EX-99.1 2 l37889exv99w1.htm EX-99.1 exv99w1
(Unaudited)
CONDENSED CONSOLIDATED STATEMENT OF INCOME
                                 
    AS REPORTED   ADJUSTED (1)
(Dollars in thousands, except share data)   Q1 2009   Q2 2009   Q1 2009   Q2 2009
     
Net sales
   $ 866,616     $ 736,761     $ 866,616     $ 736,761  
Cost of products sold
     710,811       609,950       710,811       609,950  
Manufacturing rationalization / reorganization expenses - cost of products sold
     1,191       1,439                  
     
Gross Profit
   $ 154,614     $ 125,372     $ 155,805     $ 126,811  
Selling, administrative & general expenses (SG&A)
     123,137       127,208       123,137       127,208  
Manufacturing rationalization / reorganization expenses - SG&A
     274       836       —       —  
Impairment and restructuring
     13,755       50,706       —       —  
     
Operating (Loss) Income
   $ 17,448     $ (53,378 )   $ 32,668     $ (397 )
Other income (expense)
     6,751       (892 )     6,751       (892 )
Special items - other income
     1,222       757       —       —  
     
(Loss) Earnings Before Interest and Taxes (EBIT) (2)
   $ 25,421     $ (53,513 )   $ 39,419     $ (1,289 )
Interest expense, net
     (8,063 )     (7,900 )     (8,063 )     (7,900 )
     
(Loss) Income From Continuing Operations Before Income Taxes
     17,358       (61,413 )     31,356       (9,189 )
Provision (benefit) for income taxes
     18,793       (23,009 )     10,504       (3,078 )
     
(Loss) Income From Continuing Operations
   $ (1,435 )   $ (38,404 )   $ 20,852     $ (6,111 )
(Loss) Income from discontinued operations net of income taxes (3)
     (3,643 )     (25,466 )     (13,566 )     (13,813 )
     
Net (Loss) Income
   $ (5,078 )   $ (63,870 )   $ 7,286     $ (19,924 )
Less: Net Income (Loss) Attributable to Noncontrolling Interest
     (5,948 )     647       183       664  
     
Net (Loss) Income Attributable to The Timken Company
   $ 870     $ (64,517 )   $ 7,103     $ (20,588 )
     
 
                                
Net Income per Common Share Attributable to The Timken Company Common Shareholders:
                                
 
                                
(Loss) Earnings Per Share - Continuing Operations
   $ 0.05     $ (0.41 )   $ 0.22     $ (0.07 )
(Loss) Earnings Per Share - Discontinued Operations
     (0.04 )     (0.26 )     (0.15 )     (0.14 )
         
Earnings Per Share
   $ 0.01     $ (0.67 )   $ 0.07     $ (0.21 )
 
                                
Diluted (Loss) Earnings Per Share - Continuing Operations
   $ 0.05     $ (0.41 )   $ 0.22     $ (0.07 )
Diluted (Loss) Earnings Per Share - Discontinued Operations
     (0.04 )     (0.26 )     (0.15 )     (0.14 )
         
Earnings Per Share
   $ 0.01     $ (0.67 )   $ 0.07     $ (0.21 )
 
                                
Average Shares Outstanding
     96,028,860       96,147,809       96,028,860       96,147,809  
Average Shares Outstanding - assuming dilution
     96,028,860       96,147,809       96,028,860       96,147,809  
     

 

 

BUSINESS SEGMENTS
                 
(Dollars in thousands) (Unaudited)   Q1 2009   Q2 2009
 
Mobile Industries Segment
                
Net sales to external customers
   $ 300,623     $ 292,190  
Adjusted (loss) earnings before interest and taxes (EBIT) (2)
     (2,345 )     (12,001 )
Adjusted EBIT Margin (2)
     -0.8 %     -4.1 %
 
                
Process Industries Segment
                
Net sales to external customers
   $ 224,174     $ 206,318  
Intergroup sales
     922       700  
     
Total net sales
   $ 225,096     $ 207,018  
Adjusted earnings before interest and taxes (EBIT) (2)
     43,492       35,053  
Adjusted EBIT Margin (2)
     19.3 %     16.9 %
 
                
Aerospace and Defense Segment
                
Net sales to external customers
   $ 109,254     $ 109,241  
Adjusted earnings before interest and taxes (EBIT) (2)
     18,108       18,733  
Adjusted EBIT Margin (2)
     16.6 %     17.1 %
 
                
Total Bearings and Power Transmission Group
                
Net sales to external customers
   $ 634,051     $ 607,749  
Intergroup sales
     922       700  
     
Total net sales
   $ 634,973     $ 608,449  
Adjusted earnings before interest and taxes (EBIT) (2)
     59,255       41,785  
Adjusted EBIT Margin (2)
     9.3 %     6.9 %
 
                
Steel Group
                
Net sales to external customers
   $ 232,565     $ 129,012  
Intergroup sales
     16,003       5,823  
     
Total net sales
   $ 248,568     $ 134,835  
Adjusted (loss) earnings before interest and taxes (EBIT) (2)
     (7,262 )     (32,907 )
Adjusted EBIT Margin (2)
     -2.9 %     -24.4 %
 
                
Unallocated corporate expense
   $ (12,317 )   $ (13,175 )
 
                
Intergroup eliminations income (expense) (4)
   $ (257 )   $ 3,008  
 
                
Consolidated
                
Net sales to external customers
   $ 866,616     $ 736,761  
Adjusted earnings before interest and taxes (EBIT) (2)
   $ 39,419     $ (1,289 )
Adjusted EBIT Margin (2)
     4.5 %     -0.2 %
 
(1)   “Adjusted” statements exclude the impact of impairment and restructuring, manufacturing rationalization/reorganization and special charges and credits for all periods shown.
 
(2)   EBIT is defined as operating income plus other income (expense). EBIT Margin is EBIT as a percentage of net sales. EBIT and EBIT margin on a segment basis exclude certain special items set forth above. EBIT and EBIT Margin are important financial measures used in the management of the business, including decisions concerning the allocation of resources and assessment of performance. Management believes that reporting EBIT and EBIT Margin best reflect the performance of the company’s business segments and EBIT disclosures are responsive to investors.
 
(3)   Discontinued Operations relate to the announced sale of the Needle Roller Bearings (NRB) operations to JTEKT Corporation that is projected to close in December 2009.
 
(4)   Intergroup eliminations represent intergroup profit or loss between the Steel Group and the Bearings and Power Transmission Group.

 

 

Reconciliation of GAAP net income attributable to the Timken Co. and EPS — diluted
This reconciliation is provided as additional relevant information about the company’s performance. Management believes adjusted net income and adjusted earnings per share are more representative of the company’s performance and therefore useful to investors. Management also believes that it is appropriate to compare GAAP net income to adjusted net income in light of special items related to impairment and restructuring and manufacturing rationalization/reorganization costs, Continued Dumping and Subsidy Offset Act (CDSOA) receipts, and gain/loss on the sale of non-strategic assets.
                                 
    Q1 2009   Q2 2009
(Dollars in thousands, except per share data) (Unaudited)   $   EPS (5)   $   EPS (5)
 
Net (loss) income attributable to The Timken Company
   $ 870     $ 0.01     $ (64,517 )   $ (0.67 )
 
Pre-tax special items:
                                
Manufacturing rationalization/reorganization expenses - cost of products sold
     1,191       0.01       1,439       0.01  
Manufacturing rationalization/reorganization expenses - SG&A
     274       —       836       0.01  
Impairment and restructuring
     13,755       0.14       50,706       0.53  
Special items - other income
     (1,222 )     (0.01 )     (757 )     (0.01 )
Provision for income taxes (6)
     8,289       0.09       (19,931 )     (0.21 )
Special items, loss from discontinued operations net of income taxes (3)
     (9,923 )     (0.10 )     11,653       0.12  
 
                                
Less: net loss attributable to noncontrolling interest
     (6,131 )     (0.06 )     (17 )     —  
     
Adjusted net (loss) income attributable to The Timken Company
   $ 7,103     $ 0.07     $ (20,588 )   $ (0.21 )
     
 
(5)   EPS amounts may not sum due to rounding differences.
 
(6)   Provision for income taxes includes adjustments to remove the income taxes associated with pre-tax special items and the impact of discrete tax items recorded during the period(s), and to reflect one overall effective tax rate on Adjusted pre-tax income.

 

 

Reconciliation of GAAP income from continuing operations and EPS — diluted.
This reconciliation is provided as additional relevant information about the company’s performance. Management believes adjusted income from continuing operations and adjusted earnings per share are more representative of the company’s performance and therefore useful to investors. Management also believes that it is appropriate to compare GAAP income from continuing operations to adjusted income from continuing operations in light of special items related to impairment and restructuring and manufacturing rationalization/reorganization costs, Continued Dumping and Subsidy Offset Act (CDSOA) receipts, and gain/loss on the sale of non-strategic assets.
                                 
    Q1 2009   Q2 2009
(Dollars in thousands, except per share data) (Unaudited)   $   EPS (5)   $   EPS (5)
 
(Loss) from continuing operations
   $ (1,435 )   $ (0.01 )   $ (38,404 )   $ (0.40 )
 
                                
Pre-tax special items:
                                
Manufacturing rationalization/reorganization expenses - cost of products sold
     1,191       0.01       1,439       0.01  
Manufacturing rationalization/reorganization expenses - SG&A
     274       —       836       0.01  
Impairment and restructuring
     13,755       0.14       50,706       0.53  
Special items - other expense (income)
     (1,222 )     (0.01 )     (757 )     (0.01 )
Provision for income taxes (7)
     8,289       0.09       (19,931 )     (0.21 )
     
Adjusted income (loss) from continuing operations
   $ 20,852     $ 0.22     $ (6,111 )   $ (0.07 )
     
 
(5)   EPS amounts will not sum due to rounding differences.
 
(7)   Provision for income taxes includes the tax effect of pre-tax special items on our effective tax rate, as well as the impact of discrete tax items recorded during the respective periods.

 

 

Reconciliation of GAAP income from continuing operations before income taxes
This reconciliation is provided as additional relevant information about the company’s performance. Management believes Consolidated adjusted earnings before interest and taxes (EBIT) and Total Bearings and Power Transmission Group adjusted EBIT are more representative of the company’s performance and therefore useful to investors. Management also believes that it is appropriate to compare GAAP Income from Continuing Operations before Income Taxes to Consolidated adjusted EBIT in light of special items related to impairment and restructuring and manufacturing rationalization/reorganization costs, Continued Dumping and Subsidy Offset Act (CDSOA) receipts, and gain/loss on the sale of non-strategic assets.
                 
    Q1 2009   Q2 2009
(Thousands of U.S. dollars) (Unaudited)   $   $
 
(Loss) Income from continuing operations before income taxes
   $ 17,358     $ (61,413 )
 
                
Pre-tax reconciling items:
                
Interest expense
     8,429       8,440  
Interest income
     (366 )     (540 )
Manufacturing rationalization/reorganization expenses - cost of products sold
     1,191       1,439  
Manufacturing rationalization/reorganization expenses - SG&A
     274       836  
Impairment and restructuring
     13,755       50,706  
Special items - other income
     (1,222 )     (757 )
     
 
                
Consolidated adjusted earnings (loss) before interest and taxes (EBIT)
   $ 39,419     $ (1,289 )
     
 
                
Steel Group adjusted earnings (loss) before interest and taxes (EBIT)
     7,262       32,907  
Unallocated corporate expense
     12,317       13,175  
Intergroup eliminations expense (income)
     257       (3,008 )
     
Total Bearings and Power Transmission Group adjusted earnings before interest and taxes (EBIT)
   $ 59,255     $ 41,785  
     

 

 

(Unaudited)
CONDENSED CONSOLIDATED STATEMENT OF INCOME
                                                                                 
    AS REPORTED     ADJUSTED (1)  
(Dollars in thousands, except share data)   Q1 2008     Q2 2008     Q3 2008     Q4 2008     Year 2008     Q1 2008     Q2 2008     Q3 2008     Q4 2008     Year 2008  
           
Net sales
   $ 1,246,684     $ 1,359,812     $ 1,336,352     $ 1,097,952     $ 5,040,800     $ 1,246,684     $ 1,359,812     $ 1,336,352     $ 1,097,952     $ 5,040,800  
Cost of products sold
     967,788       1,044,779       954,490       918,483       3,885,540       967,788       1,044,779       954,490       918,483       3,885,540  
Manufacturing rationalization / reorganization expenses — cost of products sold
     778       660       322       1,647       3,407       —       —       —       —       —  
                         
Gross Profit
   $ 278,118     $ 314,373     $ 381,540     $ 177,822     $ 1,151,853     $ 278,896     $ 315,033     $ 381,862     $ 179,469     $ 1,155,260  
Selling, administrative & general expenses (SG&A)
     161,092       177,928       176,861       139,729       655,610       161,092       177,928       176,861       139,729       655,610  
Manufacturing rationalization / reorganization expenses — SG&A
     808       1,249       (370 )     (166 )     1,521       —       —       —       —       —  
Impairment and restructuring
     2,558       2,505       2,379       25,341       32,783       —       —       —       —       —  
                         
Operating Income
   $ 113,660     $ 132,691     $ 202,670     $ 12,918     $ 461,939     $ 117,804     $ 137,105     $ 205,001     $ 39,740     $ 499,650  
Other income (expense)
     (3,809 )     (913 )     555       (7,823 )     (11,990 )     (3,809 )     (913 )     555       (7,823 )     (11,990 )
Special items — other income (expense)
     20,354       191       (558 )     8,260       28,247       —       —       —       —       —  
                         
Earnings Before Interest and Taxes (EBIT) (2)
   $ 130,205     $ 131,969     $ 202,667     $ 13,355     $ 478,196     $ 113,995     $ 136,192     $ 205,556     $ 31,917     $ 487,660  
Interest expense, net
     (9,499 )     (10,007 )     (9,575 )     (9,528 )     (38,609 )     (9,499 )     (10,007 )     (9,575 )     (9,528 )     (38,609 )
                               
Income From Continuing Operations Before Income Taxes
     120,706       121,962       193,092       3,827       439,587       104,496       126,185       195,981       22,389       449,051  
Provision for income taxes
     44,618       42,339       68,121       1,984       157,062       35,006       42,272       65,654       7,500       150,432  
                           
Income From Continuing Operations
   $ 76,088     $ 79,623     $ 124,971     $ 1,843     $ 282,525     $ 69,490     $ 83,913     $ 130,327     $ 14,889     $ 298,619  
(Loss) Income from discontinued operations net of income taxes (3)
     9,262       10,298       6,539       (37,372 )     (11,273 )     10,257       9,473       6,595       (7,937 )     18,388  
                           
Net Income (Loss)
   $ 85,350     $ 89,921     $ 131,510     $ (35,529 )   $ 271,252     $ 79,747     $ 93,386     $ 136,922     $ 6,952     $ 317,007  
Less: Net Income Attributable to Noncontrolling Interest
     885       978       1,097       622       3,582       885       978       1,097       622       3,582  
                           
Net Income (Loss) Attributable to The Timken Company
   $ 84,465     $ 88,943     $ 130,413     $ (36,151 )   $ 267,670     $ 78,862     $ 92,408     $ 135,825     $ 6,330     $ 313,425  
                           
 
                                                                                
Net Income per Common Share Attributable to The Timken Company Common Shareholders:
                                                                                
 
                                                                                
Earnings Per Share — Continuing Operations
   $ 0.78     $ 0.82     $ 1.28     $ 0.01     $ 2.90     $ 0.71     $ 0.86     $ 1.34     $ 0.15     $ 3.06  
(Loss) Earnings Per Share — Discontinued Operations
     0.10       0.10       0.07       (0.38 )     (0.12 )     0.11       0.10       0.07       (0.08 )     0.20  
                             
Earnings Per Share
   $ 6.88     $ 0.92     $ 1.35     $ (0.37 )   $ 2.78     $ 0.82     $ 0.96     $ 1.41     $ 0.07     $ 3.26  
 
                                                                                
Diluted Earnings Per Share — Continuing Operations
   $ 0.78     $ 0.81     $ 1.28     $ 0.01     $ 2.89     $ 0.71     $ 0.86     $ 1.34     $ 0.15     $ 3.06  
Diluted (Loss) Earnings Per Share — Discontinued Operations
     0.10       0.11       0.07       (0.38 )     (0.12 )     0.11       0.09       0.06       (0.08 )     0.19  
                             
Diluted Earnings Per Share
   $ 0.88     $ 0.92     $ 1.35     $ (0.37 )   $ 2.77     $ 0.82     $ 0.95     $ 1.40     $ 0.07     $ 3.25  
 
                                                                                
Average Shares Outstanding
     95,254,265       95,604,375       95,878,978       95,902,494       95,650,104       95,254,265       95,604,375       95,878,978       95,902,494       95,650,104  
Average Shares Outstanding — assuming dilution
     95,648,019       96,169,185       96,103,130       95,909,934       95,947,643       95,648,019       96,169,185       96,103,130       95,909,934       95,947,643  
                       

 

 

BUSINESS SEGMENTS
                                         
                               
(Dollars in thousands) (Unaudited)   Q1 2008     Q2 2008     Q3 2008     Q4 2008     Year 2008  
           
Mobile Industries Segment
                                        
Net sales to external customers
   $ 482,949     $ 488,127     $ 426,489     $ 374,298     $ 1,771,863  
Adjusted earnings (loss) before interest and taxes (EBIT) (2)
     24,251       10,452       8,684       (7,623 )     35,764  
Adjusted EBIT Margin (2)
     5.0 %     2.1 %     2.0 %     -2.0 %     2.0 %
 
                                        
Process Industries Segment
                                        
Net sales to external customers
   $ 281,838     $ 296,880     $ 316,904     $ 267,390     $ 1,163,012  
Intergroup sales
     410       870       972       902       3,154  
 
                              
Total net sales
   $ 282,248     $ 297,750     $ 317,876     $ 268,292     $ 1,166,166  
Adjusted earnings before interest and taxes (EBIT) (2)
     51,212       56,421       73,296       37,738       218,667  
Adjusted EBIT Margin (2)
     18.1 %     18.9 %     23.1 %     14.1 %     18.8 %
 
                                        
Aerospace and Defense Segment
                                        
Net sales to external customers
   $ 96,823     $ 100,674     $ 104,711     $ 109,746     $ 411,954  
Adjusted earnings before interest and taxes (EBIT) (2)
     4,400       9,817       9,819       17,423       41,459  
Adjusted EBIT Margin (2)
     4.5 %     9.8 %     9.4 %     15.9 %     10.1 %
 
                                        
Total Bearings and Power Transmission Group
                                        
Net sales to external customers
   $ 861,610     $ 885,681     $ 848,104     $ 751,434     $ 3,346,829  
Intergroup sales
     410       870       972       902       3,154  
 
                              
Total net sales
   $ 862,020     $ 886,551     $ 849,076     $ 752,336     $ 3,349,983  
Adjusted earnings before interest and taxes (EBIT) (2)
     79,863       76,690       91,799       47,538       295,890  
Adjusted EBIT Margin (2)
     9.3 %     8.7 %     10.8 %     6.3 %     8.8 %
 
                                        
Steel Group
                                        
Net sales to external customers
   $ 385,074     $ 474,131     $ 488,248     $ 346,518     $ 1,693,971  
Intergroup sales
     39,914       44,797       48,291       24,980       157,982  
 
                              
Total net sales
   $ 424,988     $ 518,928     $ 536,539     $ 371,498     $ 1,851,953  
Adjusted earnings (loss) before interest and taxes (EBIT) (2)
     53,379       80,318       133,802       (3,493 )     264,006  
Adjusted EBIT Margin (2)
     12.6 %     15.5 %     24.9 %     -0.9 %     14.3 %
 
                                        
Unallocated corporate expense
   $ (16,413 )   $ (19,287 )   $ (19,024 )   $ (13,633 )   $ (68,357 )
 
                                        
Intergroup eliminations expense (4)
   $ (2,834 )   $ (1,529 )   $ (1,021 )   $ 1,505     $ (3,879 )
 
                                        
Consolidated
                                        
Net sales to external customers
   $ 1,246,684     $ 1,359,812     $ 1,336,352     $ 1,097,952     $ 5,040,800  
Adjusted earnings before interest and taxes (EBIT) (2)
   $ 113,995     $ 136,192     $ 205,556     $ 31,917     $ 487,660  
Adjusted EBIT Margin (2)
     9.1 %     10.0 %     15.4 %     2.9 %     9.7 %
 
(1)   “Adjusted” statements exclude the impact of impairment and restructuring, manufacturing rationalization/reorganization and special charges and credits for all periods shown.
 
(2)   EBIT is defined as operating income plus other income (expense). EBIT Margin is EBIT as a percentage of net sales. EBIT and EBIT margin on a segment basis exclude certain special items set forth above. EBIT and EBIT Margin are important financial measures used in the management of the business, including decisions concerning the allocation of resources and assessment of performance. Management believes that reporting EBIT and EBIT Margin best reflect the performance of the company’s business segments and EBIT disclosures are responsive to investors.
 
(3)   Discontinued Operations relate to the announced sale of the Needle Roller Bearings (NRB) operations to JTEKT Corporation that is projected to close in December 2009.
 
(4)   Intergroup eliminations represent intergroup profit or loss between the Steel Group and the Bearings and Power Transmission Group.

 

 

Reconciliation of GAAP net income attributable to the Timken Co. and EPS — diluted
This reconciliation is provided as additional relevant information about the company’s performance. Management believes adjusted net income and adjusted earnings per share are more representative of the company’s performance and therefore useful to investors. Management also believes that it is appropriate to compare GAAP net income to adjusted net income in light of special items related to impairment and restructuring and manufacturing rationalization/reorganization costs, Continued Dumping and Subsidy Offset Act (CDSOA) receipts, and gain/loss on the sale of non-strategic assets.
                                                                                 
    Q1 2008     Q2 2008     Q3 2008     Q4 2008     Year 2008  
(Dollars in thousands, except per share data) (Unaudited)   $     EPS (5)     $     EPS (5)     $     EPS (5)     $     EPS (5)     $     EPS (5)  
 
Net income (loss) attributable to The Timken Company
   $ 84,465     $ 0.88     $ 88,943     $ 0.92     $ 130,413     $ 1.35     $ (36,151 )   $ (0.37 )   $ 267,670     $ 2.77  
 
                                                                                
Pre-tax special items:
                                                                                
Manufacturing rationalization/reorganization expenses - cost of products sold
     778       0.01       660       0.01       322       —       1,647       0.02       3,407       0.04  
Manufacturing rationalization/reorganization expenses - SG&A
     808       0.01       1,249       0.01       (370 )     —       (166 )     —       1,521       0.02  
Impairment and restructuring
     2,558       0.03       2,505       0.03       2,379       0.02       25,341       0.26       32,783       0.34  
Special items - other income
     (20,354 )     (0.21 )     (191 )     —       558       0.01       (8,260 )     (0.09 )     (28,247 )     (0.29 )
Provision for income taxes (6)
     9,612       0.10       67       —       2,467       0.03       (5,516 )     (0.06 )     6,630       0.07  
Special items, loss from discontinued operations net of income taxes (3)
     995       0.01       (825 )     (0.01 )     56       —       29,435       0.31       29,661       0.31  
 
                                                                                
Less: net loss attributable to noncontrolling interest
     —       —       —       —       —       —       —       —       —       —  
     
Adjusted net income attributable to The Timken Company
   $ 78,862     $ 0.82     $ 92,408     $ 0.95     $ 135,825     $ 1.40     $ 6,330     $ 0.07     $ 313,425     $ 3.25  
     
 
(5)   EPS amounts may not sum due to rounding differences.
 
(6)   Provision for income taxes includes adjustments to remove the income taxes associated with pre-tax special items and the impact of discrete tax items recorded during the period(s), and to reflect one overall effective tax rate on Adjusted pre-tax income.

 

 

Reconciliation of GAAP income from continuing operations and EPS — diluted.
This reconciliation is provided as additional relevant information about the company’s performance. Management believes adjusted income from continuing operations and adjusted earnings per share are more representative of the company’s performance and therefore useful to investors. Management also believes that it is appropriate to compare GAAP income from continuing operations to adjusted income from continuing operations in light of special items related to impairment and restructuring and manufacturing rationalization/reorganization costs, Continued Dumping and Subsidy Offset Act (CDSOA) receipts, and gain/loss on the sale of non-strategic assets.
                                                                                 
    Q1 2008   Q2 2008   Q3 2008   Q4 2008   Year 2008
(Dollars in thousands, except per share data) (Unaudited)   $   EPS (5)   $   EPS (5)   $   EPS (5)   $   EPS (5)   $   EPS (5)
 
Income from continuing operations
   $ 76,088     $ 0.80     $ 79,623     $ 0.83     $ 124,971     $ 1.30     $ 1,843     $ 0.02     $ 282,525     $ 2.94  
 
                                                                                
Pre-tax special items:
                                                                                
Manufacturing rationalization/reorganization expenses - cost of products sold
     778       0.01       660       0.01       322       —       1,647       0.02       3,407       0.04  
Manufacturing rationalization/reorganization expenses - SG&A
     808       0.01       1,249       0.01       (370 )     —       (166 )     —       1,521       0.02  
Impairment and restructuring
     2,558       0.03       2,505       0.03       2,379       0.02       25,341       0.26       32,783       0.34  
Special items - other expense (income)
     (20,354 )     (0.21 )     (191 )     —       558       0.01       (8,260 )     (0.09 )     (28,247 )     (0.29 )
Provision for income taxes (7)
     9,612       0.10       67       —       2,467       0.03       (5,516 )     (0.06 )     6,630       0.07  
     
Adjusted income from continuing operations
   $ 69,490     $ 0.73     $ 83,913     $ 0.87     $ 130,327     $ 1.36     $ 14,889     $ 0.16     $ 298,619     $ 3.11  
     
 
(5)   EPS amounts will not sum due to rounding differences.
 
(7)   Provision for income taxes includes the tax effect of pre-tax special items on our effective tax rate, as well as the impact of discrete tax items recorded during the respective periods.

 

 

Reconciliation of GAAP income from continuing operations before income taxes
This reconciliation is provided as additional relevant information about the company’s performance. Management believes Consolidated adjusted earnings before interest and taxes (EBIT) and Total Bearings and Power Transmission Group adjusted EBIT are more representative of the company’s performance and therefore useful to investors. Management also believes that it is appropriate to compare GAAP Income from Continuing Operations before Income Taxes to Consolidated adjusted EBIT in light of special items related to impairment and restructuring and manufacturing rationalization/reorganization costs, Continued Dumping and Subsidy Offset Act (CDSOA) receipts, and gain/loss on the sale of non-strategic assets.
                                         
    Q1 2008   Q2 2008   Q3 2008   Q4 2008   Year 2008
(Thousands of U.S. dollars) (Unaudited)   $   $   $   $   $
 
Income from continuing operations before income taxes
   $ 120,706     $ 121,962     $ 193,092     $ 3,827     $ 439,587  
 
                                        
Pre-tax reconciling items:
                                        
Interest expense
     10,878       11,494       11,003       11,026       44,401  
Interest income
     (1,379 )     (1,487 )     (1,428 )     (1,498 )     (5,792 )
Manufacturing rationalization/reorganization expenses - cost of products sold
     778       660       322       1,647       3,407  
Manufacturing rationalization/reorganization expenses - SG&A
     808       1,249       (370 )     (166 )     1,521  
Impairment and restructuring
     2,558       2,505       2,379       25,341       32,783  
Special items - other income
     (20,354 )     (191 )     558       (8,260 )     (28,247 )
     
 
                                        
Consolidated adjusted earnings before interest and taxes (EBIT)
   $ 113,995     $ 136,192     $ 205,556     $ 31,917     $ 487,660  
     
 
                                        
Steel Group adjusted earnings (loss) before interest and taxes (EBIT)
     (53,379 )     (80,318 )     (133,802 )     3,493       (264,006 )
Unallocated corporate expense
     16,413       19,287       19,024       13,633       68,357  
Intergroup eliminations expense
     2,834       1,529       1,021       (1,505 )     3,879  
 
                                        
     
Total Bearings and Power Transmission Group adjusted earnings before interest and taxes (EBIT)
   $ 79,863     $ 76,690     $ 91,799     $ 47,538     $ 295,890