Cuts In Working Capital Help The U.S. Capital Goods Sector Offset Economic Downturns Aug 11

  • ID: 2086749
  • August 2011
  • Region: United States
  • Standard & Poors
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  • AGCO Corp.
  • Cooper Industries PLC
  • Eaton Corp.
  • Illinois Tool Works Inc.
  • Pentair Inc.
  • Timken Co.
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The cyclical nature of capital goods companies can translate into significantly weaker earnings and credit measures in a recession. A mitigating factor that Standard & Poor's Ratings Services has typically observed is the release of working capital as cash inflows from inventory and accounts receivable more than offset cash outflows related to shrinking accounts payable for most of our rated entities. We observed that at the height of the industrial economy's downturn in 2009, most U.S. capital goods companies significantly reduced nominal working capital, which significantly increased their cash flows. In fact, the change accounted for, on average, about 25% of total operating cash flow in that year for the companies we analyzed. In 2010, issuers returned working capital to...

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- Leggett & Platt Inc.
- Snap-on Inc.
- United Technologies Corp.
- Westinghouse Air Brake Technologies Corp.
- Illinois Tool Works Inc.
- ITT Corp.
- Danaher Corp.
- Timken Co.
- Honeywell International Inc.
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- Park-Ohio Industries Inc.
- Victor Technologies Group Inc.
- Thomas & Betts Corp.
- IDEX Corp.
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- TriMas Corp.
- Titan International Inc.
- J.B. Poindexter & Co. Inc.
- SPX Corp.
- Hubbell Inc.
- Carlisle Cos. Inc.
- Mettler-Toledo International Inc.
- Blount Inc.
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- Pentair Inc.
- CNH Global N.V.
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- Manitowoc Company Inc. (The)
- Itron Inc.
- Roper Technologies Inc.
- Polypore International Inc.
- Altra Industrial Motion Inc.
- Xerium Technologies Inc.
- Sensata Technologies B.V.
- Ingersoll-Rand PLC
- Cooper Industries PLC
- Douglas Dynamics Inc.

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