NORTH CANTON, Ohio,
Jan. 29, 2015 /PRNewswire/
-- The Timken Company (NYSE: TKR;
www.timken.com) today reported fourth-quarter sales of
$762.2 million, up approximately
2 percent over the prior-year quarter. The revenue increase
was driven by organic growth in Process Industries, partially
offset by unfavorable currency and a decrease in Mobile Industries
sales due to planned program exits. For the fourth quarter, the
company generated net income from continuing operations of
$38.9 million, or $0.43 per diluted share; this compares with
$33.7 million or $0.35 per diluted share from a year ago.
Adjusted net income from continuing operations in the fourth
quarter was $57.9 million or
$0.65 per diluted share (reference
table for adjustments). This was up from $45.2 million or $0.48 per diluted share for the same period a
year ago. Revenue growth, lower manufacturing costs and a lower tax
rate drove the net income improvement, which was partially offset
by currency. Earnings per share in the quarter also benefited from
fewer shares outstanding versus the prior period.
For 2014, sales were $3.1 billion, up slightly over 2013.
Excluding the impact of $110 million
of planned program exits in Mobile Industries that concluded in
2013, sales were up approximately 5 percent. Net income from
continuing operations was $144.5 million, or $1.58 per diluted share, which compared with
$175.2 million or $1.82 per diluted share in 2013.
Adjusted net income from continuing operations improved in 2014
to $232.9 million or
$2.55 per diluted share. This
compares with $198.6 million or
$2.07 per diluted share in the prior
year. Revenue growth and cost reductions drove the net income
improvement. In addition, earnings per share also benefited from
the company's share repurchase program.
"We are pleased to report solid fourth-quarter results that
reflect strong execution in a slow-growth, strong-dollar
environment," said Timken President and Chief Executive Officer
Richard G. Kyle. "For the full year, we were able to grow
the top line modestly and convert that revenue growth into a 23
percent increase in adjusted EPS through our continued focus on
portfolio improvement and cost reduction, complemented by our share
repurchase program.
"Looking ahead to 2015, we are viewing our markets slightly more
cautiously than 2014. New business wins combined with modest market
growth are expected to result in approximately 4 percent organic
growth, but that will largely be offset by the impact of currency,"
Kyle added. "As in 2014, we expect to continue to improve our cost
structure and mix to deliver solid earnings per share growth on the
revenue. We remain focused on creating value for our customers and
are well-positioned to respond favorably should the economy grow
faster than we are currently projecting."
|
Adjusted Net
Income and Diluted Earnings Per Share (EPS) from Continuing
Operations
|
|
Fourth
Quarter
|
|
Full
Year
|
|
($ in
Mils.)
|
EPS
|
|
($ in
Mils.)
|
EPS
|
|
2014 Net
Income from Continuing Operations
|
$ 38.9
|
$0.43
|
|
$ 144.5
|
$ 1.58
|
|
2014 Adjustments
(pre-tax):
|
|
|
|
|
|
|
- Pension
settlement charges
|
33.0
|
0.37
|
|
33.7
|
0.37
|
|
- Aerospace
impairment and restructuring charges
|
3.7
|
0.04
|
|
121.6
|
1.33
|
|
- Charges for
cost-reduction initiatives and plant
rationalization costs
|
2.2
|
0.02
|
|
14.6
|
0.16
|
|
- Gain on sale
of real estate in Brazil
|
―
|
―
|
|
(22.6)
|
(0.25)
|
|
- Provision
(benefit) for income taxes
|
(19.9)
|
(0.22)
|
|
(58.9)
|
(0.65)
|
|
2014 Total
adjustments
|
19.0
|
0.21
|
|
88.4
|
0.97
|
|
2014
Adjusted Net Income from Continuing
Operations
|
$ 57.9
|
$ 0.65
|
|
$ 232.9
|
$ 2.55
|
Among recent developments, the company:
- Continued to execute its aerospace business restructuring plan,
completing the sale of its engine overhaul assets in Mesa, Arizona;
- Acquired the assets of Revolvo Ltd. in the U.K., bringing
additional breadth to the Timken portfolio of industrial product
solutions;
- Entered into a group annuity contract to transfer approximately
$600 million of retiree pension
obligations to Prudential Insurance Company of America, funded
entirely with plan assets; and
- Completed a special program to offer lump-sum pension
distributions to eligible former employees.
Fourth-Quarter Segment Results
Mobile
Industries, which now also includes aerospace results for all
periods, reported fourth-quarter sales of $389.5 million, down approximately 7 percent
from the same period a year ago. More than half of the decrease
came from planned program exits in the light vehicle sector that
were completed in 2013. The remainder was largely due to declines
in aerospace and agriculture, and the impact of currency, partially
offset by growth in the rail sector. Earnings before interest and
taxes (EBIT) for the fourth quarter were $22.4 million or 5.8 percent of sales.
This compares with EBIT of $38.0 million or 9.1 percent of sales
during the same period in 2013. Adjusted EBIT was $28.6 million or 7.3 percent of sales, compared
with $34.0 million or
8.1 percent of sales in the fourth quarter last year. The
decline in earnings was driven by lower volume and unfavorable mix,
partially offset by lower manufacturing costs.
Process Industries sales of $372.7
million for the fourth quarter were up approximately
12 percent over the same period last year. Sales were driven
by organic growth in both the original equipment and aftermarket
channels as well as the benefit of acquisitions, partially offset
by currency. EBIT for the quarter was $79.7 million or 21.4 percent of sales
on improved volume and strong manufacturing performance. This
compares with EBIT of $50.9 million or 15.4 percent of sales
during the same period in 2013.
2015 Outlook
For 2015, the company expects
year-over-year revenue to be up a net 1 percent after offsetting
currency from an expected increase of approximately 4 percent
organic growth. The outlook for full-year 2015 by
segment:
- Mobile Industries' sales are expected to be roughly flat to
down 2 percent. Without the impact of currency, sales are expected
to increase 1 to 3 percent reflecting organic growth primarily from
the light vehicle market sector, partially offset by a decline in
the agriculture market. Full-year Mobile Industries EBIT margins
are expected be within the targeted 10 to 13 percent range.
- Process Industries' sales are expected to increase
approximately 2 to 4 percent. Excluding currency, sales are
expected to increase 5 to 7 percent driven by organic growth in
original equipment sectors, including wind energy and marine, the
industrial aftermarket and the benefit of acquisitions. Full-year
Process Industries EBIT margins are expected to be near the high
end of the targeted margin range of 17 to 20 percent.
Timken projects 2015 earnings per diluted share to range from
$0.85 to $0.95, which includes
$1.85 of non-cash pension settlement
charges and $0.20 per share of
charges associated with cost-reduction initiatives and plant
rationalizations, partially offset by $0.25 of income associated with discrete tax
accrual adjustments.
Excluding these items, 2015 adjusted earnings per diluted share
are expected to range from $2.65 to
$2.75, up 6 percent at the midpoint, as organic growth and
the benefit of margin expansion initiatives are expected to be
largely offset by the impact of currency.
Conference Call Information
Timken will host a
conference call today at 11:00 a.m. Eastern Time to review its
financial results. Presentation materials will be available
online in advance of the call for interested investors and
securities analysts.
|
Conference
Call:
|
Thursday, Jan. 29,
2015
|
|
11:00 a.m. Eastern
Time
|
|
Live Dial-In:
888-211-4542 or 816-581-1736
|
|
(Call in 10 minutes
prior to be included.)
|
|
Conference ID: Timken
Earnings Call
|
|
Live
Webcast: www.timken.com/investors
|
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through Feb. 12, 2015:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
8692909
|
About The Timken Company
The Timken Company
(NYSE: TKR; www.timken.com) engineers, manufactures and markets
Timken® bearings, transmissions, gearboxes, chain, and
related products, and offers a spectrum of power system rebuild and
repair services around the world. The leading authority on tapered
roller bearings, Timken today applies its deep knowledge of
metallurgy, tribology and power transmission across the broad
spectrum of bearings and related systems to improve the reliability
and efficiency of machinery and equipment all around the world.
Known for its quality products and collaborative technical sales
model, Timken posted $3.1 billion in
sales in 2014. With approximately 16,000 people operating from 28
countries, Timken makes the world more productive and keeps
industry in motion.
Certain statements in this release (including statements
regarding the company's forecasts, estimates and expectations) that
are not historical in nature are "forward-looking" statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. In particular, the statements related to expectations
regarding the company's future financial performance, including
information under the heading "Outlook," are forward-looking. The
company cautions that actual results may differ materially from
those projected or implied in forward-looking statements due to a
variety of important factors, including: the finalization of the
company's financial statements for the fourth quarter and full year
of 2014; the company's ability to respond to the changes in its end
markets that could affect demand for the company's products;
unanticipated changes in business relationships with customers or
their purchases from the company; changes in the financial health
of the company's customers, which may have an impact on the
company's revenues, earnings and impairment charges; fluctuations
in raw material and energy costs; the impact of the company's
last-in, first-out accounting; weakness in global or regional
economic conditions and financial markets; changes in the expected
costs associated with product warranty claims; the ability to
achieve satisfactory operating results in the integration of
acquired companies; the impact on operations of general economic
conditions; fluctuations in customer demand; the impact on the
company's pension obligations due to changes in interest rates,
investment performance and other tactics designed to reduce risk;
the company's ability to complete and achieve the benefits of
announced plans, programs, initiatives, and capital investments;
the company's ability to realize the potential benefits of the
spinoff of the steel business and avoid possible indemnification
liabilities under certain agreements it entered into with
TimkenSteel Corporation in connection with the spinoff; and the
taxable nature of the spinoff. Additional factors are
discussed in the company's filings with the Securities and Exchange
Commission, including the company's Annual Report on Form 10-K for
the year ended Dec. 31, 2013,
quarterly reports on Form 10-Q and current reports on Form 8-K.
Except as required by the federal securities laws, the company
undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.
|
Media Contact:
Gloria Irwin
|
Investor Contact:
Steve Tschiegg
|
|
Communications
Manager
|
Director – Capital
Markets & Investor Relations
|
|
Telephone: (234)
262-3514
|
Telephone: (234)
262-7446
|
|
mediarelations@timken.com
|
steve.tschiegg@timken.com
|
|
The Timken
Company
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENT OF INCOME
|
|
|
|
|
|
|
(Dollars in
millions, except share data) (Unaudited)
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2014
|
2013
|
|
2014
|
2013
|
|
Net sales
|
$
762.2
|
$
749.5
|
|
$
3,076.2
|
$
3,035.4
|
|
Cost of products
sold
|
541.4
|
541.6
|
|
2,178.2
|
2,167.0
|
|
Gross
Profit
|
220.8
|
207.9
|
|
898.0
|
868.4
|
|
Selling, general
& administrative expenses (SG&A)
|
131.7
|
134.0
|
|
542.5
|
546.6
|
|
Impairment and
restructuring
|
5.4
|
3.8
|
|
113.4
|
8.7
|
|
Pension settlement
charges
|
33.0
|
0.5
|
|
33.7
|
7.2
|
|
Operating
Income
|
50.7
|
69.6
|
|
208.4
|
305.9
|
|
Other income
(expense), net
|
(0.8)
|
7.2
|
|
19.9
|
6.7
|
|
Earnings Before
Interest and Taxes (EBIT) (1)
|
49.9
|
76.8
|
|
228.3
|
312.6
|
|
Interest expense,
net
|
(7.0)
|
(6.4)
|
|
(24.3)
|
(22.5)
|
|
Income From
Continuing Operations Before Income Taxes
|
42.9
|
70.4
|
|
204.0
|
290.1
|
|
Provision for income
taxes
|
3.6
|
36.6
|
|
57.0
|
114.6
|
|
Income From
Continuing Operations
|
39.3
|
33.8
|
|
147.0
|
175.5
|
|
Income from
Discontinued Operations, net of income
taxes(2)
|
3.0
|
18.9
|
|
21.7
|
87.5
|
|
Net
Income
|
42.3
|
52.7
|
|
168.7
|
263.0
|
|
Less: Net Income
Attributable to Non-controlling Interest
|
0.4
|
0.1
|
|
2.5
|
0.3
|
|
Net Income
Attributable to The Timken Company
|
$
41.9
|
$
52.6
|
|
$
166.2
|
$
262.7
|
|
|
|
|
|
|
|
Net Income per
Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
|
|
|
|
Basic
earnings per share - Continuing Operations
|
$
0.44
|
$
0.36
|
|
$
1.60
|
$
1.84
|
|
Basic
earnings per share - Discontinued Operations
|
$
0.03
|
$
0.20
|
|
$
0.24
|
$
0.92
|
|
Basic
earnings per share
|
$
0.47
|
$
0.56
|
|
$
1.84
|
$
2.76
|
|
|
|
|
|
|
|
Diluted
earnings per share - Continuing Operations
|
$
0.43
|
$
0.35
|
|
$
1.58
|
$
1.82
|
|
Diluted
earnings per share - Discontinued Operations
|
$
0.04
|
$
0.20
|
|
$
0.24
|
$
0.92
|
|
Diluted
earnings per share
|
$
0.47
|
$
0.55
|
|
$
1.82
|
$
2.74
|
|
|
|
|
|
|
|
Average Shares
Outstanding
|
88,633,324
|
93,868,899
|
|
90,367,346
|
94,989,561
|
|
Average Shares
Outstanding - assuming dilution
|
89,572,040
|
94,636,017
|
|
91,217,142
|
95,823,728
|
|
|
|
|
|
|
|
(1) EBIT is defined
as operating income plus other income (expense). EBIT is an
important financial measure used in the management of the business,
including decisions concerning the allocation of resources and
assessment of performance. Management believes that reporting
EBIT is useful to investors as this measure is representative of
the Company's performance and cash
generation.
|
|
(2) Discontinued
Operations relate to the spinoff of the steel business on June 30,
2014 and includes both operating results and separation
costs.
|
|
BUSINESS
SEGMENTS
|
|
|
|
|
|
(Dollars in
millions) (Unaudited)
|
|
|
|
|
|
Three Months
Ended
December 31,
|
Twelve Months
Ended
December 31,
|
|
2014
|
2013
|
2014
|
2013
|
|
|
|
|
|
|
Mobile
Industries (1)
|
|
|
|
|
|
Net sales to external
customers
|
$
389.5
|
$
418.1
|
$
1,685.4
|
$
1,775.8
|
|
Earnings before
interest and taxes (EBIT) (2)
|
$
22.4
|
$
38.0
|
$
65.6
|
$
193.7
|
|
EBIT Margin
(2)
|
5.8 %
|
9.1 %
|
3.9 %
|
10.9 %
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
Net sales to external
customers
|
$
372.7
|
$
331.4
|
$
1,390.8
|
$
1,259.6
|
|
Earnings before
interest and taxes (EBIT) (2)
|
$
79.7
|
$
50.9
|
$
267.1
|
$
189.3
|
|
EBIT Margin
(2)
|
21.4 %
|
15.4 %
|
19.2 %
|
15.0 %
|
|
|
|
|
|
|
Unallocated corporate
expense
|
$
(19.2)
|
$
(12.1)
|
$
(71.4)
|
$
(70.4)
|
|
Unallocated pension
settlement charges
|
$
(33.0)
|
$
—
|
$
(33.0)
|
$
—
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
Net sales to external
customers
|
$
762.2
|
$
749.5
|
$
3,076.2
|
$
3,035.4
|
|
Earnings before
interest and taxes (EBIT) (2)
|
$
49.9
|
$
76.8
|
$
228.3
|
$
312.6
|
|
EBIT Margin
(2)
|
6.5 %
|
10.2 %
|
7.4 %
|
10.3 %
|
|
|
|
|
|
|
(1) Effective October
1, 2014, the results for the former Aerospace segment were
primarily reported in the Mobile Industries segment. All
prior periods presented reflect this change.
|
|
|
|
|
(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
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 is useful to investors as these
measures are representative of the Company's performance and cash
generation.
|
|
CONDENSED
CONSOLIDATED BALANCE SHEET
|
|
|
(Dollars in
millions) (Unaudited)
|
|
|
|
December 31,
2014
|
December 31,
2013
|
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
278.8
|
$
384.6
|
|
Restricted
cash
|
15.3
|
15.1
|
|
Accounts
receivable
|
475.7
|
444.0
|
|
Inventories,
net
|
585.5
|
582.6
|
|
Other current
assets
|
126.6
|
144.7
|
|
Current assets,
discontinued operations
|
—
|
366.5
|
|
Total Current
Assets
|
1,481.9
|
1,937.5
|
|
Property, Plant and
Equipment, net
|
780.5
|
855.8
|
|
Goodwill
|
259.5
|
346.1
|
|
Non-current pension
assets
|
176.2
|
223.5
|
|
Other
assets
|
303.3
|
265.8
|
|
Non-current assets,
discontinued operations
|
—
|
849.2
|
|
Total
Assets
|
$
3,001.4
|
$
4,477.9
|
|
|
|
|
LIABILITIES
|
|
|
|
Accounts
payable
|
$
143.9
|
$
139.9
|
|
Short-term
debt
|
8.1
|
269.3
|
|
Income
taxes
|
80.4
|
114.3
|
|
Accrued
expenses
|
301.4
|
304.3
|
|
Current liabilities,
discontinued operations
|
—
|
152.3
|
|
Total Current
Liabilities
|
533.8
|
980.1
|
|
|
|
|
Long-term
debt
|
522.1
|
176.4
|
|
Accrued pension
cost
|
165.9
|
159.0
|
|
Accrued
postretirement benefits cost
|
141.8
|
138.3
|
|
Other non-current
liabilities
|
48.7
|
138.8
|
|
Non-current
liabilities, discontinued operations
|
—
|
236.7
|
|
Total
Liabilities
|
1,412.3
|
1,829.3
|
|
|
|
|
EQUITY
|
|
|
|
The Timken Company
shareholders' equity
|
1,576.2
|
2,636.6
|
|
Noncontrolling
Interest
|
12.9
|
12.0
|
|
Total
Equity
|
1,589.1
|
2,648.6
|
|
Total Liabilities and
Equity
|
$
3,001.4
|
$
4,477.9
|
|
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
|
|
|
|
(Dollars in
millions) (Unaudited)
|
|
|
|
|
|
Three Months
Ended
December 31,
|
Twelve Months
Ended
December 31,
|
|
2014
|
2013
|
2014
|
2013
|
|
Cash Provided
(Used)
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
Net income
attributable to The Timken Company
|
$
41.9
|
$
52.6
|
$
166.2
|
$
262.7
|
|
Net income from
discontinued operations
|
(3.0)
|
(18.9)
|
(21.7)
|
(87.5)
|
|
Net income
attributable to noncontrolling interest
|
0.4
|
0.1
|
2.5
|
0.3
|
|
Adjustments to
reconcile net income to net cash provided (used) by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
33.6
|
36.1
|
137.0
|
142.4
|
|
Impairment
charges
|
0.1
|
0.1
|
98.9
|
0.1
|
|
(Gain) loss on sale of
assets
|
0.7
|
(3.4)
|
(20.2)
|
(1.1)
|
|
Pension and other
postretirement expense
|
39.5
|
13.0
|
62.0
|
55.1
|
|
Pension and other
postretirement benefit contributions and payments
|
(2.3)
|
(13.1)
|
(49.9)
|
(93.4)
|
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
4.3
|
0.2
|
(48.3)
|
(4.6)
|
|
Inventories
|
25.3
|
35.9
|
(26.8)
|
34.6
|
|
Accounts payable
|
(39.3)
|
(1.0)
|
8.0
|
0.9
|
|
Accrued expenses
|
9.6
|
20.3
|
2.2
|
(39.6)
|
|
Income taxes
|
(21.0)
|
29.8
|
(68.6)
|
34.5
|
|
Other, net
|
16.6
|
4.5
|
37.9
|
(11.6)
|
|
Net Cash Provided by
Operating Activities - Continuing Operations
|
$
106.4
|
$
156.2
|
$
279.2
|
$
292.8
|
|
Net Cash Provided by
Operating Activities - Discontinued Operations
|
5.2
|
23.9
|
27.8
|
137.2
|
|
Net Cash Provided by
Operating Activities
|
$
111.6
|
$
180.1
|
$
307.0
|
$
430.0
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
Capital
expenditures
|
$
(39.7)
|
$
(42.0)
|
$
(126.8)
|
$
(133.6)
|
|
Acquisitions
|
(9.7)
|
0.3
|
(21.7)
|
(64.2)
|
|
Other
|
11.8
|
5.5
|
30.8
|
13.7
|
|
Net Cash Used by
Investing Activities - Continuing Operations
|
$
(37.6)
|
$
(36.2)
|
$
(117.7)
|
$
(184.1)
|
|
Net Cash Used by
Investing Activities - Discontinued Operations
|
-
|
(73.2)
|
(77.0)
|
(191.9)
|
|
Net Cash Used by
Investing Activities
|
$
(37.6)
|
$
(109.4)
|
$
(194.7)
|
$
(376.0)
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
Cash dividends paid to
shareholders
|
$
(22.1)
|
$
(21.5)
|
$
(90.3)
|
$
(87.5)
|
|
Purchase of treasury
shares
|
(4.4)
|
(81.9)
|
(270.9)
|
(189.2)
|
|
Net proceeds (payments) from
credit facilities
|
(0.3)
|
(2.8)
|
(9.8)
|
4.8
|
|
Net proceeds (payments) from
long-term debt
|
(0.1)
|
1.8
|
95.5
|
(8.0)
|
|
Distribution of
TimkenSteel
|
—
|
—
|
(46.5)
|
—
|
|
Other
|
(0.2)
|
(1.1)
|
19.8
|
30.6
|
|
Net Cash Used by
Financing Activities - Continuing Operations
|
$
(27.1)
|
$
(105.5)
|
$
(302.2)
|
$
(249.3)
|
|
Net Cash Provided by
Financing Activities - Discontinued Operations
|
-
|
-
|
100.0
|
-
|
|
Net Cash Used by
Financing Activities
|
$
(27.1)
|
$
(105.5)
|
$
(202.2)
|
$
(249.3)
|
|
Effect of exchange
rate changes on cash
|
(6.3)
|
1.3
|
(15.9)
|
(6.5)
|
|
Increase (decrease)
In Cash and Cash Equivalents
|
$
40.6
|
$
(33.5)
|
$
(105.8)
|
$
(201.8)
|
|
Cash and cash
equivalents at beginning of period
|
238.2
|
418.1
|
384.6
|
586.4
|
|
Cash and Cash
Equivalents at End of Period
|
$
278.8
|
$
384.6
|
$
278.8
|
$
384.6
|
|
Reconciliation of
EBIT to GAAP Net Income:
|
|
|
|
|
|
|
This reconciliation
is provided as additional relevant information about the Company's
performance. Management believes consolidated earnings before
interest and taxes (EBIT) is representative of the Company's
performance and therefore useful to investors. Management
also believes that it is appropriate to compare GAAP net income to
consolidated EBIT.
|
|
|
|
|
|
|
|
(Dollars in
millions) (Unaudited)
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2014
|
2013
|
|
2014
|
2013
|
|
Net Income
|
$
42.3
|
$
52.7
|
|
$
168.7
|
$
263.0
|
|
|
|
|
|
|
|
Income From
Discontinued Operations, net of income taxes
|
(3.0)
|
(18.9)
|
|
(21.7)
|
(87.5)
|
|
Provision for income
taxes
|
3.6
|
36.6
|
|
57.0
|
114.6
|
|
Interest
expense
|
8.3
|
6.9
|
|
28.7
|
24.4
|
|
Interest
income
|
(1.3)
|
(0.5)
|
|
(4.4)
|
(1.9)
|
|
Consolidated earnings
before interest and taxes (EBIT)
|
$
49.9
|
$
76.8
|
|
$
228.3
|
$
312.6
|
|
Reconciliations of
Adjusted Net Income from Continuing Operations and Net Income from
Continuing Operations to GAAP Income from Continuing Operations and
Adjusted Earnings Per Share to GAAP Earnings Per
Share:
|
|
These reconciliations
are provided as additional relevant information about the Company's
performance. Management believes that adjusted net income
from continuing operations, net income from continuing operations,
and diluted earnings per share, adjusted to remove: (a) gain on the
sale of real estate in Brazil; (b) charges for cost-reduction
initiatives and plant rationalization costs; (c) Aerospace
impairment and restructuring charges; (d) pension settlement
charges; and (e) provision for income taxes are representative of
the Company's performance and therefore useful to
investors.
|
|
Three Months
Ended
|
Twelve Months
Ended
|
|
(Dollars in
millions, except share data) (Unaudited)
|
December
31,
|
December
31,
|
|
2014
|
EPS
|
2013
|
EPS
|
2014
|
EPS
|
2013
|
EPS
|
|
Income from
Continuing Operations
|
$
39.3
|
|
$
33.8
|
|
$
147.0
|
|
$ 175.5
|
|
|
Less: Net
Income Attributable to Noncontrolling Interest
|
0.4
|
|
0.1
|
|
2.5
|
|
0.3
|
|
|
Net Income from Continuing Operations
|
$
38.9
|
$
0.43
|
$
33.7
|
$
0.35
|
$
144.5
|
$
1.58
|
$ 175.2
|
$
1.82
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Gain on sale
of real estate in Brazil (1)
|
-
|
-
|
(5.4)
|
(0.06)
|
(22.6)
|
(0.25)
|
(5.4)
|
(0.06)
|
|
Charges for
cost-reduction initiatives and plant rationalization costs
(2)
|
2.2
|
0.02
|
4.4
|
0.05
|
14.6
|
0.16
|
14.8
|
0.15
|
|
Aerospace
impairment and restructuring charges (3)
|
3.7
|
0.04
|
-
|
-
|
121.6
|
1.33
|
-
|
-
|
|
Pension
settlement charges (4)
|
33.0
|
0.37
|
0.5
|
0.01
|
33.7
|
0.37
|
7.2
|
0.08
|
|
Provision
(benefit) for income taxes (5)
|
(19.9)
|
(0.22)
|
12.0
|
0.13
|
(58.9)
|
(0.65)
|
6.8
|
0.07
|
|
Total Adjustments:
|
19.0
|
0.21
|
11.5
|
0.12
|
88.4
|
0.97
|
23.4
|
0.24
|
|
Adjusted Net Income
from Continuing Operations
|
$
57.9
|
$
0.65
|
$
45.2
|
$
0.48
|
$
232.9
|
$
2.55
|
$ 198.6
|
$
2.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Gain on the sale of real estate relates to the sale of the former
manufacturing facility in Sao Paulo, Brazil.
|
|
|
|
|
|
|
|
|
|
|
(2)
Cost-reduction initiatives and plant rationalization costs related
to plant closures, the rationalization of certain plants, and
severance related to cost reduction
initiatives.
|
|
|
|
|
|
|
|
|
|
|
(3)
Aerospace impairment and restructuring charges related to goodwill
impairment charges, inventory valuation adjustments, and
severance.
|
|
|
|
|
|
|
|
|
|
|
(4)
Pension settlement charges related to the settlement of certain
U.S. pension obligations.
|
|
|
|
|
|
|
|
|
|
|
(5)
Provision (benefit) for income taxes includes the tax impact on
pre-tax special items, the impact of discrete tax items recorded
during the respective periods, as well as adjustments to reflect
the use of one overall effective tax rate on adjusted pre-tax
income in interim periods.
|
|
Reconciliation of
Net Sales After Planned Program Exits for the Total Company and
Mobile Industries Segment to Net Sales
|
|
The following
reconciliation is provided as additional relevant information about
the Company's performance. Management believes that net
sales, after planned program exits, are representative of the
Company's continuing operations and therefore useful to
investors.
|
|
|
|
|
|
|
|
|
|
|
|
The Timken
Company
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
(Dollars in
millions) (Unaudited)
|
2014
|
2013
|
|
2014
|
2013
|
|
Net Sales
|
$
762.2
|
$
749.5
|
|
$
3,076.2
|
$
3,035.4
|
|
Planned Program
Exits
|
15.0
|
-
|
|
110.0
|
-
|
|
Total
|
$
777.2
|
$
749.5
|
|
$
3,186.2
|
$
3,035.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile Industries
Segment
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
(Dollars in
millions) (Unaudited)
|
2014
|
2013
|
|
2014
|
2013
|
|
Net Sales
|
$
389.5
|
$
418.1
|
|
$
1,685.4
|
$
1,775.8
|
|
Planned Program
Exits
|
15.0
|
-
|
|
110.0
|
-
|
|
Total
|
$
404.5
|
$
418.1
|
|
$
1,795.4
|
$
1,775.8
|
|
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 additional relevant information about
the Company's performance. Management believes that EBIT and
EBIT margin, after adjustments, are representative of the Company's
core operations and therefore useful to investors.
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Twelve Months
Ended
|
|
(Dollars in
millions, except share data) (Unaudited)
|
December
31,
|
December
31,
|
|
2014
|
Percentage to
Net Sales
|
2013
|
Percentage to
Net Sales
|
2014
|
Percentage to
Net Sales
|
2013
|
Percentage to
Net Sales
|
|
Net Income
|
$
42.3
|
5.5 %
|
$
52.7
|
7.0 %
|
$
168.7
|
5.5 %
|
$
263.0
|
8.7 %
|
|
|
|
|
|
|
|
|
|
|
Income From
Discontinued Operations, net of income taxes
|
(3.0)
|
(0.4)%
|
(18.9)
|
(2.5)%
|
(21.7)
|
(0.7)%
|
(87.5)
|
(2.9)%
|
|
Provision for income
taxes
|
3.6
|
0.5 %
|
36.6
|
4.9 %
|
57.0
|
1.9 %
|
114.6
|
3.8 %
|
|
Interest
expense
|
8.3
|
1.1 %
|
6.9
|
0.9 %
|
28.7
|
0.9 %
|
24.4
|
0.8 %
|
|
Interest
income
|
(1.3)
|
(0.2)%
|
(0.5)
|
(0.1)%
|
(4.4)
|
(0.1)%
|
(1.9)
|
(0.1)%
|
|
Consolidated earnings
before interest and taxes (EBIT)
|
$
49.9
|
6.5 %
|
$
76.8
|
10.2 %
|
$
228.3
|
7.4 %
|
$
312.6
|
10.3 %
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Gain on sale
of real estate in Brazil (1)
|
—
|
—%
|
(5.4)
|
(0.7)%
|
(22.6)
|
(0.7)%
|
(5.4)
|
(0.2)%
|
|
Charges for
cost-reduction initiatives and plant rationalization costs
(2)
|
2.2
|
0.3 %
|
4.4
|
0.6 %
|
14.6
|
0.5 %
|
14.8
|
0.5 %
|
|
Aerospace
impairment and restructuring charges (3)
|
3.7
|
0.5 %
|
—
|
—%
|
121.6
|
4.0 %
|
—
|
—%
|
|
Pension
settlement charges (4)
|
33.0
|
4.3 %
|
0.5
|
0.1 %
|
33.7
|
1.1 %
|
7.2
|
0.2 %
|
|
Total Adjustments
|
38.9
|
5.1 %
|
(0.5)
|
(0.1)%
|
147.3
|
4.8 %
|
16.6
|
0.5 %
|
|
Consolidated earnings
before interest and taxes (EBIT), after adjustments
|
$
88.8
|
11.7 %
|
$
76.3
|
10.2 %
|
$
375.6
|
12.2 %
|
$
329.2
|
10.8 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Gain on the sale of real estate relates to the sale of the former
manufacturing facility in Sao Paulo, Brazil.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
Cost-reduction initiatives and plant rationalization costs related
to plant closures, the rationalization of certain plants, and
severance related to cost reduction
initiatives.
|
|
|
|
|
|
|
|
|
|
|
(3)
Aerospace impairment and restructuring charges related to goodwill
impairment charges, inventory valuation adjustments, and
severance.
|
|
|
|
|
|
|
|
|
|
|
(4)
Pension settlement charges related to the settlement of certain
U.S. pension obligations.
|
|
Reconciliation of
segment EBIT Margin, After Adjustments, to segment EBIT as a
Percentage of Sales and segment EBIT, After Adjustments, to segment
EBIT:
|
|
The following
reconciliation is provided as additional relevant information about
the Company's Mobile Industries and Process Industries segment
performance. Management believes that segment EBIT and EBIT
margin, after adjustments, are representative of the segment's core
operations and therefore useful to
investors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions) (Unaudited)
|
Three
Months
Ended
December
31,
2014
|
Percentage to Net
Sales
|
Three
Months
Ended
December
31,
2013
|
Percentage to Net
Sales
|
Twelve
Months
Ended
December
31, 2014
|
Percentage to Net
Sales
|
Twelve
Months
Ended
December
31, 2013
|
Percentage to Net
Sales
|
|
Earnings before
interest and taxes (EBIT)
|
$
22.4
|
5.8%
|
$
38.0
|
9.1%
|
$
65.6
|
3.9%
|
$
193.7
|
10.9%
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of real
estate in Brazil (1)
|
—
|
—%
|
(5.4)
|
(1.3)%
|
(22.6)
|
(1.3)%
|
(5.4)
|
(0.3)%
|
|
Charges for
cost-reduction initiatives and plant rationalization
costs(2)
|
2.5
|
0.6 %
|
0.9
|
0.2 %
|
11.8
|
0.7 %
|
10.2
|
0.6 %
|
|
Aerospace impairment
and restructuring charges(3)
|
3.7
|
0.9 %
|
—
|
—%
|
121.6
|
7.2 %
|
—
|
—%
|
|
Pension settlement
charges(4)
|
—
|
—%
|
0.5
|
0.1%
|
0.7
|
—%
|
7.2
|
0.4%
|
|
Earnings before
interest and taxes (EBIT), after adjustments
|
$
28.6
|
7.3%
|
$
34.0
|
8.1%
|
$
177.1
|
10.5%
|
$
205.7
|
11.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions) (Unaudited)
|
Three
Months
Ended
December
31,
2014
|
Percentage to Net
Sales
|
Three
Months
Ended
December
31,
2013
|
Percentage to Net
Sales
|
Twelve
Months
Ended
December
31, 2014
|
Percentage to Net
Sales
|
Twelve
Months
Ended
December
31, 2013
|
Percentage to Net
Sales
|
|
Earnings before
interest and taxes (EBIT)
|
$
79.7
|
21.4%
|
$
50.9
|
15.4%
|
$
267.1
|
19.2%
|
$
189.3
|
15.0%
|
|
|
|
|
|
|
|
|
|
|
Charges for
cost-reduction initiatives and plant rationalization
costs(2)
|
(0.3)
|
(0.1)%
|
3.5
|
1.1 %
|
2.2
|
0.2%
|
4.5
|
0.4 %
|
|
Earnings before
interest and taxes (EBIT), after adjustments
|
$
79.4
|
21.3%
|
$
54.4
|
16.4%
|
$
269.3
|
19.4%
|
$
193.8
|
15.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Gain on the sale of real estate relates to the sale of the former
manufacturing facility in Sao Paulo, Brazil.
|
|
|
|
|
|
|
|
|
|
|
(2)
Cost-reduction initiatives and plant rationalization costs related
to plant closures, the rationalization of certain plants, and
severance related to cost reduction
initiatives.
|
|
|
|
|
|
|
|
|
|
|
(3)
Aerospace impairment and restructuring charges related to goodwill
impairment charges, inventory valuation adjustments, and
severance.
|
|
|
|
|
|
|
|
|
|
|
(4)
Pension settlement charges related to the settlement of certain
U.S. pension obligations.
|
|
Reconciliation of
Total Debt to Net Debt and the Ratio of Net Debt to
Capital:
|
|
This reconciliation
is provided as additional relevant information about the Company's
financial position. Capital, used for the ratio of total debt
to capital, is defined as total debt plus total shareholders'
equity. Capital, used for the ratio of net debt to capital,
is defined as total debt less cash, cash equivalents and restricted
cash plus total shareholders' equity. Management believes Net
Debt is an important measure of the Company's financial position,
due to the amount of cash and cash
equivalents.
|
|
|
(Dollars in
millions) (Unaudited)
|
|
|
|
|
|
December 31,
2014
|
December 31,
2013
|
|
Short-term
debt
|
|
|
$
8.1
|
$
269.3
|
|
Long-term
debt
|
|
|
522.1
|
176.4
|
|
Total Debt
(1)
|
|
|
$
530.2
|
$
445.7
|
|
Less: Cash, cash
equivalents and restricted cash
|
|
|
(294.1)
|
(399.7)
|
|
Net Debt
(1)
|
|
|
$
236.1
|
$
46.0
|
|
|
|
|
|
|
Total
equity
|
|
|
$
1,589.1
|
$
2,648.6
|
|
|
|
|
|
|
Ratio of Total Debt
to Capital
|
|
|
25.0 %
|
14.4 %
|
|
Ratio of Net Debt to
Capital
|
|
|
12.9 %
|
1.7 %
|
|
|
|
|
|
|
(1) Total Debt and
Net Debt at December 31, 2013 excludes $30.2 million of debt
transferred to TimkenSteel and is considered discontinued
operations.
|
|
|
|
|
|
|
Reconciliations of
Free Cash Flow to GAAP Net Cash Provided by Operating
Activities:
|
|
Management believes
that free cash flow is useful to investors because it is a
meaningful indicator of cash generated from operating activities
available for the execution of its business
strategy.
|
|
|
(Dollars in
millions) (Unaudited)
|
|
|
|
Three Months
Ended
|
Twelve Months
Ended
|
|
December
31,
|
December
31,
|
|
2014
|
2013
|
2014
|
2013
|
|
Net cash provided by
operating activities from continuing operations
|
$
106.4
|
$
156.2
|
$
279.2
|
$
292.8
|
|
Less: capital
expenditures
|
(39.7)
|
(42.0)
|
(126.8)
|
(133.6)
|
|
Free cash flow
|
$
66.7
|
$
114.2
|
$
152.4
|
$
159.2
|
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SOURCE The Timken Company