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Timken’s 2011 financial results confirm its transformation and repositioning

Canton, OH - In 2011, the Timken Company generated $454.3 million in income from continuing operations, net of non-controlling interest, or $4.59 per diluted share, up 65% from $274.8 million, or $2.73 per diluted share, a year ago (all figures...


Canton, OH – In 2011, the Timken Company generated $454.3 million in income from continuing operations, net of non-controlling interest, or $4.59 per diluted share, up 65% from $274.8 million, or $2.73 per diluted share, a year ago (all figures in US dollars). Higher volume, favourable mix, surcharges and pricing drove the improvement, more than offsetting increased raw material and administrative costs.

“Our financial results tell the story of a transformed Timken Company,” said James W. Griffith, Timken president and chief executive officer. “We’ve successfully repositioned the company, focusing our efforts on those industries and applications where we bring significant value and can make a difference in our customers’ performance. As a result of this and our improved operating model, we have increased our earning power, serving Timken customers across a multitude of high-performance applications in industrial markets.”

Among developments announced in 2011, Timken:

– Completed two acquisitions further diversifying its portfolio, including Philadelphia Gear for $200 million in July and Drives LLC for $92 million in October;

– Launched initiatives to further enhance productivity and serve growth in its steel business, including a new $35-million in-line forge press at the company’s Faircrest plant in Canton;

– Continued to expand bearing capacity, with about $50 million invested in 2011 to serve global growth in attractive industrial markets;

– Returned capital to shareholders, increasing quarterly dividends 11% to 20 cents per share, and repurchasing 1 million shares of company stock;

– Entered into an amended and restated $500 million unsecured senior credit facility that matures in May 2016;

– Contributed approximately $400 million to the company’s pension and post-retirement benefit plans; and

– Began collaborating with The University of Akron to establish a new laboratory focused on surface-engineering technologies, and formed a new alliance with Stark State College to construct a large bearing test centre in Canton.

Outlook

Timken expects sales growth of 5% to 8% in 2012, with:

– Mobile Industries sales relatively flat for the year, reflecting improved off-highway and rail demand, offset by reduced light-vehicle business;

– Process Industries sales up 8% to 13%, projecting increased demand from global industrial distribution, continued growth in Asia, the full-year impact from acquisitions and new-product sales;

– Aerospace and Defense sales up 10% to 15%, driven by increased demand in the defense and commercial aerospace sectors; and

– Steel sales up 5% to 10%, driven by demand in the energy and mobile on-highway sectors, as well as pricing.

Timken projects 2012 annual earnings in the range of $4.90 to $5.20 per diluted share, reflecting improved operating performance. The company expects to generate approximately $515 million in cash from operations, which includes discretionary pension and VEBA trust contributions of approximately $150 million, net of tax. Free cash flow is expected to be $90 million after making capital expenditures of about $345 million and paying roughly $80 million in dividends. Excluding the discretionary pension and VEBA trust contributions, the company expects free cash flow of approximately $240 million in 2012.