NORTH CANTON, Ohio,
Feb. 9, 2017 /PRNewswire/ -- The Timken Company (NYSE:
TKR) (www.timken.com), a global leader in bearings and mechanical
power transmission products, today reported fourth-quarter
2016 sales of $655 million, down 8.3
percent from the same period a year ago. The results reflect
weakness across most end markets and unfavorable currency,
partially offset by the benefit of acquisitions.
In the fourth quarter, Timken posted net income
of $24.1 million or $0.31 per diluted share,
versus a net loss of $(35.7) million
or $(0.44) per basic share for the same period a year
ago. The year-over-year improvement in net income was driven by
lower pension settlement charges, CDSOA income1 and
lower operating costs, partially offset by lower volume and
unfavorable price/mix. The year-ago period also included a gain
from the divestiture of the aerospace PMA business and higher
discrete income tax benefits.
Excluding special items (detailed in the attached tables),
adjusted net income was $36.7 million
or $0.47 per diluted share. This compares with adjusted
net income of $49.0 million or $0.59 per
diluted share for the same period in 2015. The decline in adjusted
net income reflects lower volume and unfavorable price/mix,
partially offset by the benefit of SG&A cost reduction
initiatives and lower material costs.
"We performed well in the fourth quarter, giving us a solid
finish to the year," said Richard G.
Kyle, Timken president and chief executive officer. "Despite
the difficult market environment, we delivered historically strong
earnings and cash flow in 2016, which is evidence of the structural
improvements we've made to our business. We advanced our strategy
on all fronts and continued to position the company for profitable
growth and shareholder value creation over the long term."
Among significant accomplishments during the quarter, the
company acquired EDT Corp., a manufacturer of polymer housed units
and stainless steel ball bearings used widely by the food and
beverage industry. The company also returned $38 million in
capital to shareholders through the repurchase of roughly
480,000 shares and the payment of
its 378th consecutive quarterly dividend.
Earlier this month, the Timken Board of Directors approved a new
share repurchase authorization for up to 10 million shares,
expiring Feb. 28, 2021. This replaces
the prior authorization which expired Jan.
31, 2017.
2016 Full-Year Results
For 2016, sales were $2.7 billion
or 7 percent lower than 2015. The decrease was primarily driven by
weaker demand across industrial end markets and unfavorable
currency, partially offset by growth in automotive and the net
benefit of acquisitions and divestitures.
Net income was $152.6 million or
$1.92 per diluted share for the year,
versus a net loss of ($70.8) million
or ($0.84) per basic share a year
ago. The year-over-year increase in net income was driven by lower
pension settlement charges, current year CDSOA income, as well as
lower operating costs, partially offset by lower volume,
unfavorable price/mix and currency. The year-ago period also
included a gain from the divestiture of the aerospace PMA business
and higher discrete income tax benefits.
Excluding special items (detailed in the attached tables),
adjusted net income was $156.2 million or $1.97 per diluted share. This compares with
$189.1 million or $2.21 per diluted share in 2015. The decline in
adjusted net income reflects lower volume and unfavorable
price/mix, partially offset by lower material, manufacturing and
SG&A costs (including the benefit of cost reduction
initiatives). Earnings per share also benefited from the repurchase
of approximately 4 percent of the company's outstanding shares in
2016.
Fourth-Quarter Segment Results
Mobile Industries reported fourth-quarter sales
of $342.3 million, 10 percent lower than the
same period a year ago, driven primarily by lower demand in the
rail, automotive and aerospace sectors, as well as unfavorable
currency.
Earnings before interest and taxes (EBIT) in the quarter
were $19.2 million or 5.6 percent of sales,
compared with EBIT of $58.9 million
or 15.5 percent of sales for the same period a year ago.
The decrease in EBIT reflects lower volume and unfavorable
price/mix, partially offset by lower SG&A expenses and
favorable material and manufacturing costs. The year-ago period
also included a gain from the divestiture of the aerospace PMA
business.
Excluding special items (detailed in the attached tables),
adjusted EBIT in the quarter was $26.5 million
or 7.7 percent of sales, compared
with $36.2 million or 9.5 percent of sales in the
fourth quarter last year.
Process Industries sales of $312.5 million for
the fourth quarter declined 6.5 percent from the same period a year
ago, driven primarily by weaker demand in the industrial
aftermarket and heavy industries sectors, lower military marine
revenue and unfavorable currency, partially offset by the benefit
of acquisitions.
EBIT for the quarter was $43.2 million
or 13.8 percent of sales, compared with EBIT
of $45.2 million or 13.5 percent of sales for
the same period a year ago. The decrease in EBIT was driven by the
impact of lower volume and unfavorable price/mix, partially offset
by favorable SG&A and material costs. The year-ago period also
included a fixed asset write-off charge.
Excluding special items (detailed in the attached tables),
adjusted EBIT in the quarter was $45.8
million or 14.6 percent of sales, compared
with $55.7 million or 16.7 percent of sales in the fourth
quarter last year.
2017 Outlook
The company expects 2017 revenue to be relatively flat compared
with 2016. This includes a negative currency impact of roughly 1.5
percent, based on Dec. 31, 2016,
exchange rates. Within its segments, the company estimates
full-year 2017:
- Mobile Industries' sales to be down approximately 4-5 percent,
driven primarily by market-related declines in the rail sector,
continued softness in the agriculture and heavy truck sectors, and
unfavorable currency.
- Process Industries' sales to be up approximately 4-5 percent,
reflecting growth in the industrial aftermarket and wind energy
sectors, and the benefit of acquisitions, offset partially by
unfavorable currency.
"Sentiment in most of our markets has improved over the last few
months, and while we are forecasting the full year to be relatively
flat, we are planning for sequential strengthening as we move
through 2017," said Kyle. "We will continue to navigate the
environment with discipline and flexibility, staying focused on
outgrowing our markets, managing our costs and investing in our
business for the long term. As markets improve, we are confident in
our ability to achieve new levels of financial performance."
Timken plans to adopt mark-to-market pension accounting for its
defined benefit pension and other postretirement benefit plans in
the first quarter of 2017. This change will have no effect on
employees' retirement benefits, plan funding requirements or Timken
cash flows. Under the new accounting method, the company will
immediately recognize actuarial gains and losses in the year in
which they occur (in the fourth quarter or earlier as required)
rather than amortizing them over many years.
This change is expected to add approximately $0.15 to earnings per share for 20172.
Including this impact, Timken anticipates 2017 earnings per diluted
share to range from $1.90 to $2.00 for the full year
on a GAAP basis. Excluding restructuring and other special items,
the company expects 2017 adjusted earnings per diluted share to
range from $2.05 to $2.15. In connection with the
adoption of mark-to-market accounting, prior-year results will be
retrospectively modified to reflect the new method. Adjusted
earnings for 2016 are expected to be revised upward by
approximately $0.15 per diluted
share. Additional information will be provided in conjunction with
the company's first quarter 2017 earnings release.
Conference Call Information
Timken will host a conference call today at 11 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, Feb. 9,
2017
|
|
11 a.m. Eastern
Time
|
|
Live Dial-In:
877-548-7906 or 719-325-4838
|
|
(Call in 10 minutes
prior to be included.)
|
|
Conference ID:
Timken's 4Q Earnings Call
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through Feb. 23, 2017:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
7247268
|
|
|
Live
Webcast:
|
http://investors.timken.com
|
About The Timken Company
The Timken Company (NYSE: TKR; www.timken.com) engineers,
manufactures and markets bearings, gear drives, belts, chain,
couplings, and related products, and offers a spectrum of
powertrain rebuild and repair services. The leading authority on
tapered roller bearings, Timken today applies its deep knowledge of
metallurgy, tribology and mechanical power transmission across a
variety of bearings and related systems to improve reliability and
efficiency of machinery and equipment all around the world. The
company's growing product and services portfolio features many
strong industrial brands including Timken®,
Fafnir®, Philadelphia Gear®, Carlisle®, Drives®,
Lovejoy® and Interlube™. Known for its quality products
and collaborative technical sales model, Timken posted $2.7 billion in sales in 2016. With more than
14,000 employees 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 plans 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 2016; 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
changes to the company's accounting methods, including the
actual impact from the adoption of mark-to-market accounting;
weakness in global or regional economic conditions and capital
markets; fluctuations in currency valuations; 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;
and retention of U.S. Continued Dumping and Subsidy Offset Act
distributions. 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, 2015, 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 Relations:
234.262.3514
mediarelations@timken.com
Investor Relations:
Jason
Hershiser
234.262.7101
jason.hershiser@timken.com
1 Represents funds received by the company under the
U.S. Continued Dumping and Subsidy Offset Act (CDSOA).
2 This amount represents the estimated change to
pension and OPEB expense as a result of adopting mark-to-market
accounting in the first quarter. Note that this amount does not
include the actuarial gain or loss for 2017, which will not be
known until the quarter of remeasurement. Therefore, no estimate of
actuarial gains or losses has been included in our 2017
outlook.
The Timken
Company
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
(Dollars in millions,
except per share data)
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2016
|
2015
|
|
2016
|
2015
|
Net sales
|
$
|
654.8
|
|
$
|
714.4
|
|
|
$
|
2,669.8
|
|
$
|
2,872.3
|
Cost of products
sold
|
490.7
|
|
523.5
|
|
|
1,975.0
|
|
2,078.4
|
Gross
Profit
|
164.1
|
|
190.9
|
|
|
694.8
|
|
793.9
|
Selling, general
& administrative expenses
|
112.0
|
|
119.0
|
|
|
450.0
|
|
494.3
|
Impairment and
restructuring charges
|
3.0
|
|
2.7
|
|
|
21.7
|
|
14.7
|
Pension settlement
charges
|
16.2
|
|
241.8
|
|
|
28.1
|
|
465.0
|
Gain on
divestitures
|
—
|
|
(29.0)
|
|
|
—
|
|
(28.7)
|
Operating Income
(Loss)
|
32.9
|
|
(143.6)
|
|
|
195.0
|
|
(151.4)
|
Continued Dumping and
Subsidy Offset Act income (1)
|
6.0
|
|
—
|
|
|
59.6
|
|
—
|
Other income
(expense), net
|
0.9
|
|
(6.7)
|
|
|
(0.9)
|
|
(7.5)
|
Earnings (Loss)
Before Interest and Taxes
(EBIT)(2)
|
39.8
|
|
(150.3)
|
|
|
253.7
|
|
(158.9)
|
Interest expense,
net
|
(7.6)
|
|
(7.7)
|
|
|
(31.6)
|
|
(30.7)
|
Income (Loss)
Before Income Taxes
|
32.2
|
|
(158.0)
|
|
|
222.1
|
|
(189.6)
|
Provision (benefit)
for income taxes
|
8.1
|
|
(122.6)
|
|
|
69.2
|
|
(121.6)
|
Net Income
(Loss)
|
24.1
|
|
(35.4)
|
|
|
152.9
|
|
(68.0)
|
Less: Net income
attributable to noncontrolling interest
|
—
|
|
0.3
|
|
|
0.3
|
|
2.8
|
Net Income (Loss)
Attributable to The Timken Company
|
$
|
24.1
|
|
$
|
(35.7)
|
|
|
$
|
152.6
|
|
$
|
(70.8)
|
|
|
|
|
|
|
Net Income (Loss)
per Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
|
|
|
Basic Earnings (Loss) per
share
|
$
|
0.31
|
|
$
|
(0.44)
|
|
|
$
|
1.94
|
|
$
|
(0.84)
|
|
|
|
|
|
|
Diluted Earnings (Loss)
per share
|
$
|
0.31
|
|
$
|
(0.44)
|
|
|
$
|
1.92
|
|
$
|
(0.84)
|
|
|
|
|
|
|
Average Shares
Outstanding
|
77,599,869
|
|
81,845,054
|
|
|
78,516,029
|
|
84,631,778
|
Average Shares
Outstanding - assuming dilution
|
78,482,319
|
|
81,845,054
|
|
|
79,234,324
|
|
84,631,778
|
|
|
|
|
|
|
(1) U.S.
Continued Dumping and Subsidy Offset Act ("CDSOA") income
represents the amount of funds received by the Company from monies
collected by U.S. Customs and Border Protection ("U.S. Customs") on
entries of merchandise subject to anti-dumping orders that entered
the U.S. prior to October 1, 2007.
|
|
|
|
|
|
|
(2) EBIT is a non-GAAP measure
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 core operations.
|
BUSINESS
SEGMENTS
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
(Dollars in
millions)
|
2016
|
2015
|
|
2016
|
2015
|
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
|
Net sales
|
$
|
342.3
|
|
$
|
380.3
|
|
|
$
|
1,446.4
|
|
$
|
1,558.3
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
19.2
|
|
$
|
58.9
|
|
|
$
|
108.8
|
|
$
|
173.3
|
|
EBIT Margin
(1)
|
5.6
|
%
|
15.5
|
%
|
|
7.5
|
%
|
11.1
|
%
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
Net sales
|
$
|
312.5
|
|
$
|
334.1
|
|
|
$
|
1,223.4
|
|
$
|
1,314.0
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
43.2
|
|
$
|
45.2
|
|
|
$
|
163.2
|
|
$
|
190.2
|
|
EBIT Margin
(1)
|
13.8
|
%
|
13.5
|
%
|
|
13.3
|
%
|
14.5
|
%
|
|
|
|
|
|
|
Corporate
expense
|
$
|
(12.4)
|
|
$
|
(12.6)
|
|
|
$
|
(49.8)
|
|
$
|
(57.4)
|
|
Pension settlement
charges (2)
|
(16.2)
|
|
(241.8)
|
|
|
(28.1)
|
|
(465.0)
|
|
CDSOA
income(3)
|
6.0
|
|
—
|
|
|
59.6
|
|
—
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
Net sales
|
$
|
654.8
|
|
$
|
714.4
|
|
|
$
|
2,669.8
|
|
$
|
2,872.3
|
|
Earnings (loss)
before interest and taxes (EBIT) (1)
|
$
|
39.8
|
|
$
|
(150.3)
|
|
|
$
|
253.7
|
|
$
|
(158.9)
|
|
EBIT Margin
(1)
|
6.1
|
%
|
(21.0)
|
%
|
|
9.5
|
%
|
(5.5)
|
%
|
|
|
|
|
|
|
(1) EBIT
is a non-GAAP measure defined as operating income plus other income
(expense). EBIT Margin is a non-GAAP measure defined as 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 core operations of the segments and
Company, respectively.
|
|
|
|
|
|
|
(2) Pension settlement charges in
2016 primarily related to lump sum distributions to new retirees,
the purchase of a group annuity contract from The Canada Life
Assurance Company ("Canada Life"), and lump-sum distributions to
deferred vested participants. Pension settlement charges in 2015
primarily related to the purchase of group annuity contracts from
Prudential Insurance Company of America ("Prudential") for two of
the Company's U.S. defined benefit pension plans, as well as lump
sum distributions to new retirees.
|
|
|
|
|
|
|
(3) CDSOA
income represents the amount of funds received by the Company from
monies collected by U.S. Customs on entries of merchandise subject
to anti-dumping orders that entered the U.S. prior to October 1,
2007.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
(Dollars in
millions)
|
(Unaudited)
December 31,
2016
|
|
December 31,
2015
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
148.8
|
|
|
$
|
129.6
|
|
Restricted
cash
|
2.7
|
|
|
0.2
|
|
Accounts
receivable
|
438.0
|
|
|
454.6
|
|
Inventories,
net
|
545.8
|
|
|
543.2
|
|
Other current
assets
|
68.7
|
|
|
78.8
|
|
Total Current
Assets
|
1,204.0
|
|
|
1,206.4
|
|
Property, plant and
equipment, net
|
804.4
|
|
|
777.8
|
|
Goodwill and other
intangible assets
|
628.5
|
|
|
598.6
|
|
Non-current pension
assets
|
32.1
|
|
|
86.3
|
|
Other
assets
|
89.3
|
|
|
115.0
|
|
Total
Assets
|
$
|
2,758.3
|
|
|
$
|
2,784.1
|
|
|
|
|
|
LIABILITIES
|
|
|
|
Accounts
payable
|
$
|
176.2
|
|
|
$
|
159.7
|
|
Short-term debt,
including current portion of long-term debt
|
24.2
|
|
|
77.1
|
|
Income
taxes
|
16.9
|
|
|
13.1
|
|
Accrued
expenses
|
235.4
|
|
|
255.4
|
|
Total Current
Liabilities
|
452.7
|
|
|
505.3
|
|
|
|
|
|
Long-term
debt
|
635.0
|
|
|
579.4
|
|
Accrued pension
cost
|
154.7
|
|
|
146.9
|
|
Accrued
postretirement benefits cost
|
131.5
|
|
|
136.1
|
|
Other non-current
liabilities
|
78.4
|
|
|
71.8
|
|
Total
Liabilities
|
1,452.3
|
|
|
1,439.5
|
|
|
|
|
|
EQUITY
|
|
|
|
The Timken Company
shareholders' equity
|
1,274.9
|
|
|
1,324.5
|
|
Noncontrolling
Interest
|
31.1
|
|
|
20.1
|
|
Total
Equity
|
1,306.0
|
|
|
1,344.6
|
|
Total Liabilities and
Equity
|
$
|
2,758.3
|
|
|
$
|
2,784.1
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Three Months Ended
December 31,
|
Twelve Months
Ended December 31,
|
(Dollars in
millions)
|
2016
|
2015
|
2016
|
2015
|
Cash Provided
(Used)
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net income (loss)
attributable to The Timken Company
|
$
|
24.1
|
|
$
|
(35.7)
|
|
$
|
152.6
|
|
$
|
(70.8)
|
|
Net income
attributable to noncontrolling interest
|
—
|
|
0.3
|
|
0.3
|
|
2.8
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
33.4
|
|
33.0
|
|
131.7
|
|
130.8
|
|
Impairment
charges
|
0.1
|
|
—
|
|
3.9
|
|
3.3
|
|
Gain on
divestitures
|
—
|
|
(29.0)
|
|
—
|
|
(28.7)
|
|
Pension and other
postretirement expense
|
25.1
|
|
251.4
|
|
63.5
|
|
502.9
|
|
Pension and other
postretirement benefit contributions and payments
|
(2.4)
|
|
(6.3)
|
|
(24.7)
|
|
(29.8)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
8.1
|
|
13.8
|
|
20.3
|
|
11.9
|
|
Inventories
|
23.7
|
|
45.7
|
|
10.1
|
|
52.8
|
|
Accounts
payable
|
(2.8)
|
|
(15.4)
|
|
12.2
|
|
11.6
|
|
Accrued
expenses
|
14.4
|
|
5.9
|
|
(4.7)
|
|
(51.7)
|
|
Income
taxes
|
(5.6)
|
|
(152.9)
|
|
17.2
|
|
(210.5)
|
|
Other, net
|
6.8
|
|
17.7
|
|
19.6
|
|
50.2
|
|
Net Cash Provided by
Operating Activities
|
$
|
124.9
|
|
$
|
128.5
|
|
$
|
402.0
|
|
$
|
374.8
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Capital
expenditures
|
$
|
(53.1)
|
|
$
|
(40.5)
|
|
$
|
(137.5)
|
|
$
|
(105.6)
|
|
Acquisitions
|
(9.8)
|
|
0.3
|
|
(72.6)
|
|
(213.3)
|
|
Divestitures
|
—
|
|
43.4
|
|
—
|
|
46.2
|
|
Other
|
(4.8)
|
|
0.4
|
|
(0.9)
|
|
7.5
|
|
Net Cash (Used)
Provided by Investing Activities
|
$
|
(67.7)
|
|
$
|
3.6
|
|
$
|
(211.0)
|
|
$
|
(265.2)
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Cash dividends paid
to shareholders
|
$
|
(20.2)
|
|
$
|
(21.3)
|
|
$
|
(81.6)
|
|
$
|
(87.0)
|
|
Purchase of treasury
shares
|
(17.7)
|
|
(81.8)
|
|
(101.0)
|
|
(309.7)
|
|
Net (payments)
proceeds from credit facilities
|
(1.4)
|
|
(65.9)
|
|
17.6
|
|
131.2
|
|
Net payments from
long-term debt
|
(0.2)
|
|
—
|
|
(15.3)
|
|
(1.1)
|
|
Other
|
8.2
|
|
17.6
|
|
10.9
|
|
25.0
|
|
Net Cash Used by
Financing Activities
|
$
|
(31.3)
|
|
$
|
(151.4)
|
|
$
|
(169.4)
|
|
$
|
(241.6)
|
|
Effect of exchange
rate changes on cash
|
(6.1)
|
|
(6.1)
|
|
(2.4)
|
|
(17.2)
|
|
Increase (Decrease)
in Cash and Cash Equivalents
|
$
|
19.8
|
|
$
|
(25.4)
|
|
$
|
19.2
|
|
$
|
(149.2)
|
|
Cash and cash
equivalents at Beginning of Period
|
129.0
|
|
155.0
|
|
129.6
|
|
278.8
|
|
Cash and Cash
Equivalents at End of Period
|
$
|
148.8
|
|
$
|
129.6
|
|
$
|
148.8
|
|
$
|
129.6
|
|
Reconciliations of
Adjusted Net Income to GAAP Net Income (Loss) and Adjusted Earnings
Per Share to GAAP Earnings (Loss) Per Share:
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following
reconciliation is provided as additional relevant information about
the Company's performance deemed useful to investors.
Management believes that non-GAAP measures of adjusted net income
and adjusted diluted earnings per share 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 adjusted net income
and adjusted diluted earnings per share is useful to investors as
these measures are representative of the Company's core
operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions, except share data)
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
2016
|
|
EPS
|
2015
|
|
EPS
|
|
2016
|
|
EPS
|
2015
|
|
EPS
|
Net Income (Loss)
Attributable to The Timken Company
|
$
|
24.1
|
|
|
$
|
0.31
|
|
$
|
(35.7)
|
|
|
$
|
(0.44)
|
|
|
$
|
152.6
|
|
|
$
|
1.92
|
|
$
|
(70.8)
|
|
|
$
|
(0.84)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
settlement charges(2)
|
$
|
16.2
|
|
|
|
$
|
241.8
|
|
|
|
|
$
|
28.1
|
|
|
|
$
|
465.0
|
|
|
|
Impairment and restructuring
charges(3)
|
6.6
|
|
|
|
3.1
|
|
|
|
|
28.0
|
|
|
|
15.9
|
|
|
|
Acquisition related charges
(4)
|
0.9
|
|
|
|
3.8
|
|
|
|
|
4.2
|
|
|
|
5.7
|
|
|
|
Fixed
asset write-off (5)
|
—
|
|
|
|
9.7
|
|
|
|
|
—
|
|
|
|
9.7
|
|
|
|
CDSOA
income(6)
|
(6.0)
|
|
|
|
—
|
|
|
|
|
(59.6)
|
|
|
|
—
|
|
|
|
Health
care plan modification costs(7)
|
2.9
|
|
|
|
—
|
|
|
|
|
2.9
|
|
|
|
—
|
|
|
|
Gain on
dissolution/divestment of subsidiary(8)
|
—
|
|
|
|
(29.0)
|
|
|
|
|
(0.5)
|
|
|
|
(28.7)
|
|
|
|
Provision
(benefit) for income taxes(9)
|
(8.0)
|
|
|
|
(144.7)
|
|
|
|
|
0.5
|
|
|
|
(207.7)
|
|
|
|
Total
Adjustments:
|
12.6
|
|
|
0.16
|
|
84.7
|
|
|
1.03
|
|
|
3.6
|
|
|
0.05
|
|
259.9
|
|
|
3.05
|
|
Adjusted Net Income
from The Timken Company
|
$
|
36.7
|
|
|
$
|
0.47
|
|
$
|
49.0
|
|
|
$
|
0.59
|
|
|
$
|
156.2
|
|
|
$
|
1.97
|
|
$
|
189.1
|
|
|
$
|
2.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Adjustments are pre-tax, with net
tax provision (benefit) listed separately.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
Pension settlement charges in 2016 primarily related to lump sum
distributions to new retirees, the purchase of a group annuity
contract from Canada Life, and lump-sum distributions to deferred
vested participants. Pension settlement charges in 2015 primarily
related to the purchase of group annuity contracts from Prudential
for two of the Company's U.S. defined benefit pension plans, as
well as lump sum distributions to new retirees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
Impairment and restructuring charges, including items recorded in
cost of products sold, related to plant closures, the
rationalization of certain plants and severance related to cost
reduction initiatives. The Company re-assesses its operating
footprint and makes adjustments as needed that result in
restructuring charges. However, management believes these
actions are not representative of the Company's core
operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)
Acquisition related charges in 2016 related to the acquisition of
Lovejoy, Inc. ("Lovejoy") and EDT Corp. ("EDT"), including one-time
transaction costs. Acquisition related charges in 2015 related to
the acquisition of Carlstar Belts LLC ("Timken Belts").
|
|
(5) The
fixed asset write-off related to costs that remained in
construction in process ("CIP") after the related assets were
placed into service. Management of the Company concluded that
the correction of this error in the fourth quarter of 2015 and the
presence of this error in prior periods is immaterial to all
periods presented.
|
|
(6) CDSOA
income represents the amount of funds received by the Company from
monies collected by U.S. Customs on entries of merchandise subject
to anti-dumping orders that entered the U.S. prior to October 1,
2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) Health
care plan modification costs represent one-time charges associated
with a redesign in medical insurance options available for active
associates. In connection with the redesign, the Company
elected to pay certain unused reimbursement account balances to
associates impacted by the change in available options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) Includes gain on the sale of
Timken Alcor Aerospace Technologies, Inc ("Alcor") of $29.0 million
in the fourth quarter of 2015.
|
|
(9)
Provision (benefit) for income taxes includes the net tax impact on
pre-tax adjustments, 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
EBIT to GAAP Net Income (Loss), and EBIT Margin, After Adjustments,
to Net Income (Loss) as a Percentage of Sales and EBIT, After
Adjustments, to Net Income (Loss):
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
The following
reconciliation is provided as additional relevant information about
the Company's performance deemed useful to investors.
Management believes consolidated earnings (loss) before
interest and taxes (EBIT) is a non-GAAP measure that is useful to
investors as it is representative of the Company's performance and
that it is appropriate to compare GAAP net income (loss) to
consolidated EBIT. Management also believes that non-GAAP measures
of adjusted EBIT and adjusted EBIT margin are useful to investors
as they are representative of the Company's core operations and are
used in the management of the business, including decisions
concerning the allocation of resources and assessment of
performance.
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions, except share data)
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2016
|
Percentage
to Net
Sales
|
2015
|
Percentage
to
Net Sales
|
|
2016
|
Percentage
to Net Sales
|
2015
|
Percentage
to Net Sales
|
Net Income
(Loss)
|
$
|
24.1
|
|
3.7
|
%
|
$
|
(35.4)
|
|
(5.0)
|
%
|
|
$
|
152.9
|
|
5.7
|
%
|
$
|
(68.0)
|
|
(2.4)
|
%
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit)
for income taxes
|
8.1
|
|
1.2
|
%
|
(122.6)
|
|
(17.2)
|
%
|
|
69.2
|
|
2.6
|
%
|
(121.6)
|
|
(4.2)
|
%
|
Interest
expense
|
8.4
|
|
1.3
|
%
|
8.4
|
|
1.2
|
%
|
|
33.5
|
|
1.3
|
%
|
33.4
|
|
1.2
|
%
|
Interest
income
|
(0.8)
|
|
—
|
%
|
(0.7)
|
|
(0.1)
|
%
|
|
(1.9)
|
|
(0.1)
|
%
|
(2.7)
|
|
(0.1)
|
%
|
Consolidated
EBIT
|
$
|
39.8
|
|
6.1
|
%
|
$
|
(150.3)
|
|
(21.0)
|
%
|
|
$
|
253.7
|
|
9.5
|
%
|
$
|
(158.9)
|
|
(5.5)
|
%
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Pension
settlement charges (1)
|
$
|
16.2
|
|
2.5
|
%
|
$
|
241.8
|
|
33.9
|
%
|
|
$
|
28.1
|
|
1.1
|
%
|
$
|
465.0
|
|
16.2
|
%
|
Impairment and restructuring
charges(2)
|
6.6
|
|
1.0
|
%
|
3.1
|
|
0.4
|
%
|
|
28.0
|
|
1.0
|
%
|
15.9
|
|
0.5
|
%
|
CDSOA
income(3)
|
(6.0)
|
|
(0.9)
|
%
|
—
|
|
—
|
%
|
|
(59.6)
|
|
(2.2)
|
%
|
—
|
|
—
|
%
|
Health
care plan modification costs(4)
|
2.9
|
|
—
|
%
|
—
|
|
—
|
%
|
|
2.9
|
|
4.0
|
%
|
—
|
|
—
|
%
|
Acquisition related
charges(5)
|
0.9
|
|
0.1
|
%
|
3.8
|
|
0.5
|
%
|
|
4.2
|
|
0.2
|
%
|
5.7
|
|
0.2
|
%
|
Fixed
asset write-off (6)
|
—
|
|
—
|
%
|
9.7
|
|
1.4
|
%
|
|
—
|
|
—
|
%
|
9.7
|
|
0.3
|
%
|
Gain on
dissolution/divestment of subsidiary(7)
|
—
|
|
—
|
%
|
(29.0)
|
|
(4.1)
|
%
|
|
(0.5)
|
|
—
|
%
|
(28.7)
|
|
(1.0)
|
%
|
Total
Adjustments
|
20.6
|
|
6.7
|
%
|
229.4
|
|
32.1
|
%
|
|
3.1
|
|
4.1
|
%
|
467.6
|
|
16.2
|
%
|
Adjusted
EBIT
|
$
|
60.4
|
|
9.2
|
%
|
$
|
79.1
|
|
11.1
|
%
|
|
$
|
256.8
|
|
9.6
|
%
|
$
|
308.7
|
|
10.7
|
%
|
|
|
|
|
|
|
|
|
|
|
(1) Pension settlement charges in
2016 primarily related to lump sum distributions to new retirees,
the purchase of a group annuity contract from Canada Life, and
lump-sum distributions to deferred vested participants. Pension
settlement charges in 2015 primarily related to the purchase of
group annuity contracts from Prudential for two of the Company's
U.S. defined benefit pension plans, as well as lump sum
distributions to new retirees.
|
|
|
|
|
|
|
|
|
|
|
(2)
Impairment and restructuring charges, including rationalization
costs recorded in cost of products sold, related to plant closures,
the rationalization of certain plants and severance related to cost
reduction initiatives. The Company re-assesses its operating
footprint and makes adjustments as needed that result in
restructuring charges. However, management believes that
these actions are not representative of the Company's core
operations.
|
|
|
|
|
|
|
|
|
|
|
(3) CDSOA
income represents the amount of funds received by the Company from
monies collected by U.S. Customs on entries of merchandise subject
to anti-dumping orders that entered the U.S. prior to October 1,
2007.
|
|
|
|
|
|
|
|
|
|
|
(4) Health
care plan modification costs represent one-time charges associated
with a redesign in medical insurance options available for active
associates. In connection with the redesign, the Company
elected to pay certain unused reimbursement account balances to
associates impacted by the change in available options.
|
|
|
|
|
|
|
|
|
|
|
(5)
Acquisition related charges in 2016 related to the acquisition of
Lovejoy and EDT, including one-time transaction costs. Acquisition
related charges in 2015 related to the acquisition of Timken
Belts.
|
|
|
|
|
|
|
|
|
|
|
(6) The fixed asset write-off related
to costs that remained in CIP after the related assets were placed
into service. Management of the Company concluded that the
correction of this error in the fourth quarter of 2015 and the
presence of this error in prior periods is immaterial to all
periods presented.
|
|
|
|
|
|
|
|
|
|
|
(7)
Includes gain on the sale of Alcor of $29.0 million in the fourth
quarter of 2015.
|
Reconciliation of
segment EBIT Margin, After Adjustments, to segment EBIT as a
Percentage of Sales and segment EBIT, After Adjustments, to segment
EBIT:
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
The following
reconciliation is provided as additional relevant information about
the Company's Mobile Industries and Process Industries segment
performance deemed useful to investors. Management believes that
non-GAAP measures of adjusted EBIT and adjusted EBIT margin for the
segments are useful to investors as they are representative of each
segment's core operations and are used in the management of the
business, including decisions concerning the allocation of
resources and assessment of performance.
|
|
|
|
|
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Three Months
Ended
December 31,
2016
|
Percentage
to Net
Sales
|
Three Months
Ended
December 31,
2015
|
Percentage
to Net
Sales
|
|
Twelve Months
Ended
December 31,
2016
|
Percentage
to Net
Sales
|
Twelve Months
Ended
December 31,
2015
|
Percentage
to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
|
19.2
|
|
5.6
|
%
|
$
|
58.9
|
|
15.5
|
%
|
|
$
|
108.8
|
|
7.5
|
%
|
$
|
173.3
|
|
11.1
|
%
|
|
|
|
|
|
|
|
|
|
|
Impairment and
restructuring charges (1)
|
5.6
|
|
1.6
|
%
|
2.5
|
|
0.6
|
%
|
|
21.5
|
|
1.5
|
%
|
6.9
|
|
0.4
|
%
|
Gain on
dissolution/divestment of subsidiary (2)
|
—
|
|
—
|
%
|
$
|
(29.0)
|
|
(7.6)
|
%
|
|
(1.4)
|
|
(0.1)
|
%
|
(29.0)
|
|
(1.8)
|
%
|
Health care plan
modification costs (3)
|
1.7
|
|
0.5
|
%
|
$
|
—
|
|
—
|
%
|
|
1.7
|
|
0.1
|
%
|
—
|
|
—
|
%
|
Acquisition related
charges (4)
|
—
|
|
—
|
%
|
2.3
|
|
0.6
|
%
|
|
—
|
|
—
|
%
|
3.0
|
|
0.2
|
%
|
Fixed asset write-off
(5)
|
—
|
|
—
|
%
|
1.5
|
|
0.4
|
%
|
|
—
|
|
—
|
%
|
1.5
|
|
0.1
|
%
|
Adjusted
EBIT
|
$
|
26.5
|
|
7.7
|
%
|
$
|
36.2
|
|
9.5
|
%
|
|
$
|
130.6
|
|
9.0
|
%
|
$
|
155.7
|
|
10.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Three Months
Ended
December 31, 2016
|
Percentage to
Net
Sales
|
Three Months
Ended
December 31,
2015
|
Percentage to Net
Sales
|
|
Twelve Months
Ended
December 31,
2016
|
Percentage to
Net
Sales
|
Twelve Months
Ended
December 31,
2015
|
Percentage to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
|
43.2
|
|
13.8
|
%
|
$
|
45.2
|
|
13.5
|
%
|
|
$
|
163.2
|
|
13.3
|
%
|
$
|
190.2
|
|
14.5
|
%
|
|
|
|
|
|
|
|
|
|
|
Impairment and
restructuring charges(1)
|
1.2
|
|
0.4
|
%
|
1.0
|
|
0.3
|
%
|
|
6.7
|
|
0.5
|
%
|
8.9
|
|
0.7
|
%
|
Loss on
dissolution/divestment of subsidiary (2)
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
0.9
|
|
0.1
|
%
|
0.3
|
|
—
|
%
|
Health care plan
modification costs (3)
|
0.7
|
|
0.2
|
%
|
—
|
|
—
|
%
|
|
0.7
|
|
0.1
|
%
|
—
|
|
—
|
%
|
Acquisition related
charges (4)
|
0.7
|
|
0.2
|
%
|
1.3
|
|
0.4
|
%
|
|
2.4
|
|
0.2
|
%
|
1.8
|
|
0.1
|
%
|
Fixed asset write-off
(5)
|
—
|
|
—
|
%
|
8.2
|
|
2.5
|
%
|
|
—
|
|
—
|
%
|
8.2
|
|
0.6
|
%
|
Adjusted
EBIT
|
$
|
45.8
|
|
14.6
|
%
|
$
|
55.7
|
|
16.7
|
%
|
|
$
|
173.9
|
|
14.2
|
%
|
$
|
209.4
|
|
15.9
|
%
|
|
|
|
|
|
|
|
|
|
|
(1) Impairment and
restructuring charges, including rationalization costs recorded in
cost of products sold, related to plant closures, the
rationalization of certain plants and severance related to cost
reduction initiatives. The Company re-assesses its operating
footprint and makes adjustments as needed that result in
restructuring charges. However, management believes these
actions are not representative of the Company's core
operations.
|
|
|
|
|
|
|
|
|
|
|
(2) Includes (gain) loss on the sale
of Alcor of $29.0 million in the fourth quarter of 2015.
|
|
|
|
|
|
|
|
|
|
|
(3) Health
care plan modification costs represent one-time charges associated
with a redesign in medical insurance options available for active
associates. In connection with the redesign, the Company
elected to pay certain unused reimbursement account balances to
associates impacted by the change in available options.
|
|
|
|
|
|
|
|
|
|
|
(4) Acquisition related charges in
2016 related to the acquisition of Lovejoy and EDT, including
one-time transaction costs. Acquisition related charges in 2015
related to the acquisition of Timken Belts.
|
|
|
|
|
|
|
|
|
|
|
(5) The
fixed asset write-off related to costs that remained in CIP after
the related assets were placed into service. Management of
the Company concluded that the correction of this error in the
fourth quarter of 2015 and the presence of this error in prior
periods is immaterial to all periods presented.
|
Reconciliation of
Total Debt to Net Debt and the Ratio of Net Debt to Capital to the
Ratio of Total Debt to Capital:
|
(Unaudited)
|
|
|
|
|
These reconciliations
are provided as additional relevant information about the Company's
financial position deemed useful to investors. Capital, used for
the ratio of total debt to capital, is a non-GAAP measure defined
as total debt plus total shareholders' equity. Capital, used for
the ratio of net debt to capital, is a non-GAAP measure defined as
total debt less cash, cash equivalents and restricted cash plus
total shareholders' equity. Management believes Net Debt and the
Ratio of Net Debt to Capital are important measures of the
Company's financial position, due to the amount of cash and cash
equivalents on hand.
|
|
|
|
|
(Dollars in
millions)
|
|
|
|
|
|
|
December 31,
2016
|
December 31,
2015
|
Short-term debt,
including current portion of long-term debt
|
|
|
$
|
24.2
|
|
$
|
77.1
|
|
Long-term
debt
|
|
|
635.0
|
|
579.4
|
|
Total
Debt
|
|
|
$
|
659.2
|
|
$
|
656.5
|
|
Less: Cash, cash
equivalents and restricted cash
|
|
|
(151.5)
|
|
(129.8)
|
|
Net Debt
|
|
|
$
|
507.7
|
|
$
|
526.7
|
|
|
|
|
|
|
Total
equity
|
|
|
$
|
1,306.0
|
|
$
|
1,344.6
|
|
|
|
|
|
|
Ratio of Total Debt
to Capital
|
|
|
33.5
|
%
|
32.8
|
%
|
Ratio of Net Debt to
Capital
|
|
|
28.0
|
%
|
28.1
|
%
|
|
|
|
|
|
Reconciliation of
Free Cash Flow to GAAP Net Cash Provided by Operating
Activities:
|
(Unaudited)
|
|
|
|
|
Management believes
that free cash flow is a non-GAAP measure that 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)
|
|
|
|
|
Three Months
Ended
December 31,
|
Twelve Months
Ended
December 31,
|
|
2016
|
2015
|
2016
|
2015
|
Net cash provided by
operating activities
|
$
|
124.9
|
|
$
|
128.5
|
|
$
|
402.0
|
|
$
|
374.8
|
|
Less: capital
expenditures
|
(53.1)
|
|
(40.5)
|
|
(137.5)
|
|
(105.6)
|
|
Free cash
flow
|
$
|
71.8
|
|
$
|
88.0
|
|
$
|
264.5
|
|
$
|
269.2
|
|
Reconciliation of
Adjusted Earnings per Share to GAAP Earnings per Share for Full
Year 2017 Outlook:
|
(Unaudited)
|
The following
reconciliation is provided as additional relevant information about
the Company's outlook deemed useful to investors. Forecasted
full year adjusted diluted earnings per share is an important
financial measure that management believes is useful to investors
as it is representative of the Company's expectation for the
performance of its core business operations.
|
|
|
|
|
|
Low End
Earnings
Per Share
|
|
High End
Earnings
Per Share
|
Forecasted full year
GAAP diluted earnings per share
|
$
|
1.90
|
|
|
$
|
2.00
|
|
|
|
|
Forecasted
Adjustments:
|
|
|
|
Impairment and restructuring charges
(1)
|
0.15
|
|
|
0.15
|
Total
Adjustments:
|
$
|
0.15
|
|
|
$
|
0.15
|
Forecasted full year
adjusted diluted earnings per share
|
$
|
2.05
|
|
|
$
|
2.15
|
|
|
|
|
|
|
|
|
(1) Impairment and restructuring
charges relate to severance and other cost reduction initiatives,
net of tax.
|
|
|
|
|
Reconciliation of
Free Cash Flow to GAAP Net Cash Provided by Operating Activities
for Full Year 2017 Outlook:
|
(Unaudited)
|
|
|
|
|
|
|
|
Forecasted full year
free cash flow is a non-GAAP measure that is useful to investors
because it is representative of the Company's expectation of cash
that will be generated from operating activities and available for
the execution of its business strategy.
|
(Dollars in
Millions)
|
|
|
Free Cash
Flow Outlook
|
Net cash provided by
operating activities
|
|
|
$
|
310.0
|
Less: capital
expenditures
|
|
|
(110.0)
|
Free cash
flow
|
|
|
$
|
200.0
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/timken-reports-fourth-quarter-and-full-year-2016-results-provides-2017-outlook-300404611.html
SOURCE The Timken Company