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The Timken Company

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by

Wenjia Chen

on 16 September 2014

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Transcript of The Timken Company

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The Timken Company
Background
In 2002, Timken Company was considering acquiring Torrington Company from Ingersoll-Rand.
Torrington
Bearing Industry
Problems and Potential Solutions
Questions?
Who are involved?
Timken
Evolution (1898-2002)
Structure
- Automotive Group
- Industrial Group
- Steel Group
Designed, manufactured, and distributed a range of bearings and related products
Designed, manufactured, and distributed different alloys, as well as custom-made steel products.
Products
Bearings:
Antifriction-industry segment.
Bearing Stack Comprises:
- Load-carrying Components: Safely carries the weight of the railcar and its cargo.
- Nonload-carrying Components: provides the force necessary to achieve clamp.
Application under extreme speed and temperature.
Steel products:
alloy, steel components, and seamless mechanical tubing etc.
Operating and Financial Strategies
2002, company-wide restructuring:
- Consolidating operations into global business.
- Planning to add new products to its portfolio, called “bundling”.

Acquisition for Torrington:
-Benefits: 5% overlap in product offerings, 80% overlap in customer lists
increase the penetration of global market from 7% to 11%
Third-largest producer of bearings
Save $80 million cost

-Costs
:
$130 million

Integration cost
Down-grading because of higher debt
Significant variation in its financial performance:
-EPS peaked at $2.73 in 1997, hit a low with a loss of $0.69 in 2001.
-Debt-to-equity ratio, rose from 20.5% in 1995 to 43.1% in 2002, resulting in down-grading.
Ingersoll Rand
Operating and Financial Strategies
Began in 1871, Ingersoll-Rand is a global diversified manufacturer of industrial and commercial equipment and components
Worth $8.9 billion.
Ingersoll Rand
In 2002, IR divested engineered solution segment -- Torrington.

Why?
higher growth and return
cross-selling strategy
Founded in 1866, Torrington was originally a maker of sewing-machine needles.

By the turn of the century, it expanded and moved into other products including a new line ball bearings for the fledgling automobile industry.

During World War Ⅱ, it developed needle bearings for military products.

In 1969, it was aquired by IR.
Torrington
Two similar segments to Timken: Automobile & Industrial

Sales from different segments (2002)
Revenues and Operating Income (2002 & 2007)
Specifications
Bearing Industry
Peaking in 1990s and dropped in 2001
Slowly recovered in 2002 and expected 2%-3% growth in 2003
Foreign competition
Foreign competitors
Bundling:
differentiate products
fight imports

Losing investment-grade rating
Issuing stocks

Financial Information
Income statements
Balance sheet
Financial ratios (D/E, EBIT interest coverage, etc.)
Stock prices
Industrial financial data
Full transcript