 1% Up 140 bps Up 23% • Process Industries sales up 10.4% vs. 2013 • SG&A expense improved 40 bps $3.0 $3.1 10.8% 12.2% $2.07 $2.55 (% of sales) vs. 2013 • Adjusted ROIC of 11.5%, up from 9.7% in 2013
Slide 20: Capital Allocation Priorities
Capital Allocation Priorities Disciplined Approach to Drive Shareholder Value Capital Expenditures Organic Growth and Margin Improvement CapEx: ~4% of Sales Dividend Target: 25 – 35% Payout Ratio Acquisitions Share Repurchases Target Accretive Bolt-on Transactions Buybacks to Enhance Shareholder Val
Slide 21: Balance Sheet and Leverage
Balance Sheet and Leverage Balance Sheet (3/31/15) ($ Millions) Net Debt/Capital Capital Structure ($ Millions) Net Debt Net Debt/ Capital $800 40% Cash $169 Target: 30 – 40% Debt 523 $600 30% Net Debt 354 20% $400 20% Equity 1,416 13% Net Capital $1,770 $200 $354 10% Leverage 2% $236 $0 $46 0% Tota
Slide 22: M&A Strategy
M&A Strategy Our Objectives: • Pursue a pipeline of strategic targets; 2010 – 2014 emphasis on bolt-ons • Focus on bearings, adjacent power Total Total Sales transmission products and industrial # of Deals Spent Acquired services 9 ~$400M ~$300M • M&A to expand capabilities – Product/services offeri
Slide 23: Portfolio Transformation – Building for Growth
Portfolio Transformation – Building for Growth Sales: $30M Electric motor repair, related Sales: $18M services and up- Electric motor repair Sales: $17M and related services Sales: $85M tower wind Electric motor repair Industrial gear maintenance and related services drive and repair and repair serv
Slide 24: Creating Shareholder Value
Creating Shareholder Value Dividends Paid Total Shareholder Return(1) (5-Year Annualized, ending 12/31/14) $1.00 $1.00 22.4% $0.92 $0.92 $0.78 18.1% $0.75 15.4% $0.53 $0.50 $0.25 $0.00 2010 2011 2012 2013 2014 Timken S&P 500 S&P 400 Industrials Delivering A Strong Dividend Payout & Strong TSR Perfor
Slide 25: Key Take-Aways
Key Take-Aways • Strong financial performance in 2014; progress made toward long-term financial targets ‒ Sales up 1% ‒ Adj. EBIT margins up 140 bps ‒ Adj. EPS up 23% • Executing capital allocation plan ‒ Total dividends paid in 2014 of $1.00 per share (39% of adj. EPS) ‒ Repurchased 5.2 million sha
Slide 26: Appendix
Appendix 26
Slide 27: Timken Transformation
Timken Transformation Timken Improved Financial The Timken Transformation 2007 - 2014 Performance (Ex. Steel)1 5-Year Avg. 5-Year Avg. 2007 2004 – 2008 2010 – 2014 • Exited automotive business that did not Sales: $3.1B Sales: $3.7B meet value proposition criteria $4,500 Margin: 12.6% 16% Margin: 5.0
Slide 28: Capital Spending
Capital Spending Long-Term Target: ~ 4.0% of Sales Outlook ~2% • Increased focus on growth Organic Growth ‒ New products ‒ Capacity expansions • Growth CapEx – IRRs 1 – 2% generally > 20% Performance • Performance improvement Improvement targeted at expanding gross margins and ≤ 1% enhancing competi
Slide 29: 2015 Incentive Compensation Plan
2015 Incentive Compensation Plan Annual Long-Term Short-term Operational 3-Year Strategic Long-term Shareholder Objective Business Priorities Business Priorities Value Creation 130 Senior 330 Leadership 330 Leadership Participants 5,000 Associates Globally Leadership Associates Associates Associates
Slide 30: Large, Highly Fragmented Addressable Market
Large, Highly Fragmented Addressable Market #1 or #2 in Key Targeted End-Markets Competitive Landscape Industry-Leading Positions NORTH AMERICA Peer 1 • Roller bearings Peer 2 • Aftermarket bearings 51% Peer 3 • Gear drive repair Peer 4 Peer 5 GLOBAL • Tapered roller bearings • Rail bearings and rep
Slide 31: GAAP Reconciliation: Segment Adjusted EBIT
GAAP Reconciliation: Segment Adjusted EBIT Reconciliation of EBIT After Adjustments and EBIT as a Percentage of Sales: The following reconciliation provides additional relevant information about the Company's performance. Management believes that EBIT and EBIT margin, after adjustments, are represen
Slide 32: GAAP Reconciliation: Sales Excluding Planned Program Exits & Currency Effects
GAAP Reconciliation: Sales Excluding Planned Program Exits & Currency Effects Reconciliation of Net Sales After Planned Program Exits and Currency Effects to Net Sales The following reconciliation is provided as additional relevant information about the Company's performance. Management believes tha
Slide 33: GAAP Reconciliation: Consolidated EBIT & EBIT Margin
GAAP Reconciliation: Consolidated EBIT & EBIT Margin Reconciliation of EBIT Margin, After Adjustments, to Net Income as a Percentage of Sales and EBIT, After Adjustments, to Net Income: The following reconciliation is provided as additional relevant information about the Company's performance. Manag
Slide 34: GAAP Reconciliation: EPS
GAAP Reconciliation: EPS Reconciliation of Earnings Per Share and Earnings Per Share After Adjustments to Net Income; excluding the Steel Business: The following reconciliation provides additional relevant information about the Company's performance. Management believes that earnings per share (EPS)
Slide 35: GAAP Reconciliation: Adjusted ROIC
GAAP Reconciliation: Adjusted ROIC Reconciliation of Adjusted Return on Invested Capital (ROIC): The following reconciliation provides additional relevant information about the Company's performance. Management believes that ROIC, after adjustments, is representative of financial return of the Compa
Slide 36: GAAP Reconciliation: Net Debt/Capital
GAAP Reconciliation: Net Debt/Capital Reconciliation of Net Debt to Total Debt and the Ratio of Net Debt to Capital: This reconciliation is provided as additional relevant information about the Company's financial position. Capital, used for the ratio of total debt to capital, is defined as total de
Slide 37: GAAP Reconciliation: 2004-2014
GAAP Reconciliation: 2004-2014 Reconciliation of Sales, EBIT to Net Income, EBIT After Adjustments to Net Income , EBIT as a Percentage of Sales and EBIT After Adjustments as a Percentage of Sales; all excluding the Steel Business: The following reconciliation is provided as additional relevant info
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