NORTH CANTON, Ohio,
April 26, 2017 /PRNewswire/
-- The Timken Company (NYSE: TKR; www.timken.com), a
global leader in bearings and mechanical power transmission
products, today reported first-quarter 2017 sales
of $703.8 million, up 2.9 percent from the same period a
year ago. The results reflect increased industrial distribution and
off-highway demand, as well as the benefit of acquisitions,
partially offset by lower rail, wind energy and aerospace
shipments.
In the first quarter, Timken posted net income
of $38.2 million or $0.48 per diluted share,
versus net income of $65.9 million or $0.82 per
diluted share for the same period a year ago. The year-ago period
included CDSOA1 income of approximately
$31 million after-tax. The
year-over-year change in net income also reflects the impact of
higher volume, improved manufacturing performance and lower
restructuring charges, partially offset by unfavorable price/mix
and a pension mark-to-market remeasurement charge in the
quarter.
Excluding special items (detailed in the attached tables),
adjusted net income in the first quarter of 2017
was $43.7 million or $0.55 per diluted share,
up from $39.9 million
or $0.50 per diluted share for the same period in 2016.
The increase in adjusted net income reflects the impact of higher
volume and improved manufacturing performance, partially offset by
unfavorable price/mix. The company generated cash from operations
of $46.7 million and free cash flow
of $27.4 million in the first
quarter.
"We had a solid start to the year, with stronger demand in
sectors like industrial distribution and off-highway," said
Richard G. Kyle, Timken president
and chief executive officer. "We responded well to the increase in
demand, improved operating margins and generated solid cash flow,
while continuing to advance our strategy across the globe."
Recently, the company:
- Added to its mechanical power transmission product portfolio
with the acquisition of Torsion Control Products, Inc., a
manufacturer of engineered torsional couplings, which complements
the Lovejoy acquisition made last year; and
- Returned $28 million in capital
to shareholders in the first quarter through the repurchase of
185,000 shares and the payment of its 379th consecutive quarterly
dividend.
First-Quarter Segment Results
Mobile Industries reported first-quarter sales
of $383 million, roughly flat compared to the same period
a year ago, with increased demand in the mining and agriculture
sectors offset by softness in rail and aerospace.
Earnings before interest and taxes (EBIT) in the quarter
were $30.8 million or 8 percent of sales,
compared with EBIT of $32 million
or 8.4 percent of sales for the same period a year ago.
The decrease in EBIT primarily reflects unfavorable price/mix in
the quarter partially offset by favorable currency.
Excluding special items (detailed in the attached tables),
adjusted EBIT in the quarter was $36.6 million
or 9.6 percent of sales, compared
with $37.7 million or 9.8 percent of sales in the
first quarter last year.
Process Industries sales of $320.8 million for
the first quarter were up 6.6 percent from the same period a year
ago, driven primarily by increased industrial distribution demand,
higher marine revenue and the benefit of acquisitions, partially
offset by lower revenue in wind energy and services.
EBIT for the quarter was $43 million
or 13.4 percent of sales, compared with EBIT
of $33.8 million or 11.2 percent of sales for
the same period a year ago. The increase in EBIT was driven by the
impact of higher volume, improved manufacturing performance, lower
SG&A expenses and the benefit of acquisitions, partially offset
by unfavorable price/mix. In addition to these operating factors,
year-on-year results were also impacted by lower restructuring
charges in the quarter.
Excluding special items (detailed in the attached tables),
adjusted EBIT in the quarter was $44.2 million or 13.8 percent of
sales, compared with $37.4 million or 12.4 percent of
sales in the first quarter last year.
2017 Outlook
"Encouraged by our start to the year, we are raising our revenue
and earnings outlook, with the expectation that markets sustain
their recent improvements," said Kyle. "We are confident in our
ability to generate solid bottom-line growth in 2017."
The company now expects 2017 revenue to be up 5 to 6 percent in
total versus 2016. Within its segments, the company estimates
full-year 2017:
- Mobile Industries' sales to be up 2-3 percent, driven primarily
by improved demand in the off-highway and heavy truck sectors and
the benefit of acquisitions, partially offset by continued weakness
in the rail sector.
- Process Industries' sales to be up 9-10 percent, reflecting
growth across most end-market sectors and the benefit of
acquisitions, offset partially by unfavorable currency.
Timken now anticipates 2017 earnings per diluted share to range
from $2.15 to $2.25 for the full year
on a GAAP basis, which does not include the impact of any potential
mark-to-market pension remeasurement adjustments in the fourth
quarter.
The company expects 2017 adjusted earnings per diluted share to
range from $2.35 to $2.45.
Recast of 2016 Earnings for Change in Accounting
Principle
In the first quarter of 2017, Timken implemented a change in
accounting principle for pension and OPEB costs. Prior to 2017, the
Company amortized actuarial gains and losses into earnings over
time. Under the new principle, the company will recognize actuarial
gains and losses as a mark-to-market remeasurement gain or loss
when they occur rather than amortizing them to earnings over time.
In addition, the Company has changed its accounting policy for
measuring the market-related value of plan assets from a calculated
amount (based on a smoothing of asset returns) to fair value. As a
result of these changes, 2016 earnings have been recast to make the
company's results comparable year-over-year. First-quarter 2016
earnings have been recast from $0.78 to
$0.82 per diluted share. First-quarter 2016 adjusted
earnings have been recast from $0.46 to
$0.50 per diluted share. More information on the 2016 impact
of this change in accounting principle can be found in the Form 8-K
filed by the company on April 24,
2017.
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:
|
Wednesday, April 26,
2017
|
|
11:00 a.m. Eastern
Time
|
|
Live Dial-In:
877-545-1407 or 719-325-4795
|
|
(Call in 10 minutes
prior to be included.)
|
|
Conference ID:
Timken's 1Q Earnings Call
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through May 10, 2017:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
1748373
|
|
|
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®,
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 first
quarter of 2017; 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; 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, 2016, 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.
1 Represents funds received by the company under the
U.S. Continued Dumping and Subsidy Offset Act (CDSOA).
Media Relations:
234.262.3514
mediarelations@timken.com
Investor Relations:
Jason
Hershiser
234.262.7101
jason.hershiser@timken.com
|
|
|
|
|
|
|
|
The Timken
Company
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
(Unaudited)
|
|
|
(Dollars in millions,
except per share data)
|
Three Months
Ended
March 31,
|
|
2017
|
2016
|
|
|
|
Net sales
|
$
|
703.8
|
|
$
|
684.0
|
|
Cost of products
sold
|
523.3
|
|
500.9
|
|
Gross
Profit
|
180.5
|
|
183.1
|
|
Selling, general
& administrative expenses
|
119.6
|
|
117.3
|
|
Impairment and
restructuring charges
|
1.7
|
|
10.5
|
|
Operating
Income
|
59.2
|
|
55.3
|
|
Continued Dumping and
Subsidy Offset Act income, net(1)
|
—
|
|
47.7
|
|
Other income,
net
|
1.7
|
|
—
|
|
Earnings Before
Interest and Taxes (EBIT)(2)
|
60.9
|
|
103.0
|
|
Interest expense,
net
|
(7.3)
|
|
(8.1)
|
|
Income Before
Income Taxes
|
53.6
|
|
94.9
|
|
Provision for income
taxes
|
15.5
|
|
29.1
|
|
Net
Income
|
38.1
|
|
65.8
|
|
Less: Net loss
attributable to noncontrolling interest
|
(0.1)
|
|
(0.1)
|
|
Net Income
Attributable to The Timken Company
|
$
|
38.2
|
|
$
|
65.9
|
|
|
|
|
Net Income per
Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
Basic Earnings per
share
|
$
|
0.49
|
|
$
|
0.83
|
|
|
|
|
Diluted Earnings per
share
|
$
|
0.48
|
|
$
|
0.82
|
|
|
|
|
Average Shares
Outstanding
|
77,731,793
|
|
79,769,761
|
|
Average Shares
Outstanding - assuming dilution
|
78,893,954
|
|
80,437,533
|
|
|
|
|
(1) U.S.
Continued Dumping and Subsidy Offset Act ("CDSOA") income, net,
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
March 31,
|
(Dollars in
millions)
|
2017
|
2016
|
|
|
|
Mobile
Industries
|
|
|
Net sales
|
$
|
383.0
|
|
$
|
383.2
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
30.8
|
|
$
|
32.0
|
|
EBIT Margin
(1)
|
8.0
|
%
|
8.4
|
%
|
|
|
|
Process
Industries
|
|
|
Net sales
|
$
|
320.8
|
|
$
|
300.8
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
43.0
|
|
$
|
33.8
|
|
EBIT Margin
(1)
|
13.4
|
%
|
11.2
|
%
|
|
|
|
Corporate
expense
|
$
|
(12.9)
|
|
$
|
(10.5)
|
|
CDSOA income,
net(2)
|
—
|
|
47.7
|
|
|
|
|
Consolidated
|
|
|
Net sales
|
$
|
703.8
|
|
$
|
684.0
|
|
Earnings (loss)
before interest and taxes (EBIT) (1)
|
$
|
60.9
|
|
$
|
103.0
|
|
EBIT Margin
(1)
|
8.7
|
%
|
15.1
|
%
|
|
|
|
(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) CDSOA
income, net, 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)
March 31,
2017
|
|
December 31,
2016
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
129.5
|
|
|
$
|
148.8
|
|
Restricted
cash
|
2.9
|
|
|
2.7
|
|
Accounts
receivable
|
492.7
|
|
|
438.0
|
|
Inventories,
net
|
566.2
|
|
|
553.7
|
|
Other current
assets
|
79.4
|
|
|
68.7
|
|
Total Current
Assets
|
1,270.7
|
|
|
1,211.9
|
|
Property, plant and
equipment, net
|
807.6
|
|
|
804.4
|
|
Goodwill and other
intangible assets
|
622.6
|
|
|
628.5
|
|
Non-current pension
assets
|
30.6
|
|
|
32.1
|
|
Other
assets
|
84.1
|
|
|
86.3
|
|
Total
Assets
|
$
|
2,815.6
|
|
|
$
|
2,763.2
|
|
|
|
|
|
LIABILITIES
|
|
|
|
Accounts
payable
|
$
|
226.6
|
|
|
$
|
176.2
|
|
Short-term debt,
including current portion of long-term debt
|
37.2
|
|
|
24.2
|
|
Income
taxes
|
25.2
|
|
|
16.9
|
|
Accrued
expenses
|
209.4
|
|
|
235.4
|
|
Total Current
Liabilities
|
498.4
|
|
|
452.7
|
|
|
|
|
|
Long-term
debt
|
600.1
|
|
|
635.0
|
|
Accrued pension
cost
|
155.5
|
|
|
154.7
|
|
Accrued
postretirement benefits cost
|
130.7
|
|
|
131.5
|
|
Other non-current
liabilities
|
76.1
|
|
|
78.4
|
|
Total
Liabilities
|
1,460.8
|
|
|
1,452.3
|
|
|
|
|
|
EQUITY
|
|
|
|
The Timken Company
shareholders' equity
|
1,321.1
|
|
|
1,279.7
|
|
Noncontrolling
Interest
|
33.7
|
|
|
31.2
|
|
Total
Equity
|
1,354.8
|
|
|
1,310.9
|
|
Total Liabilities and
Equity
|
$
|
2,815.6
|
|
|
$
|
2,763.2
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
(Unaudited)
|
|
|
|
Three Months
Ended
March 31,
|
(Dollars in
millions)
|
2017
|
2016
|
Cash Provided
(Used)
|
|
|
OPERATING
ACTIVITIES
|
|
|
Net income
attributable to The Timken Company
|
$
|
38.2
|
|
$
|
65.9
|
|
Net loss attributable
to noncontrolling interest
|
(0.1)
|
|
(0.1)
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
32.9
|
|
32.6
|
|
Impairment
charges
|
—
|
|
2.6
|
|
CDSOA
receivable
|
—
|
|
(48.1)
|
|
Pension and other
postretirement expense
|
7.2
|
|
4.9
|
|
Pension and other
postretirement benefit contributions and payments
|
(6.1)
|
|
(10.2)
|
|
Changes in operating
assets and liabilities:
|
|
|
Accounts
receivable
|
(50.3)
|
|
(4.9)
|
|
Inventories
|
(6.5)
|
|
(0.1)
|
|
Accounts
payable
|
48.6
|
|
16.5
|
|
Accrued
expenses
|
(28.4)
|
|
(30.3)
|
|
Income
taxes
|
8.2
|
|
23.9
|
|
Other, net
|
3.0
|
|
(4.1)
|
|
Net Cash Provided by
Operating Activities
|
$
|
46.7
|
|
$
|
48.6
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
Capital
expenditures
|
$
|
(19.3)
|
|
$
|
(24.2)
|
|
Investments in
short-term marketable securities, net
|
(6.8)
|
|
(0.5)
|
|
Other
|
(0.8)
|
|
0.1
|
|
Net Cash Used by
Investing Activities
|
$
|
(26.9)
|
|
$
|
(24.6)
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
Cash dividends paid
to shareholders
|
$
|
(20.3)
|
|
$
|
(20.7)
|
|
Purchase of treasury
shares
|
(8.1)
|
|
(35.0)
|
|
Proceeds from
exercise of stock options
|
16.6
|
|
0.3
|
|
Shares surrendered
for taxes
|
(8.2)
|
|
(1.5)
|
|
Net (payments)
proceeds from credit facilities
|
(22.6)
|
|
31.2
|
|
Net payments from
long-term debt
|
(0.3)
|
|
—
|
|
Other
|
(0.1)
|
|
4.8
|
|
Net Cash Used by
Financing Activities
|
$
|
(43.0)
|
|
$
|
(20.9)
|
|
Effect of exchange
rate changes on cash
|
3.9
|
|
4.6
|
|
(Decrease) Increase
in Cash and Cash Equivalents
|
$
|
(19.3)
|
|
$
|
7.7
|
|
Cash and Cash
Equivalents at Beginning of Period
|
148.8
|
|
129.6
|
|
Cash and Cash
Equivalents at End of Period
|
$
|
129.5
|
|
$
|
137.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
March 31,
|
|
|
2017
|
|
EPS
|
2016
|
|
EPS
|
Net Income
Attributable to The Timken Company
|
|
$
|
38.2
|
|
|
$
|
0.48
|
|
$
|
65.9
|
|
|
$
|
0.82
|
|
|
|
|
|
|
|
|
|
Adjustments:(1)
|
|
|
|
|
|
|
|
Impairment and restructuring
charges(2)
|
|
$
|
4.6
|
|
|
|
$
|
10.7
|
|
|
|
Acquisition related charges
|
|
0.1
|
|
|
|
—
|
|
|
|
Pension
related charges(3)
|
|
4.4
|
|
|
|
1.2
|
|
|
|
CDSOA
income, net(4)
|
|
—
|
|
|
|
(47.7)
|
|
|
|
Gain on
dissolution of subsidiary
|
|
—
|
|
|
|
(1.4)
|
|
|
|
(Benefit)
provision for income taxes(5)
|
|
(3.6)
|
|
|
|
11.2
|
|
|
|
Total
Adjustments:
|
|
5.5
|
|
|
0.07
|
|
(26.0)
|
|
|
(0.32)
|
|
Adjusted Net Income
from The Timken Company
|
|
$
|
43.7
|
|
|
$
|
0.55
|
|
$
|
39.9
|
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
(1) Adjustments are pre-tax, with net
tax provision (benefit) listed separately.
|
|
|
|
|
|
|
|
|
(2)
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.
|
|
|
|
|
|
|
|
|
(3) In
2017, pension related charges represent actuarial losses that
resulted from the remeasurement of pension plan assets and
obligations as a result of changes in assumptions. The Company
recognizes actuarial (gains) and losses through earnings in
connection with the annual remeasurement in the fourth quarter, or
on an interim basis if specific events trigger a remeasurement. In
2016, pension related charges represent professional fees
associated with the implementation of a group annuity
contract.
|
|
|
|
|
|
|
|
|
(4) CDSOA
income, net, 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.
|
|
|
|
|
|
|
|
|
(5)
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliations of
Adjusted Gross Profit to GAAP Gross Profit and Adjusted Gross
Profit as a Percentage of Sales to GAAP Gross Profit as a
Percentage of Sales:
|
(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 gross profit and
adjusted gross profit 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 adjusted gross profit and
adjusted gross profit margin are useful to investors as these
measures are representative of the Company's core
operations.
|
|
|
|
|
|
(Dollars in
millions)
|
Three Months
Ended
March 31,
|
|
2017
|
Percentage to
Net Sales
|
2016
|
Percentage
to
Net Sales
|
Gross
Profit
|
$
|
180.5
|
|
25.6
|
%
|
$
|
183.1
|
|
26.8
|
%
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Impairment and restructuring
charges(1)
|
2.8
|
|
0.4
|
%
|
0.2
|
|
—
|
%
|
Acquisition related
charge(2)
|
0.1
|
|
—
|
%
|
—
|
|
—
|
%
|
Pension related
charges(3)
|
2.5
|
|
0.4
|
%
|
—
|
|
—
|
%
|
Total
Adjustments:
|
$
|
5.4
|
|
0.8
|
%
|
$
|
0.2
|
|
—
|
%
|
Adjusted Gross
Profit
|
$
|
185.9
|
|
26.4
|
%
|
$
|
183.3
|
|
26.8
|
%
|
|
|
|
|
|
(1) Impairment and restructuring
charges related to plant closures and the rationalization of
certain plants. 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) Acquisition related charges in
2017 relate to the acquisition of EDT Corp. ("EDT"), including
one-time transaction costs.
|
|
|
|
|
|
(3) Pension related charges represent
actuarial losses that resulted from the remeasurement of pension
plan assets and obligations as a result of changes in assumptions.
The Company recognizes actuarial (gains) and losses through
earnings in connection with the annual remeasurement in the fourth
quarter, or on an interim basis if specific events trigger a
remeasurement.
|
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)
|
Three Months
Ended
March 31,
|
|
2017
|
Percentage to
Net Sales
|
2016
|
Percentage
to
Net Sales
|
Net Income
|
$
|
38.1
|
|
5.4
|
%
|
$
|
65.8
|
|
9.6
|
%
|
|
|
|
|
|
Provision for income
taxes
|
15.5
|
|
2.2
|
%
|
29.1
|
|
4.3
|
%
|
Interest
expense
|
7.9
|
|
1.1
|
%
|
8.4
|
|
1.2
|
%
|
Interest
income
|
(0.6)
|
|
—
|
%
|
(0.3)
|
|
—
|
%
|
Consolidated
EBIT
|
$
|
60.9
|
|
8.7
|
%
|
$
|
103.0
|
|
15.1
|
%
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Impairment and restructuring
charges(1)
|
$
|
4.6
|
|
0.6
|
%
|
$
|
10.7
|
|
1.5
|
%
|
CDSOA
income(2)
|
—
|
|
—
|
%
|
(47.7)
|
|
(7.0)
|
%
|
Acquisition related charges
|
0.1
|
|
—
|
%
|
—
|
|
—
|
%
|
Pension
related charges(3)
|
4.4
|
|
0.6
|
%
|
1.2
|
|
0.2
|
%
|
Gain on
dissolution of subsidiary
|
—
|
|
—
|
%
|
(1.4)
|
|
(0.2)
|
%
|
Total
Adjustments
|
9.1
|
|
1.2
|
%
|
(37.2)
|
|
(5.5)
|
%
|
Adjusted
EBIT
|
$
|
70.0
|
|
9.9
|
%
|
$
|
65.8
|
|
9.6
|
%
|
|
|
|
|
|
(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 that
these actions are not representative of the Company's core
operations.
|
|
|
|
|
|
(2) CDSOA
income, net, 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.
|
|
|
|
|
|
(3) In
2017, pension related charges represent actuarial losses that
resulted from the remeasurement of pension plan assets and
obligations as a result of changes in assumptions. The Company
recognizes actuarial (gains) and losses through earnings in
connection with the annual remeasurement in the fourth quarter, or
on an interim basis if specific events trigger a remeasurement. In
2016, pension related charges represent professional fees
associated with the implementation of a group annuity
contract.
|
|
|
|
|
|
|
|
|
|
|
|
|
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
March 31, 2017
|
Percentage to Net
Sales
|
Three Months
Ended
March 31, 2016
|
Percentage to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
|
30.8
|
|
8.0
|
%
|
$
|
32.0
|
|
8.4
|
%
|
|
|
|
|
|
Impairment and
restructuring charges (1)
|
4.0
|
|
1.1
|
%
|
7.1
|
|
1.8
|
%
|
Gain on dissolution
of subsidiary
|
—
|
|
—
|
%
|
$
|
(1.4)
|
|
(0.4)
|
%
|
Pension related
charges(2)
|
1.8
|
|
0.5
|
%
|
—
|
|
—
|
%
|
Adjusted
EBIT
|
$
|
36.6
|
|
9.6
|
%
|
$
|
37.7
|
|
9.8
|
%
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
(Dollars in
millions)
|
Three Months
Ended
March 31, 2017
|
Percentage to Net
Sales
|
Three Months
Ended
March 31, 2016
|
Percentage to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
|
43.0
|
|
13.4
|
%
|
$
|
33.8
|
|
11.2
|
%
|
|
|
|
|
|
Impairment and
restructuring charges(1)
|
—
|
|
—
|
%
|
3.6
|
|
1.2
|
%
|
Acquisition related
charges
|
0.1
|
|
—
|
%
|
—
|
|
—
|
%
|
Pension related
charges(2)
|
1.1
|
|
0.4
|
%
|
—
|
|
—
|
%
|
Adjusted
EBIT
|
$
|
44.2
|
|
13.8
|
%
|
$
|
37.4
|
|
12.4
|
%
|
|
|
|
|
|
(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)
Pension related charges represent actuarial losses that resulted
from the remeasurement of pension plan assets and obligations as a
result of changes in assumptions. The Company recognizes actuarial
(gains) and losses through earnings in connection with the annual
remeasurement in the fourth quarter, or on an interim basis if
specific events trigger a remeasurement.
|
|
|
|
|
|
|
|
|
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)
|
|
|
|
March 31,
2017
|
December 31,
2016
|
Short-term debt,
including current portion of long-term debt
|
$
|
37.2
|
|
$
|
24.2
|
|
Long-term
debt
|
600.1
|
|
635.0
|
|
Total
Debt
|
$
|
637.3
|
|
$
|
659.2
|
|
Less: Cash, cash
equivalents and restricted cash
|
(132.4)
|
|
(151.5)
|
|
Net Debt
|
$
|
504.9
|
|
$
|
507.7
|
|
|
|
|
Total
equity
|
$
|
1,354.8
|
|
$
|
1,310.9
|
|
|
|
|
Ratio of Total Debt
to Capital
|
32.0
|
%
|
33.5
|
%
|
Ratio of Net Debt to
Capital
|
27.1
|
%
|
27.9
|
%
|
|
|
|
|
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
March 31,
|
|
2017
|
2016
|
Net cash provided by
operating activities
|
$
|
46.7
|
|
$
|
48.6
|
|
Less: capital
expenditures
|
(19.3)
|
|
(24.2)
|
|
Free cash
flow
|
$
|
27.4
|
|
$
|
24.4
|
|
|
|
|
|
|
|
|
|
|
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
|
$
|
2.15
|
|
|
$
|
2.25
|
|
|
|
|
|
Forecasted
Adjustments:
|
|
|
|
Impairment and restructuring charges
(1)
|
0.15
|
|
|
0.15
|
|
Pension
related charges (2)
|
0.05
|
|
|
0.05
|
|
Total
Adjustments:
|
$
|
0.20
|
|
|
$
|
0.20
|
|
Forecasted full year
adjusted diluted earnings per share
|
$
|
2.35
|
|
|
$
|
2.45
|
|
|
|
|
|
(1) Impairment and restructuring
charges relate to severance and other cost reduction initiatives,
net of tax.
|
|
|
|
|
(2)
Pension related charges represent actuarial losses that resulted
from the remeasurement of pension plan assets and obligations as a
result of changes in assumptions. The Company recognizes actuarial
(gains) and losses through earnings in connection with the annual
remeasurement in the fourth quarter, or on an interim basis if
specific events trigger a remeasurement.
|
|
|
|
|
|
|
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
|
|
|
$
|
325.0
|
|
Less: capital
expenditures
|
|
|
(115.0)
|
|
Free cash
flow
|
|
|
$
|
210.0
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/timken-reports-first-quarter-2017-results-raises-full-year-outlook-300445750.html
SOURCE The Timken Company