Timken Company (the) · NYSE:TKR

Timken Company (the) — Investor Day (May 2017)

133 slides from Timken Company (the)'s investor day presentation, May 19, 2017

1. Slide 1: 2017 Investor Day: Delivering Next-Level Performance

   2017 Investor Day MAY 19, 2017 Delivering Next-Level Performance

2. Slide 2: 2017 Investor Day - Shelly Chadwick

   2017 Investor Day Shelly Chadwick Vice President, Finance and Chief Accounting Officer 2

3. Slide 3: Today's Agenda

   Today’s Agenda 3 Noon Welcome Shelly Chadwick Company Overview and Direction Rich Kyle Our Outgrowth Strategy Chris Coughlin Strengthening Our Bearings Core Amanda Montgomery Keeping the World in Motion Andreas Roellgen 1:20 Q&A 1:40 Break 2:00 Reconvene Jason Hershiser Our M&A Strategy Rich Kyle Be

4. Slide 4: Forward-Looking Statements

   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 the

5. Slide 5: Next-Level Performance

   Next-Level Performance 5 Rich Kyle President and Chief Executive Officer

6. Slide 6: Timken Investor Day Themes

   Timken Investor Day Themes Attractive Growth Opportunities Timken Is a Strong Global Competitor Timken Positioned to Deliver Next-Level Performance  Vital technologies for world’s equipment and vehicles  Differentiated products, barriers to entry and brand preference  Demand driven by strong macr

7. Slide 7: Timken Products and Services Are and Will Remain Vital

   Timken Products and Services Are and Will Remain Vital  In a world of changing technology, bearings will remain a vital component to the world’s equipment and vehicles  OEMs across the globe rely on Timken to assist them in designing and building today’s and tomorrow’s equipment and vehicles  Tim

8. Slide 8: We Make & Service Bearings and Mechanical Power Transmission Products

   We Make & Service Bearings and Mechanical Power Transmission Products Used in the World’s Equipment & Vehicles  Timken engineered bearings feature a broad range of sizes, rolling elements and proprietary designs that are vital to a wide array of customer applications  Timken mechanical power trans

9. Slide 9: Using Our Technology and Expertise, We Make Industries Work Better

   Using Our Technology and Expertise, We Make the World’s Industries Work Better FRICTION MANAGEMENT We reduce resistance to motion to increase efficiency MECHANICAL POWER TRANSMISSION We make transferring force, torque and speed possible METALLURGY We understand the physical and chemical behaviors of

10. Slide 10: Our Sales Are Diversified Across End Market Sectors

    Our Sales Are Diversified Across End Market Sectors 10 Percentage of Sales for 2016 20% 16% 9% 9% 8% 8% 8% 5% 5% 4% 4% 4% G E N E R A L I N D U S T R I A L P A P E R / A G G R E G A T E C O N S T R U C T I O N C I V I L A E R O S P A C E M I N I N G M E T A L S A G R I C U L T U R E D E F E N S E H

11. Slide 11: Mobile Industries Features a Balanced & Attractive Market Mix

    Mobile Industries Features a Balanced & Attractive Market Mix 11 29% 25% 18% 14% 14% Automotive Off-Highway Rail Aerospace Heavy Truck MARKET SECTOR MIX (SALES) SALES $1.45 billion EBIT MARGIN* 6.0% ADJUSTED EBIT MARGIN* 9.6% PRODUCT PORTFOLIO Engineered bearings, mechanical power transmission produ

12. Slide 12: Process Industries Offers Industry-Leading Portfolio

    Process Industries Offers Industry-Leading Portfolio to OEMs and Aftermarket 12 76% 24% Distribution/End User OEM CHANNEL MIX (SALES) PRODUCT PORTFOLIO Engineered bearings, mechanical power transmission products and related services SALES $1.22 billion EBIT MARGIN* 12.2% ADJUSTED EBIT MARGIN* 14.6%

13. Slide 13: Increasingly Broad Portfolio of Quality Brands

    We Feature an Increasingly Broad Portfolio of Quality Brands 13

14. Slide 14: We Go to Market Through OEMs, Distributors and End Users

    We Go to Market Through OEMs, Distributors and End Users 14 ~50% SALES OEM CUSTOMERS ~50% SALES DISTRIBUTION/END USER

15. Slide 15: We Have Built Global Capabilities

    2016 SALES BY GEOGRAPHY We Have Built Global Capabilities 28 countries 73 plants and service centers 58 sales offices 14K associates 25 logistics centers 15 60% North America 17% Europe, Middle East, Africa 16% Asia Pacific 7% Latin America Percentage of Sales for 2016

16. Slide 16: Driven by a Team of Strong, Respected Executive Leaders

    Driven by a Team of Strong, Respected Executive Leaders 16 Rich Kyle President and Chief Executive Officer 11 years with Timken William Burkhart Executive Vice President, General Counsel and Secretary 23 years with Timken Michael Connors Vice President, Marketing 34 years with Timken Ajay Das Vice P

17. Slide 17: Our Proven Strategy Drives Next-Level Performance

    OPERATE WITH EXCELLENCE  Drive enterprise-wide Lean and continuous improvement efforts  Build a more cost-effective global manufacturing footprint  Deliver efficiencies across our supply chains  Optimize processes and SG&A efficiency DEPLOY CAPITAL TO DRIVE SHAREHOLDER VALUE  Invest in organic

18. Slide 18: Our Actions Are Driven by the Timken Business Model

    Our Actions Are Driven by the Timken Business Model 18 Challenging Applications Aftermarket & Rebuild Fragmentation High Service Requirements Markets Supported by Strong Macros Technology & Innovation Business Capabilities Operational Excellence Talent T I M K E N C O M P E T I T I V E D I F F E R E

19. Slide 19: Strategic Actions Delivered Results and Strengthened Company

    19 Strategic Actions Delivered Results and Strengthened Company  Spun off Steel business and restructured Aerospace division  Invested heavily in product development and outgrowth initiatives  Drove operational excellence initiatives and invested in footprint  Structurally reduced fixed cost  I

20. Slide 20: Created Value for Our Shareholders

    … and Created Value for Our Shareholders As of 5/12/17. All periods include reinvestment of dividends. Peers represent composite of 18-company group consisting primarily of S&P 400 Mid-Cap Industrials. The 10-Year period takes into account the value of the TimkenSteel Corporation common shares distr

21. Slide 21: Timken Is Positioned to Deliver Next-Level Performance

    We will:  Win with customers – innovate, differentiate, deliver value  Outgrow improving end markets through the differentiators of the Timken Business Model  Invest in the business to drive competitive advantage  Generate strong cash flow and create value through capital allocation – core busin

22. Slide 22: What You Will Hear Today

    What You Will Hear Today 22  Focused, talented and committed management team  Strong market, brand and technical position  Sound strategy to: - Grow and improve market position - Deliver next-level financial results  Timken is a compelling investment

23. Slide 23: Leveraging Investments, Achieving Outgrowth

    Leveraging Investments, Achieving Outgrowth 23 Chris Coughlin Executive Vice President and Group President

24. Slide 24: Key Messages

    Key Messages Well-Positioned to Drive Long-Term Growth Strategic Initiatives Support Growth Confident in Our Ability to Outgrow Markets  Attractive end markets supported by strong macros  Robust business model drives long-term organic growth  Operational excellence in engineering, manufacturing a

25. Slide 25: Our Differentiated Business Model Is Creating Value

    Our Differentiated Business Model Is Creating Value 25 Challenging Applications Aftermarket & Rebuild Fragmentation High Service Requirements Markets Supported by Strong Macros Technology & Innovation Business Capabilities Operational Excellence Talent T I M K E N C O M P E T I T I V E D I F F E R E

26. Slide 26: Growth-Creating Megatrends Will Fuel Opportunity

    Growth-Creating Megatrends Will Fuel Opportunity 26 URBANIZATION INFRASTRUCTURE DEVELOPMENT SUSTAINABILITY & EFFICIENCY ENERGY POPULATION GROWTH

27. Slide 27: Megatrends Align With Our End Market Sectors

    …and Align Well with Our End Market Sectors 27 URBANIZATION INFRASTRUCTURE DEVELOPMENT ENERGY Mining Pulp and Paper Cement Metals Power Gen Coal Oil and Gas SUSTAINABILITY & EFFICIENCY POPULATION GROWTH Rail Food and Beverage Construction Wind Energy

28. Slide 28: Timken Imperatives Link Market Opportunities and Differentiators

    Timken Imperatives Link Market Opportunities and Differentiators 28 28 1. Robust Product Innovation/Expansion 2. Best-in-Class Customer Experience Using Technical Sales Model 3. Strengthen Position in Aftermarket Sales and Services 4. Geographic Expansion 5. Operational Excellence Challenging Applic

29. Slide 29: Robust Product and Process Development

    1. Robust Product and Process Development Utilizes Disciplined Approach from Concept to Commercialization 29 Specify and validate product, manufacturing and supply chain requirements Evaluate macro trends and customer needs to identify opportunities and meet requirements Move product into the market

30. Slide 30: Two-Pronged Strategy for Product Development

    Two-Pronged Strategy for Product Development 30  DEFEND position and investment  GROW offering of premium products and services PRICE P E R F O R M A N C E Grow Defend Defend

31. Slide 31: Application-Specific Product Practices

    Application-Specific Product Practices Manufacturing Technology Bearing Design & Engineering Footprint & Sourcing Material Selection Defending Our Position 31 OUR APPROACH: Work holistically to optimize product and application design… in order to maximize product performance for a specific applicati

32. Slide 32: Two-Pronged Strategy for Product Development

    Two-Pronged Strategy for Product Development 32  DEFEND position and investment  GROW offering of premium products and services PRICE P E R F O R M A N C E Defend Defend Grow

33. Slide 33: Momentum in Prototypes Expected to Generate New Revenue

    Annualized Value of Prototype Orders Shipped Actual/Expected Net Revenue Impact PROTOTYPE SHIPMENTS AND ACTUAL/EXPECTED SALES Momentum in Prototypes Expected to Generate New Revenue 33 2014 2015 2016 2017 2018 2019 2020

34. Slide 34: Highly Technical Sales Force and Integrated Technology Platforms

     Industry-leading technical sales force with deep application and product knowledge  Global infrastructure operates common business processes with fully integrated global ERP system  Increased speed, visibility and accuracy of data for better decision-making  Continue to integrate acquisitions o

35. Slide 35: Customer-Facing Digitization

    DATA ANALYSIS Convert analysis into insights to engender customer loyalty and drive growth WEB & SOCIAL Reach individual customers, end-users and distributors and aid in product selection/problem-solving OUR VISION: Deliver our long-standing and proven customer value proposition both physically and

36. Slide 36: Investments in Sales Tools Increase Responsiveness

    Investments in Sales Tools Increase Our Market Responsiveness, Efficiency and Productivity 36 36  Customer Relationship Management (CRM): centralized sales data repository enhances connectivity  New Sales Support Infrastructure to increase productivity of global sales team, with priority on face-t

37. Slide 37: Newest Investment Streamlines Product Data and Engineering

    Our Newest Investment Streamlines Our Product Data and Engineering Processes 37 37  Consolidate Engineering Product Data into one global data management system connected to SAP  Connect and Automate 50+ Internal Systems to significantly increase engineering efficiency  Dramatically Improve Speed

38. Slide 38: Extremely Well-Positioned in Aftermarket

    3. Extremely Well-Positioned in Aftermarket  “Razor / Razor Blade” Model - Lifetime of revenue / high profit opportunity  OEM sales fuel installed base, driving aftermarket  Strong global distribution channels critical - Inventory stocking - Customer access  OEM service channels important in som

39. Slide 39: Expanding Product and Service Portfolio to Drive Aftermarket

    Timken Has Been Aggressively Expanding Its Product and Service Portfolio to Drive Aftermarket Penetration 39 COUPLING BEARINGS BEARINGS ELECTRIC MOTOR SERVICES SPLIT HOUSED UNIT BEARING CLUTCH GEARBOX COUPLING BRAKE DRIVEN EQUIPMENT PUMPS/COMPRESSORS FANS CONVEYORS GENERATORS MILLS BEARINGS HOUSED U

40. Slide 40: Shift in Product Portfolio Gains Share of Wallet

    The Shift in Our Product Portfolio Reflects Progress in Gaining Greater Share of Wallet 40 BEARINGS POWER TRANSMISSION PRODUCTS/SERVICES 24% 76% 2016 REVENUE

41. Slide 41: Built Formidable Global Presence to Pursue Growth

    42% 29% 29% 67% 17% 16% 15% 15% 70% 41 4. We Have Built Formidable Global Presence to Pursue Growth 2016 SALES 2012-2017 GROWTH CAPITAL INVESTED 2017 MANUFACTURING FOOTPRINT Americas EMEA Asia-Pacific

42. Slide 42: Operational Excellence Is Critical to Our Success

    5. Operational Excellence Is Critical to Our Success 42 OUR APPROACH: Work holistically to optimize product and application design… in order to maximize product performance for a specific application… and reliably meet customer value proposition… at a competitive price Application-Specific Product P

43. Slide 43: Summary

    Summary 43 NEXT-LEVEL PERFORMANCE Strategic Initiatives Support Growth Confident in Our Ability to Outgrow Markets Well-Positioned to Drive Long-term Growth

44. Slide 44: Strengthening Our Bearings Core

    Strengthening Our Bearings Core 44 Amanda Montgomery Vice President and Product Line Executive

45. Slide 45: Key Messages

    Key Messages 45 Timken’s Disciplined Product Development Process Drives Success Delivered Through Product Vitality and Lifecycle Management Multi-Dimensional Approach Fuels Robust Pipeline of Solutions  Key to outgrowth strategy  Primary focus of global engineering resources  Defends base busines

46. Slide 46: Timken's Technical Design Differentiation

    Timken’s Technical Design Differentiation 46 While macro trends change and customer needs evolve, the need for mechanical components and the value of technical differentiation continue to be critical to success  Resources and capabilities drive technical differentiation between manufacturers  High

47. Slide 47: Product Vitality Key to Outgrowth Strategy

    INTRODUCTION RE VE NU E GROWTH MATURITY DECLINE Product Vitality Key to Outgrowth Strategy Driving Organic Growth Performance  Deliver through changes to range, performance and competitiveness  Offer innovative and competitive customer solutions to defend and win new business  Adapt to changing c

48. Slide 48: Innovative Product and Process Development

    Innovative Product and Process Development Rigorous Business Process Accelerates Product Development  Opportunity evaluation begins with understanding customer needs  Product definition and process specifications balance differentiation and manufacturability  Performance validation ensures succes

49. Slide 49: Delivering Next-Level Performance

    Delivering Next-Level Performance  Expand and enhance offering under product line structure  Delivering diversification and globalization  Applied across all product categories and types  Bundled into global growth platforms 49 Over 10,000 New Products Record Number of Prototype Bearing Shipment

50. Slide 50: Two-Pronged Strategy Fuels Success

    Two-Pronged Strategy Fuels Success 50  Application-driven  Market-driven Significant product diversification achieved through multi-dimensional approach NEW PRODUCTS EXISTING PRODUCTS  Portfolio expansion  Industry innovation

51. Slide 51: Continue to Defend Core Markets

    Continue to Defend Core Markets  Purposefully design to align with customer need for performance and value  Innovate where valued within customer’s total system performance  Globalize offering and expand reach  Create installed base for future aftermarket replacement INTRODUCTION RE VE NU E GROW

52. Slide 52: Success Story: Timken SheavePac Bearing

    SUCCESS STORY: APPLICATION-DRIVEN SOLUTION Timken SheavePac™ Bearing  First to offer industry a totally maintenance-free design  Replaces standard bearings – upgraded performance interchangeable with legacy bearings and seal assemblies  Significantly reduces assembly time and risk for OEMs and re

53. Slide 53: Success Story: Power Dense Fuel-Efficient Tapered Roller Bearings

     Increasing regulations on fuel efficiency are a major driver in the automotive market  Response to competitors’ ball bearing offering  Timken launched effort to maximize value of tapered bearings by creating the most efficient, longest- lasting solution in the smallest envelope  We successfully

54. Slide 54: Expanding the Portfolio Through New Products

    Expanding the Portfolio Through New Products Organic Bearing Expansion  Rapid development of product breadth  Accelerate application and product development  Increase penetration with OEMs  Access to additional markets and customers  Catalog offerings and customized solutions 54 INTRODUCTION RE

55. Slide 55: Success Story: ADAPT Bearing

    SUCCESS STORY: INDUSTRY INNOVATION ADAPT Bearing  New-to-industry bearing addressing installation and performance shortcomings from existing solutions  Originally designed for the metals industry  Recipient of PEC Engineers’ Choice Award for mechanical equipment and parts category  Scaling innov

56. Slide 56: Success Story: Housed Unit Expansion and Growth

    HOUSED UNIT EXPANSION AND GROWTH SUCCESS STORY: Creating a Market-Leading Position in Housed Units Outgrowth Through Range Extension and Integration of Inorganic Plays  Repositioned base product line  Delivered organic product introduction  Expanded through acquisition  Timken now offers one of

57. Slide 57: Product Vitality Contributes to Next-Level Performance

    Product Vitality Contributes to Next-Level Performance 57 Timken’s Disciplined Product Development Process Drives Success Delivered Through Product Vitality and Lifecycle Management Multi-dimensional Approach Fuels Robust Pipeline of Solutions NEXT-LEVEL PERFORMANCE

58. Slide 58: Keeping the World in Motion

    Keeping the World in Motion 58 Andreas Roellgen Vice President, Europe, Asia & Africa

59. Slide 59: Key Messages

    Key Messages 59 Strong Macro Trends in Asia Strong Investments & Leverage Focus on Execution, Innovation & Customer Intimacy to Outgrow Markets  Population growth  Trending to higher quality and performance  India’s economic transformation  Investing in manufacturing, engineering, sales, managem

60. Slide 60: Massive Asia Growth Drivers

    Massive Asia Growth Drivers 60 57% of world crude steel production 47% of world construction activity 38% of world electricity generation 61% of world high-speed rail track 53% of world shipbuilding 2015 2025 Implications  Almost two-thirds of world population will live in Asia  2.5B Asians will l

61. Slide 61: Asia Trends Align with Timken Value Proposition

    Asia Trends Directly Align with Timken Value Proposition ALIGNS WELL WITH TIMKEN BUSINESS MODEL AND OUR VALUE PROPOSITION ASIA DEVELOPMENT  Urbanization  Demographics  Infrastructure  Safety  Export  Sustainability  Local Sourcing  Differentiated Solutions  Global Business Standards 61 Popu

62. Slide 62: Timken in Asia Today

    Timken in Asia Today 28 countries 8 manufacturing plants 26 sales offices 3 innovation centers 8 distribution centers 62 4,500 associates MYSORE BANGALORE RAIPUR KOLKATA AHMEDABAD GURGAON NEW DELHI JAMSHEDPUR CHENNAI KUALA LUMPUR BANGKOK JAKARTA SINGAPORE HANOI TAIPEI SHANGHAI NAGOYA YOKOHAMA SEOUL

63. Slide 63: How We Capture Growth

    How We Capture Growth LEVERAGING GLOBAL TIMKEN ASSETS  Values, Consistency in Quality  Know-How, Technology  Key Accounts  Product Platforms  Operational Excellence INVESTING IN LOCAL COMPETENCIES  Local Management Team  Sales & Engineering Resources  Application-Specific Solutions  Flexibl

64. Slide 64: Outgrowth in Wind

    Outgrowth in Wind DRIVERS  Energy Mix Change  Larger Turbines  Aging Installed Base  End-User Service  Turbine Upgrades HOW WE CAPTURE GROWTH 64  Heavy application of our know-how, advancing technology with customers  Establish local relationships  Leverage global accounts  Heavy investment

65. Slide 65: Outgrowth in Heavy Truck

    Outgrowth in Heavy Truck DRIVERS  Government Policies - Higher loads - Road safety - Fuel efficiency  Customer Application Differentiation - Local - Global multi-purpose - Global highway-haul HOW WE CAPTURE GROWTH 65  Applying know-how and technology, providing application-specific, differentiate

66. Slide 66: Outgrowth in India

    Outgrowth in India  Government Initiatives Boosting Manufacturing - Infrastructure build - Make in India - De-monetization  Strong Local Management  Building Reputation with Awards for Excellence in Business & Manufacturing  Going after new markets with expanded product range: paper, ports, cran

67. Slide 67: Asia Contributes to Next-Level Performance

    2017: ~10% GROWTH Asia Contributes to Next-Level Performance 67 Strong Macro Trends in Asia Strong Investments & Leverage Focus on Execution, Innovation & Customer Intimacy to Outgrow Markets

68. Slide 68: Enhancing Value Through M&A

    Enhancing Value Through M&A 68 Rich Kyle President and Chief Executive Officer

69. Slide 69: What We Achieve Through M&A

    69 What We Achieve Through M&A Stronger. Together. DELIVER FINANCIAL VALUE Discipline & Returns Maintain financial discipline & deliver returns  ROIC – earn the cost of capital by Year 3  EPS – accretive in Year 1  Improve mix – margins & growth STRENGTHEN THE COMPANY’S STRATEGIC POSITION Custome

70. Slide 70: How We Create Value Through M&A

    How We Create Value Through M&A 70 Five Pillars of Integration Acquire Good, Adjacent Businesses  Fit Timken Business Model filters Deploy Timken Business Model Differentiators  Talent  Technology & Product Vitality  Operational Excellence  Business Capabilities Allocate Capital Across Portfoli

71. Slide 71: Acquire Good, Adjacent Businesses

    1. Acquire Good, Adjacent Businesses  Identify and cultivate opportunities  Focused on industrial bearings and adjacent products  Adjacent product characteristics - Engineered mechanical components - Used in applications and systems where bearings are used - Timken Business Model filters - Abilit

72. Slide 72: Track Record of Strategic Acquisitions Delivers Value

    PURSUE STRATEGIC BOLT-ON ACQUISITIONS PORTFOLIO TRANSFORMATION - BUILDING FOR GROWTH Track ecord of Strategic Acquisitions Delivers Value 72 2012 2011 2013 2014 2015 2010 2016 2017 Lubrication systems Chains, augers Industrial gear drive and repair services Split roller housed unit bearings Spherica

73. Slide 73: Growing Beyond Bearings: Mechanical Power Transmission Products

    Growing Beyond Bearings: Mechanical Power Transmission Products 73 Hans Landin Vice President, Mechanical Power Transmission

74. Slide 74: Key Messages

    Key Messages Mechanical Power Transmission Products and Services – A Great Fit Provide Value for Customers, Opportunity for Company A Key Element of Our Outgrowth Strategy  Leverages our market space and knowledge, which are significantly broader than bearings  Common customers, channel partners a

75. Slide 75: MPT Products Have Natural Adjacency to Bearings

    Timken Mechanical Power Transmission Products & Services Have Natural Adjacency to Bearings  Our target products are the critical mechanical components located between a drive element/motor and the driven equipment  Close proximity to bearing positions  Require same engineering expertise – fricti

76. Slide 76: MPT Opens Up Significant Additional Market Space

    Our Focus on Mechanical Power Transmission Opens Up Significant Additional Market Space 76 $10B TRB* $3B Mechanical Power Transmission Products and Services Space $70B Bearings *TRB = Tapered roller bearings

77. Slide 77: We Have Diversified by Moving into New Market Sectors

    6% 17% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% We Have Diversified by Moving into New Market Sectors 2010 MPT SALES AS PERCENTAGE OF TOTAL TIMKEN SALES 77 2016 LIGHT GENERAL INDUSTRY AGRICULTURE HVAC TURF AND GARDEN POWER SPORTS FOOD AND BEVERAGE

78. Slide 78: We Focus on Five Pillars

    To Achieve Growth and Margin Improvement, We Focus on Five Pillars 78 Five Pillars of Integration Acquire Good, Adjacent Businesses Deploy Timken Business Model Differentiators Allocate Capital Across Portfolio Leverage Timken Scale Increase Sales Reach

79. Slide 79: Acquire Good, Adjacent Businesses

    2010 2011 2012 2013 2014 2015 2016 2017 COUPLINGS GEAR BOXES CHAIN LUBRICATION SYSTEMS BELTS CLUTCHES & BRAKES 1. Acquire Good, Adjacent Businesses 79  Strong management teams and established brands, coupled with strong distribution channels and financials, are key criteria  Entered market with ni

80. Slide 80: Deploy Timken Business Model Differentiators

    2. Deploy Timken Business Model Differentiators  Timken best practices applied to new acquisition: - Product development rigor - Operational excellence - Cost control discipline - Talent management  Further accelerates Interlube™ profitability and brings added innovation to benefit customers 80 La

81. Slide 81: Allocate Capital Across Portfolio

    3. Allocate Capital Across Portfolio  Immediate availability of increased resources: - Talent - Expertise and experience - Capital - Engineering  Quick deployment of additional resources supports growing customer demand and accelerating product development 81 Quickly increase engineering capacity

82. Slide 82: Leverage Timken Scale

    4. Leverage Timken Scale  Applying established infrastructure initiatives: - Technology - Logistics and warehousing optimization - IT – moving to common platforms, lowering ongoing costs and increasing effectiveness - Ease of doing business for customers - Corporate cost structure  Streamlined pro

83. Slide 83: Increase Sales Reach

    5. Increase Sales Reach 83  Scale and increase sales coverage: - More relevance in the market/channels - Leverage existing distribution channel and expand geographically - Increased share of wallet through cross-selling - Support distributors’ efforts to consolidate their supply chains  Successful

84. Slide 84: Establish Strong Connectivity to the Timken Brand

    Establish Strong Connectivity to the Timken Brand 84

85. Slide 85: Growing Both Organically and Inorganically

    Growing Both Organically and Inorganically to Create Strategic Value for Customers and Shareholders  Move into Mechanical Power Transmission products and services has been well-received by customers and distributors  MPT is a major focus of our M&A activity  Offers significant opportunity to grow

86. Slide 86: MPT Contributes to Next-Level Performance

    MPT Contributes to Next-Level Performance 86 NEXT-LEVEL PERFORMANCE Mechanical Power Transmission Products and Services – A Great Fit Provide Value for Customers, Opportunity for Company A Key Element of Our Outgrowth Strategy

87. Slide 87: Operating with Excellence

    Operating with Excellence 87 Rick Boyer Vice President, Operations

88. Slide 88: Key Messages

    Key Messages 88 Constructing ‘Footprint for the Future’ Driving Manufacturing Excellence  Expanded capacity in high-growth, low-cost geographies  Regional manufacturing hubs in Americas, Asia and Europe  Continually implementing state-of-the-art processes and technologies  Rigorous Lean implemen

89. Slide 89: Delivering World-Class Quality

    Delivering World-Class Quality 89  Products are in critical and challenging applications  Creates high barriers to entry/differentiation  Quality is a core value  Value rewarded by customers Risk Reduction Lessons Learned STD Work STD Training Fast Response Problem- Solving Layered Process Audit

90. Slide 90: Constructing 'Footprint for the Future'

    64% 26% 10% Constructing ‘Footprint for the Future’ 90  Expand capacity in high- growth, low-cost geographies  Regional manufacturing hubs in Americas, Asia and Europe  Continually implementing state-of-the-art processes and technologies 2007 Americas EMEA Asia-Pacific TRANSFORMING OUR BEARING FO

91. Slide 91: Driving Manufacturing Excellence

     Rigorous Lean implementation  Enterprise-wide improvement initiatives  Proprietary technologies and automation Driving Manufacturing Excellence 91 THE TIMKEN MANUFACTURING OPERATING SYSTEM Future State Vision – Hoshin Plan Leader Values, Principles, Thinking Structures, Behaviors & Routines Mana

92. Slide 92: Supporting Product Vitality

    Supporting Product Vitality 92  Design for manufacturability  Leverage global footprint  Service and speed to market Application-Specific Product Practices Manufacturing Technology Bearing Design & Engineering Footprint & Sourcing Material Selection

93. Slide 93: Driving Cost Efficiencies – SG&A

    Driving Cost Efficiencies – SG&A 93 * SG&A as a percentage of sales excludes the impact of the change to mark-to-market accounting for pensions.  Driving Lean principles across the organization  Leveraging best-cost locations  Streamlining the organization 18.0% 16.9% 2013 2016 SG&A AS % OF SALES

94. Slide 94: How Operational Excellence Contributes to Next-Level Performance

    How Operational Excellence Contributes to Next-Level Performance 94 NEXT-LEVEL PERFORMANCE Constructing ‘Footprint for the Future’ Driving Manufacturing Excellence Streamlining Business Processes Supporting Product Vitality

95. Slide 95: Next-Level Financial Performance

    Next-Level Financial Performance Phil Fracassa Executive Vice President and Chief Financial Officer 95

96. Slide 96: Key Messages

    Key Messages 96 2017 YTD – Off to Good Start Recent Performance Sets New Standard Well-Positioned to Deliver Next-Level Performance  Strong first-quarter results  Market momentum is holding  Maintaining 2017 guidance  Reacted quickly to 2015-2016 industrial down-cycle  Protected margins and gen

97. Slide 97: 1Q17 Off to Strong Start with Return to Top-Line Growth

    1Q17 Off to Strong Start with Return to Top-Line Growth  Sales up ~3% – Benefiting from improving industrial markets and recent acquisitions  Adjusted EBIT margin at 9.9%, up 30 bps from 1Q16  Adjusted EPS of $0.55 per share, up 10% from 1Q16 $684 $704 1Q16 1Q17 $103 $66 $61 $70 $0.82 $0.50 $0.48

98. Slide 98: Mobile and Process Industries 1Q17

    MOBILE INDUSTRIES 1Q17: Improving End Markets Drive Increased Demand  Sales roughly flat - Improved off-highway demand (mining and agriculture) - Rail still weak; lower aerospace shipments  Adjusted EBIT margin at 9.6%, down 20 bps from 1Q16; driven by price/mix 9.8% 9.6% 1Q16 1Q17 NET SALES ($M)

99. Slide 99: 2017 Full-Year Outlook – Guidance Maintained

    2017 Full-Year Outlook – Guidance Maintained  Net sales up 5-6%; components (at the mid-point): CURRENT OUTLOOK VS. 2016  Adjusted EPS up 13% at the mid-point  Free Cash Flow >1x adjusted net income +4% Organic +2% Acquisitions -0.5% Currency 99 See appendix for reconciliations of adjusted EPS an

100. Slide 100: Margin and Earnings Remain Strong Despite Weak Markets

     ADJ. EBIT MARGIN* Margin and Earnings Remain Strong Despite Weak Markets  Revenue in 2015 and 2016 impacted by weak industrial markets and stronger US dollar  Margins and EPS showed resiliency over that period - Responded quickly to down-cycle; cut costs to protect margins  Well-positioned for ea

101. Slide 101: Strong Free Cash Flow Expected to Continue

     $159 $155 $269 $265 $210 2013 2014 2015 2016 2017E FREE CASH FLOW ($M)*, FCF CONVERSION* Strong Free Cash Flow Expected to Continue  Biggest “step-change” in performance has been cash flow – Provides fuel for growth and other capital allocation initiatives  Expect strong cash flow going forward –

102. Slide 102: Disciplined Capital Allocation Strategy

     Disciplined Capital Allocation Strategy Enhances Shareholder Value 102 INVEST IN CORE BUSINESS Organic Growth and Margin Improvement CapEx Target: ~4% of Sales Pay Attractive Dividend Target: 25-40% Payout Ratio Over Cycle DIVIDEND Return Capital to Shareholders Through Stock Buybacks SHARE REPURCHA

103. Slide 103: Investing in Core Business Remains Top Priority

     Investing in Core Business Remains Top Priority for Growth  Investing in core business remains #1 priority for capital allocation – Highest IRRs  Includes investments in CapEx, R&D, technology, etc.  CapEx – targeted at 4% of sales – Includes normal maintenance (~1% of sales) – Bulk of spend (~3%

104. Slide 104: Rich History of Attractive and Growing Dividend

     Rich History of Attractive and Growing Dividend  Goal: Pay an attractive dividend that grows over time with earnings – Target 25-40% payout (adj. EPS)  Earlier this month, declared 380th consecutive quarterly dividend – One of the longest active dividend streaks on NYSE  Increased quarterly divid

105. Slide 105: Proven Track Record of Driving Inorganic Growth

     2012 2011 2013 2014 2015 2010 2016 2017 Lubrication systems Chains, augers Industrial gear drive and repair services Split roller housed unit bearings Spherical roller- bearing steel housed unit and steel couplings Electric motor repair and services Electric motor repair, related services and up-tow

106. Slide 106: Share Repurchases Play an Important Role

     Share Repurchases Play an Important Role  Share repurchase an important component of capital allocation strategy  Since June 30, 2014: – Repurchased 14.5M shares for $538M (avg. ~$37/share); ~16% of outstanding shares as of 6/30/14 – Includes 185K shares repurchased in 1Q17  Current share repurch

107. Slide 107: Capital Deployment Is Focused on Highest Returns

     Capital Deployment Is Focused on Highest Returns  Balanced approach to capital deployment having an impact  Allocated over $2B of capital over past 4 years across all major elements: • ~$500M in CapEx • ~$350M in dividends • ~$370M in acquisitions • ~$870M in share buybacks  Fully funded pensions

108. Slide 108: Strategy Is Driving Strong Total Shareholder Returns

     Our Strategy Is Driving Strong Total Shareholder Returns (TSR) As of 5/12/17. All periods include reinvestment of dividends. Peers represent composite of 18-company group consisting primarily of S&P 400 Mid- Cap Industrials. The 10-Year period takes into account the value of the TimkenSteel Corporat

109. Slide 109: Next-Level Financial Framework

     Next-Level Financial Framework 109 Drive Above-Market Top-Line Growth; Improved Mix Robust Earnings and Cash Generation Value-Driven Capital Deployment  Grow top line organically – target 1% above market growth rates  Add >2% top-line growth annually through M&A  Expand operating margins with gro

110. Slide 110: Next-Level Performance Targets (Over the Cycle)

     110 Next-Level Performance Targets (Over the Cycle) REVENUE GROWTH  Organic: Market growth plus 100 bps “outgrowth”  Inorganic: 200+ bps growth from acquisitions  11-13% adj. EBIT margin (consolidated)  Top end: ~300 bps above 2016 actuals OPERATING MARGINS  FCF conversion >100%  ROIC average

111. Slide 111: Financial Strength Contributes to Next-Level Performance

     111 NEXT-LEVEL PERFORMANCE Well-Positioned to Deliver Higher Levels of Performance Over the Cycle Disciplined and Balanced Capital Allocation Framework Focus on Generating Top-Tier Shareholder Returns Financial Strength Contributes to Next-Level Performance

112. Slide 112: Timken Is Positioned to Deliver Next-Level Performance

     We will:  Win with customers – innovate, differentiate, deliver value  Outgrow improving end markets through the differentiators of the Timken Business Model  Invest in the business to drive competitive advantage  Generate strong cash flow and create value through capital allocation – core busin

113. Slide 113: Appendix: Additional Slides

     Appendix: Additional Slides 113

114. Slide 114: 2017 Incentive Compensation Plan

     2017 INCENTIVE COMPENSATION PLAN Compensation Aligned to Shareholder Value Creation ANNUAL LONG-TERM OBJECTIVE Short-Term Operational Business Priorities 3-Year Strategic Business Priorities Long-Term Shareholder Value Creation PARTICIPANTS ~4,000 Associates Globally under the Corporate Plan ~300 Le

115. Slide 115: Strong Corporate Governance

     Strong Corporate Governance  Strongly independent Board (9 of 11 directors are independent)  Independent Chairman of the Board (non-executive) and Independent Lead Director  Declassified Board – all Directors elected annually  Annual Board, Committee and Director evaluations  Board refreshment

116. Slide 116: Appendix: Executive Bios

     Appendix: Executive Bios 116

117. Slide 117: Richard G. Kyle bio

     Richard G. Kyle is president, chief executive officer and a board member of The Timken Company. Prior to being elected president and CEO in 2014, Kyle served as chief operating officer of the Bearings and Power Transmission Group. In 2012, he was named group president responsible for the company’s A

118. Slide 118: Christopher A. Coughlin bio

     Christopher A. Coughlin serves as executive vice president and group president and is also an officer of The Timken Company. Named to his current position in 2014, he is responsible for the operational and commercial activities related to the company’s portfolio of engineered bearings, mechanical po

119. Slide 119: Philip D. Fracassa bio

     Philip D. Fracassa serves as executive vice president and chief financial officer of The Timken Company. Named to his position in 2014, Phil leads the Timken global finance organization, including external reporting, treasury, tax, financial planning and analysis, internal audit, risk management and

120. Slide 120: Richard M. Boyer bio

     Richard M. Boyer is vice president of operations for The Timken Company. Named to this position in 2014, Boyer is responsible for the operation of all global manufacturing facilities within the Mobile and Process Industries business units. Additionally, he has oversight for the global warehousing an

121. Slide 121: Shelly M. Chadwick bio

     Shelly M. Chadwick is vice president of finance and chief accounting officer for The Timken Company. Chadwick leads the company’s global accounting, financial reporting and treasury organizations, as well as the investor relations function. Named to the position in 2016, Chadwick has responsibility

122. Slide 122: Hans Landin bio

     Hans Landin is vice president for Mechanical Power Transmission at The Timken Company. Named to this position in 2014, Landin is responsible for driving and leading the company’s efforts in the Mechanical Power Transmission markets with products such as belts, housed units, ball bearings, chain, cou

123. Slide 123: Amanda J. Montgomery bio

     Amanda J. Montgomery is vice president of industrial bearings at The Timken Company. Named to this position in 2014, Montgomery is responsible for driving strategy development to deliver profitable growth in spherical, cylindrical, and large bore tapered roller bearings, as well as Timken’s precisio

124. Slide 124: Andreas Roellgen bio

     Andreas Roellgen is vice president of sales at The Timken Company. Named to this position in 2016, Roellgen leads the company’s efforts in growing profitable sales across all segments and markets in Europe, China, India, Russia, ASEAN, Australia and Africa. He is functionally responsible for sales a

125. Slide 125: Jason Hershiser bio

     Jason Hershiser is manager of investor relations for The Timken Company. Named to this position in 2016, Jason is responsible for communicating the company’s financial results, performance and strategies to the financial community. Since joining Timken in 2011, Jason has held several roles with vari

126. Slide 126: Appendix: GAAP Reconciliations

     Appendix: GAAP Reconciliations 126

127. Slide 127: GAAP Reconciliation: 2016 Segment EBIT & EBIT Margin

     GAAP Reconciliation: 2016 Segment EBIT & EBIT Margin 127

128. Slide 128: GAAP Reconciliation: 1Q 2017 Consolidated EBIT & EBIT Margin

     GAAP Reconciliation: 1Q 2017 Consolidated EBIT & EBIT Margin 128

129. Slide 129: GAAP Reconciliation: 1Q 2017 Net Income & EPS

     GAAP Reconciliation: 1Q 2017 Net Income & EPS 129

130. Slide 130: GAAP Reconciliation: 1Q 2017 Segment EBIT & EBIT Margin

     GAAP Reconciliation: 1Q 2017 Segment EBIT & EBIT Margin 130

131. Slide 131: GAAP Reconciliation: Adjusted EPS and Free Cash Flow Outlook

     GAAP Reconciliation: Adjusted EPS and Free Cash Flow Outlook 131

132. Slide 132: GAAP Reconciliation: 2013-16 Consolidated EBIT, EPS, FCF and ROIC

     GAAP Reconciliation: 2013-16 Consolidated EBIT, EBIT Margin, EPS, Free Cash Flow and ROIC 132

133. Slide 133: GAAP Reconciliation: Net Debt and Net Debt to Capital

     GAAP Reconciliation: Net Debt and Net Debt to Capital 133

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