Bank of America Merrill Lynch Investor Conference March 17, 2015 London
Company Overview and Direction
TIMKEN AT A GLANCE A Leader in Bearings, Power Transmission and Related Services Ticker NYSE: TKR Legacy c. 1899; 115 years of operations 2014 Sales 3.1B Employees 16,000 worldwide Global Footprint Headquarters in North…
TIMKEN TRANSFORMATION The Timken Transformation 2007 - 2014 Timken Improved Financial Performance 2007 5-Year Average 2004 2008 2010 2014 Exited automotive business that did not meet value proposition criteria Sales: 3.7B 3.1B EBIT…
ATTRACTIVE BUSINESS PROFILE End-Market Sectors Product Offering Channel Overview Power Transmission Industrial Machinery 19% Automotive 15% Products Aftermarket OEM Rail 11% Services 9% (New Heavy Truck 8% 9% Equipment Energy 7%…
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…
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 OE Service 7% 11% APAC OE 23% 22% 54% NA 67% 16%…
THE TIMKEN BUSINESS MODEL Growth Markets Driven Challenging by Strong Macros Technology & Applications Know How for Attractive Opportunities Competitive Differentiators Aftermarket Business Disciplined Filter & Rebuild…
THE GROWTH PLAN: WHAT YOU CAN EXPECT Capture Share 1. and Apply Timken Business Model Market Growth Grow International Sales and 2. Win Globally Focus on Emerging Markets Leverage 3. Technology and Accelerate Product…
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…
2. WIN GLOBALLY VAST GLOBAL FOOTPRINT FOR INTERNATIONAL GROWTH 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.…
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: An Industry-Leading Tapered Roller Bearing (TRB)…
BEARING HOUSED UNIT PORTFOLIO TRANSFORMATION BUILDING FOR GROWTH UC Series Ball Bearing Split roller housed Type E Ball bearing units housed units SNT Plummer Spherical roller bearing steel housed unit Feb February July…
4. PURSUE STRATEGIC, BOLT-ON ACQUISITIONS MARKET EXPANSION We Have also Widened the Lens Defining Our Market Space beyond Bearings Adjacent Products & Services Chains, belts, gear drives, couplings, brakes, sprockets, clutches,…
2014 ACTIONS DRIVE STRONG PERFORMANCE & OPPORTUNITY Successful organization in place and TimkenSteel spin completed 2014 earnings growth (adj. EPS) of 23% on modest top line growth Launched multiple growth opportunities & margin…
INVESTMENT SUMMARY WHY OWN TIMKEN Timken is a Compelling Investment Differentiated Business Model delivers strong financial results Fragmented, diverse end-markets and customers Attractive mix Global growth opportunity Strong,…
Financial Review
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…
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…
BALANCE SHEET AND LEVERAGE Balance Sheet (12/31/14) ( Millions) Net Debt / Capital Capital Structure ( Millions) 500 Net Debt Net Debt/ Capital 40% Target: Cash 294 30 40% 400 Debt 530 30% Net Debt 236 300 236 20% Equity…
CAPITAL SPENDING Long-Term Target: 4.0% of Sales Outlook Increased focus on growth 2% New products Organic Growth Capacity expansions Growth CapEx IRRs generally 20% 1 2% Performance Performance improvement Improvement…
M&A STRATEGY Our Objectives: Pursue a pipeline of attractive 2010 2014 targets; emphasis on bolt-ons Focus on bearings, adjacent power Total Total Sales transmission products and industrial of Deals Spent Acquired services 9 400M…
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 Industrial gear…
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…
Appendix
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…
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…
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…
GAAP RECONCILIATION: ADJUSTED ROIC Reconciliation of Adjusted Return on Invested Capital (ROIC): The following reconciliation is provided as additional relevant information about the Company's performance. Management believes that…
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,…
GAAP RECONCILIATION: PRO FORMA EPS Reconciliation of Earnings Per Share and Earnings Per Share After Adjustments to Net Income; excluding the Steel Business: The following reconciliation is provided as additional relevant information…
GAAP RECONCILIATION: SEGMENT ADJUSTED EBIT Reconciliation of EBIT After Adjustments and EBIT as a Percentage of Sales: The following reconciliation is provided as additional relevant information about the Company's performance.…
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