NORTH CANTON, Ohio,
July 26, 2017 /PRNewswire/
-- The Timken Company (NYSE: TKR; www.timken.com), a world
leader in engineered bearings and mechanical power transmission
products, today reported second-quarter 2017 sales
of $750.6 million, up 11.4 percent from the same period a
year ago and up 6.6 percent from the first quarter. The
year-over-year increase in sales reflects improved demand across
industrial end markets led by off-highway and industrial
distribution, as well as the benefit of acquisitions, partially
offset by continued weakness in rail.
![The Timken Company Logo. (PRNewsFoto/The Timken Company) (PRNewsFoto/) (PRNewsFoto/) The Timken Company Logo. (PRNewsFoto/The Timken Company) (PRNewsFoto/) (PRNewsFoto/)](https://mma.prnewswire.com/media/333357/the_timken_company_logo.jpg)
In the second quarter, Timken posted net income
of $82.5 million or $1.04 per diluted share,
versus net income of $48.2 million or $0.61 per
diluted share for the same period a year ago. The current period
includes a net benefit of approximately $30
million related to adjustments to accruals for prior-year
taxes, while the year-ago period included CDSOA1 income
of approximately $4 million after
tax. The year-over-year change in net income also reflects the
favorable impact of higher volume and acquisitions, partially
offset by unfavorable price/mix, and higher material, logistics and
selling, general and administrative (SG&A) costs.
Excluding special items (detailed in the attached tables),
adjusted net income in the second quarter of 2017
was $54 million or $0.68 per diluted share, up
from $46.8 million
or $0.59 per diluted share for the same period in 2016.
The increase in adjusted net income reflects the favorable impact
of higher volume and acquisitions, partially offset by unfavorable
price/mix and higher material, logistics and SG&A costs. The
company generated cash from operations of $67.8 million and free cash flow of $47.2 million in the second quarter of 2017.
"Most of our end markets continued to strengthen sequentially
from the first quarter. We responded well by delivering strong
sales and earnings growth with margin expansion in Process
Industries," said Richard G. Kyle,
Timken president and chief executive officer. "We also advanced our
strategy by completing several acquisitions and continuing to
invest organically in our product lines and manufacturing
capabilities in the quarter."
Among recent developments, the company:
- Began shipments from its new, state-of-the-art tapered roller
bearing plant in Romania;
- Completed the acquisition of PT Tech, adding a new category of
industrial clutches and brakes to its mechanical power transmission
portfolio;
- Completed the acquisition of Groeneveld Group, a leading
provider of automatic lubrication solutions used in on- and
off-highway applications, significantly growing Timken's presence
in this space;
- Entered into a definitive agreement to acquire ABC Bearings
Ltd., a manufacturer of roller bearings and slewing rings in
India, to serve domestic and
export markets;
- Increased the company's quarterly dividend by 4 percent to
27 cents per share; and
- Was named one of America's Best Large Employers by Forbes
magazine for the second consecutive year in a row.
Second-Quarter 2017 Segment Results
Mobile Industries reported sales of $408.4 million,
up 11 percent compared with the same period a year ago, with higher
shipments in the off-highway, aerospace and heavy truck sectors, as
well as the benefit of acquisitions, partially offset by declines
in the rail sector.
Earnings before interest and taxes (EBIT) in the quarter
were $34.4 million or 8.4 percent of sales,
compared with EBIT of $37.4 million
or 10.2 percent of sales for the same period a year ago.
The decrease in EBIT primarily reflects higher material, logistics
and SG&A costs and unfavorable price/mix, partially offset by
the favorable impact of higher volume and acquisitions.
Excluding special items (detailed in the attached tables),
adjusted EBIT in the quarter was $35.9 million
or 8.8 percent of sales, compared
with $39.7 million or 10.8 percent of sales in the
second quarter last year.
Process Industries reported sales
of $342.2 million, up 11.9 percent from the same period a
year ago, driven primarily by increased demand in the industrial
distribution and heavy industries sectors and the benefit of
acquisitions.
EBIT for the quarter was $60.2 million
or 17.6 percent of sales, compared with EBIT
of $47.9 million or 15.7 percent of sales for
the same period a year ago. The increase in EBIT was driven by the
favorable impact of higher volume, manufacturing performance and
acquisitions, partially offset by unfavorable price/mix and higher
SG&A expenses.
Excluding special items (detailed in the attached tables),
adjusted EBIT in the quarter was $60.2 million or 17.6 percent of
sales, compared with $48.9 million or 16 percent of sales
in the second quarter last year.
2017 Outlook
"As a result of stronger end-market demand, recent acquisitions
and the advancements we've made in our business, we are raising our
full-year revenue and earnings outlook for 2017," said Kyle. "In
the second half, we expect to deliver double digit year-on-year
growth in revenue and EPS while expanding margins and delivering
strong free cash flow."
The company now expects 2017 revenue to be up approximately 11
percent in total versus 2016. Within its segments, the company
estimates full-year 2017:
- Mobile Industries sales to be up 11 to 12 percent, driven by
the benefit of acquisitions and improved demand in the off-highway
and heavy truck sectors, partially offset by continued weakness in
the rail sector.
- Process Industries sales to be up 10 to 11 percent, reflecting
growth across most end-market sectors and the benefit of
acquisitions.
Timken now anticipates 2017 earnings per diluted share to range
from $2.60 to $2.70 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 second
half.
Excluding special items (detailed in attached tables), the
company expects 2017 adjusted earnings per diluted share to range
from $2.50 to $2.60.
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, July 26,
2017
|
|
11 a.m. Eastern
Time
|
|
Live Dial-In:
877-856-1969 or 719-325-4817
|
|
(Call in 10 minutes
prior to be included.)
|
|
Conference ID:
Timken's 2Q Earnings Call
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through August 9, 2017:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
6699871
|
|
|
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, lubrication systems 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®,
Groeneveld® 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 29 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 second
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.
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).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Timken
Company
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
(Dollars in millions,
except per share data)
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2017
|
2016
|
|
2017
|
2016
|
|
|
|
|
|
|
Net sales
|
$
|
750.6
|
|
$
|
673.6
|
|
|
$
|
1,454.4
|
|
$
|
1,357.6
|
|
Cost of products
sold
|
548.8
|
|
489.1
|
|
|
1,072.1
|
|
990.0
|
|
Gross
Profit
|
201.8
|
|
184.5
|
|
|
382.3
|
|
367.6
|
|
Selling, general
& administrative expenses
|
123.8
|
|
108.0
|
|
|
243.4
|
|
225.3
|
|
Impairment and
restructuring charges
|
0.8
|
|
2.9
|
|
|
2.5
|
|
13.4
|
|
Operating
Income
|
77.2
|
|
73.6
|
|
|
136.4
|
|
128.9
|
|
Continued Dumping and
Subsidy Offset Act income, net (1)
|
—
|
|
6.1
|
|
|
—
|
|
53.8
|
|
Other income
(expense), net
|
4.5
|
|
(1.7)
|
|
|
6.2
|
|
(1.7)
|
|
Earnings Before
Interest and Taxes (EBIT) (2)
|
81.7
|
|
78.0
|
|
|
142.6
|
|
181.0
|
|
Interest expense,
net
|
(7.8)
|
|
(8.3)
|
|
|
(15.1)
|
|
(16.4)
|
|
Income Before
Income Taxes
|
73.9
|
|
69.7
|
|
|
127.5
|
|
164.6
|
|
(Benefit) provision
for income taxes
|
(8.1)
|
|
21.5
|
|
|
7.4
|
|
50.6
|
|
Net
Income
|
82.0
|
|
48.2
|
|
|
120.1
|
|
114.0
|
|
Less: Net loss
attributable to noncontrolling interest
|
(0.5)
|
|
—
|
|
|
(0.6)
|
|
(0.1)
|
|
Net Income
Attributable to The Timken Company
|
$
|
82.5
|
|
$
|
48.2
|
|
|
$
|
120.7
|
|
$
|
114.1
|
|
|
|
|
|
|
|
Net Income per
Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
|
|
|
Basic Earnings per
share
|
$
|
1.06
|
|
$
|
0.61
|
|
|
$
|
1.55
|
|
$
|
1.44
|
|
|
|
|
|
|
|
Diluted Earnings per
share
|
$
|
1.04
|
|
$
|
0.61
|
|
|
$
|
1.53
|
|
$
|
1.43
|
|
|
|
|
|
|
|
Average Shares
Outstanding
|
77,931,576
|
|
78,671,509
|
|
|
77,814,438
|
|
79,225,703
|
|
Average Shares
Outstanding - assuming dilution
|
79,029,397
|
|
79,312,774
|
|
|
78,944,429
|
|
79,880,222
|
|
|
|
|
|
|
|
(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
June 30,
|
|
Six Months
Ended
June 30,
|
(Dollars in
millions)
|
2017
|
2016
|
|
2017
|
2016
|
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
|
Net sales
|
$
|
408.4
|
|
$
|
367.8
|
|
|
$
|
791.4
|
|
$
|
751.0
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
34.4
|
|
$
|
37.4
|
|
|
$
|
65.2
|
|
$
|
69.4
|
|
EBIT Margin
(1)
|
8.4
|
%
|
10.2
|
%
|
|
8.2
|
%
|
9.2
|
%
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
Net sales
|
$
|
342.2
|
|
$
|
305.8
|
|
|
$
|
663.0
|
|
$
|
606.6
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
60.2
|
|
$
|
47.9
|
|
|
$
|
103.2
|
|
$
|
81.7
|
|
EBIT Margin
(1)
|
17.6
|
%
|
15.7
|
%
|
|
15.6
|
%
|
13.5
|
%
|
|
|
|
|
|
|
Corporate
expense
|
$
|
(12.9)
|
|
$
|
(13.4)
|
|
|
$
|
(25.8)
|
|
$
|
(23.9)
|
|
CDSOA income, net
(2)
|
—
|
|
6.1
|
|
|
—
|
|
53.8
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
Net sales
|
$
|
750.6
|
|
$
|
673.6
|
|
|
$
|
1,454.4
|
|
$
|
1,357.6
|
|
Earnings (loss)
before interest and taxes (EBIT) (1)
|
$
|
81.7
|
|
$
|
78.0
|
|
|
$
|
142.6
|
|
$
|
181.0
|
|
EBIT
Margin (1)
|
10.9
|
%
|
11.6
|
%
|
|
9.8
|
%
|
13.3
|
%
|
|
|
|
|
|
|
(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)
|
|
|
|
June 30,
2017
|
|
December 31,
2016
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
445.1
|
|
|
$
|
148.8
|
|
Restricted
cash
|
2.8
|
|
|
2.7
|
|
Accounts
receivable
|
501.7
|
|
|
438.0
|
|
Inventories,
net
|
617.0
|
|
|
553.7
|
|
Other current
assets
|
92.9
|
|
|
68.7
|
|
Total Current
Assets
|
1,659.5
|
|
|
1,211.9
|
|
Property, plant and
equipment, net
|
811.6
|
|
|
804.4
|
|
Goodwill and other
intangible assets
|
661.7
|
|
|
628.5
|
|
Non-current pension
assets
|
31.1
|
|
|
32.1
|
|
Other
assets
|
74.6
|
|
|
86.3
|
|
Total
Assets
|
$
|
3,238.5
|
|
|
$
|
2,763.2
|
|
|
|
|
|
LIABILITIES
|
|
|
|
Accounts
payable
|
$
|
233.4
|
|
|
$
|
176.2
|
|
Short-term debt,
including current portion of long-term debt
|
54.5
|
|
|
24.2
|
|
Income
taxes
|
6.7
|
|
|
16.9
|
|
Accrued
expenses
|
243.3
|
|
|
235.4
|
|
Total Current
Liabilities
|
537.9
|
|
|
452.7
|
|
|
|
|
|
Long-term
debt
|
947.1
|
|
|
635.0
|
|
Accrued pension
cost
|
158.8
|
|
|
154.7
|
|
Accrued
postretirement benefits cost
|
127.7
|
|
|
131.5
|
|
Other non-current
liabilities
|
47.4
|
|
|
78.4
|
|
Total
Liabilities
|
1,818.9
|
|
|
1,452.3
|
|
|
|
|
|
EQUITY
|
|
|
|
The Timken Company
shareholders' equity
|
1,387.0
|
|
|
1,279.7
|
|
Noncontrolling
Interest
|
32.6
|
|
|
31.2
|
|
Total
Equity
|
1,419.6
|
|
|
1,310.9
|
|
Total Liabilities and
Equity
|
$
|
3,238.5
|
|
|
$
|
2,763.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
June 30,
|
Six Months
Ended
June 30,
|
(Dollars in
millions)
|
2017
|
2016
|
2017
|
2016
|
Cash Provided by
(Used in)
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net income
attributable to The Timken Company
|
$
|
82.5
|
|
$
|
48.2
|
|
$
|
120.7
|
|
$
|
114.1
|
|
Net loss attributable
to noncontrolling interest
|
(0.5)
|
|
—
|
|
(0.6)
|
|
(0.1)
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation
and amortization
|
33.9
|
|
32.4
|
|
66.8
|
|
65.0
|
|
Impairment
charges
|
—
|
|
—
|
|
—
|
|
2.6
|
|
CDSOA
receivable
|
—
|
|
41.9
|
|
—
|
|
(6.2)
|
|
Pension and
other postretirement expense
|
2.7
|
|
4.8
|
|
9.9
|
|
9.7
|
|
Pension and
other postretirement benefit contributions and payments
|
(6.1)
|
|
(4.1)
|
|
(12.2)
|
|
(14.3)
|
|
Changes in
operating assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
4.3
|
|
9.6
|
|
(46.0)
|
|
4.7
|
|
Inventories
|
(31.6)
|
|
(8.1)
|
|
(38.1)
|
|
(8.2)
|
|
Accounts
payable
|
1.9
|
|
(4.0)
|
|
50.5
|
|
12.5
|
|
Accrued
expenses
|
30.4
|
|
21.4
|
|
2.0
|
|
(8.9)
|
|
Income
taxes
|
(57.2)
|
|
5.3
|
|
(49.0)
|
|
29.2
|
|
Other,
net
|
7.5
|
|
8.1
|
|
10.5
|
|
4.0
|
|
Net Cash Provided by
Operating Activities
|
$
|
67.8
|
|
$
|
155.5
|
|
$
|
114.5
|
|
$
|
204.1
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Capital
expenditures
|
$
|
(20.6)
|
|
$
|
(26.2)
|
|
$
|
(39.9)
|
|
$
|
(50.4)
|
|
Acquisitions
|
(63.5)
|
|
(0.7)
|
|
(64.1)
|
|
(0.7)
|
|
Other,
net
|
2.1
|
|
0.5
|
|
(4.9)
|
|
0.1
|
|
Net Cash Used in
Investing Activities
|
$
|
(82.0)
|
|
$
|
(26.4)
|
|
$
|
(108.9)
|
|
$
|
(51.0)
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Cash dividends
paid to shareholders
|
$
|
(21.1)
|
|
$
|
(20.4)
|
|
$
|
(41.4)
|
|
$
|
(41.1)
|
|
Purchase of
treasury shares
|
(18.9)
|
|
(33.2)
|
|
(27.0)
|
|
(68.2)
|
|
Proceeds from
exercise of stock options
|
9.1
|
|
0.1
|
|
25.7
|
|
0.4
|
|
Shares
surrendered for taxes
|
(1.2)
|
|
—
|
|
(9.4)
|
|
(1.5)
|
|
Net proceeds
(payments) from credit facilities
|
355.1
|
|
(55.6)
|
|
332.5
|
|
(24.4)
|
|
Net payments
from long-term debt
|
(0.1)
|
|
—
|
|
(0.4)
|
|
—
|
|
Other,
net
|
—
|
|
—
|
|
(0.1)
|
|
4.8
|
|
Net Cash Provided by
(Used in) in Financing Activities
|
$
|
322.9
|
|
$
|
(109.1)
|
|
$
|
279.9
|
|
$
|
(130.0)
|
|
Effect of exchange
rate changes on cash
|
6.9
|
|
(1.3)
|
|
10.8
|
|
3.3
|
|
Increase in Cash and
Cash Equivalents
|
$
|
315.6
|
|
$
|
18.7
|
|
$
|
296.3
|
|
$
|
26.4
|
|
Cash and Cash
Equivalents at Beginning of Period
|
129.5
|
|
137.3
|
|
148.8
|
|
129.6
|
|
Cash and Cash
Equivalents at End of Period
|
$
|
445.1
|
|
$
|
156.0
|
|
$
|
445.1
|
|
$
|
156.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 the 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
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
2017
|
|
EPS
|
2016
|
|
EPS
|
|
2017
|
|
EPS
|
2016
|
|
EPS
|
Net Income
Attributable to The Timken Company
|
|
$
|
82.5
|
|
|
$
|
1.04
|
|
$
|
48.2
|
|
|
$
|
0.61
|
|
|
$
|
120.7
|
|
|
$
|
1.53
|
|
$
|
114.1
|
|
|
$
|
1.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization charges (2)
|
|
$
|
3.3
|
|
|
|
$
|
3.4
|
|
|
|
|
$
|
7.9
|
|
|
|
$
|
14.1
|
|
|
|
Acquisition related charges
(3)
|
|
2.4
|
|
|
|
0.8
|
|
|
|
|
2.5
|
|
|
|
0.8
|
|
|
|
Gain on
sale of real estate (4)
|
|
(2.0)
|
|
|
|
—
|
|
|
|
|
(2.0)
|
|
|
|
—
|
|
|
|
Pension
related charges (5)
|
|
—
|
|
|
|
—
|
|
|
|
|
4.4
|
|
|
|
1.2
|
|
|
|
CDSOA
income, net (6)
|
|
—
|
|
|
|
(6.1)
|
|
|
|
|
—
|
|
|
|
(53.8)
|
|
|
|
Health
care plan modification costs (7)
|
|
(0.7)
|
|
|
|
—
|
|
|
|
|
(0.7)
|
|
|
|
—
|
|
|
|
Gain on
dissolution of subsidiary
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(1.4)
|
|
|
|
Tax
indemnification (8)
|
|
(1.0)
|
|
|
|
—
|
|
|
|
|
(1.0)
|
|
|
|
—
|
|
|
|
(Benefit)
provision for income taxes (9)
|
|
(30.5)
|
|
|
|
0.5
|
|
|
|
|
(34.1)
|
|
|
|
11.7
|
|
|
|
Total
Adjustments:
|
|
(28.5)
|
|
|
(0.36)
|
|
(1.4)
|
|
|
(0.02)
|
|
|
(23.0)
|
|
|
(0.29)
|
|
(27.4)
|
|
|
(0.34)
|
|
Adjusted Net Income
from The Timken Company
|
|
$
|
54.0
|
|
|
$
|
0.68
|
|
$
|
46.8
|
|
|
$
|
0.59
|
|
|
$
|
97.7
|
|
|
$
|
1.24
|
|
$
|
86.7
|
|
|
$
|
1.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Adjustments are pre-tax, with net
tax provision (benefit) listed separately.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
Impairment, restructuring and reorganization charges (including
items recorded in cost of products sold) relate to: (i) plant
closures; (ii) the rationalization of certain plants; and (iii)
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)
Acquisition related charges in 2017 relate to the acquisition of
Groeneveld Group ("Groeneveld"), Torsion Control Products, Inc.
("Torsion Control Products"), PT Tech, Inc. ("PT Tech") and EDT
Corp. ("EDT"), including one-time transaction costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4) The gain on the sale of real
estate related to the sale of a manufacturing facility in South
Africa during the second quarter of 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5) 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 represented professional fees
associated with the implementation of a group annuity
contract.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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) The
tax indemnification in 2017 represents a receivable from
TimkenSteel related to the settlement of certain tax liabilities
and pursuant to the Tax Sharing Agreement between the Company and
TimkenSteel dated June 30, 2014. This amount was recorded in
other
income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9)
(Benefit) provision for income taxes includes the impact of
discrete tax items recorded during the respective periods,
including the net benefit of prior year tax matters during the
second quarter of 2017, as well as the net tax impact on pre-tax
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)
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2017
|
Percentage to
Net Sales
|
2016
|
Percentage
to
Net Sales
|
|
2017
|
Percentage to
Net Sales
|
2016
|
Percentage to
Net Sales
|
Net Income
|
$
|
82.0
|
|
10.9
|
%
|
$
|
48.2
|
|
7.2
|
%
|
|
$
|
120.1
|
|
8.3
|
%
|
$
|
114.0
|
|
8.4
|
%
|
|
|
|
|
|
|
|
|
|
|
(Benefit) provision
for income taxes
|
(8.1)
|
|
(1.1)
|
%
|
21.5
|
|
3.2
|
%
|
|
7.4
|
|
0.5
|
%
|
50.6
|
|
3.7
|
%
|
Interest
expense
|
8.5
|
|
1.1
|
%
|
8.7
|
|
1.3
|
%
|
|
16.4
|
|
1.1
|
%
|
17.1
|
|
1.3
|
%
|
Interest
income
|
(0.7)
|
|
—
|
%
|
(0.4)
|
|
(0.1)
|
%
|
|
(1.3)
|
|
(0.1)
|
%
|
(0.7)
|
|
(0.1)
|
%
|
Consolidated
EBIT
|
$
|
81.7
|
|
10.9
|
%
|
$
|
78.0
|
|
11.6
|
%
|
|
$
|
142.6
|
|
9.8
|
%
|
$
|
181.0
|
|
13.3
|
%
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization charges (1)
|
$
|
3.3
|
|
0.4
|
%
|
$
|
3.4
|
|
0.5
|
%
|
|
$
|
7.9
|
|
0.5
|
%
|
$
|
14.1
|
|
1.1
|
%
|
CDSOA
income (2)
|
—
|
|
—
|
%
|
(6.1)
|
|
(0.9)
|
%
|
|
—
|
|
—
|
%
|
(53.8)
|
|
(4.0)
|
%
|
Health
care plan modification costs (3)
|
(0.7)
|
|
(0.1)
|
%
|
—
|
|
—
|
%
|
|
(0.7)
|
|
—
|
%
|
—
|
|
—
|
%
|
Acquisition related charges
(4)
|
2.4
|
|
0.3
|
%
|
0.8
|
|
0.1
|
%
|
|
2.5
|
|
0.2
|
%
|
0.8
|
|
0.1
|
%
|
Gain on
sale of real estate (5)
|
(2.0)
|
|
(0.2)
|
%
|
—
|
|
—
|
%
|
|
(2.0)
|
|
(0.1)
|
%
|
—
|
|
—
|
%
|
Pension
related charges (6)
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
4.4
|
|
0.3
|
%
|
1.2
|
|
0.1
|
%
|
Tax
indemnification (7)
|
(1.0)
|
|
(0.1)
|
%
|
—
|
|
—
|
%
|
|
(1.0)
|
|
(0.1)
|
%
|
—
|
|
—
|
%
|
Gain on
dissolution of subsidiary
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
(1.4)
|
|
(0.1)
|
%
|
Total
Adjustments
|
2.0
|
|
0.3
|
%
|
(1.9)
|
|
(0.3)
|
%
|
|
11.1
|
|
0.8
|
%
|
(39.1)
|
|
(2.8)
|
%
|
Adjusted
EBIT
|
$
|
83.7
|
|
11.2
|
%
|
$
|
76.1
|
|
11.3
|
%
|
|
$
|
153.7
|
|
10.6
|
%
|
$
|
141.9
|
|
10.5
|
%
|
|
|
|
|
|
|
|
|
|
|
(1)
Impairment, restructuring and reorganization charges (including
items recorded in cost of products sold) relate to: (i) plant
closures; (ii) the rationalization of certain plants; and (iii)
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) 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) 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 2017 relate to the acquisition of
Groeneveld, Torsion Control Products, PT Tech and EDT, including
one-time transaction costs.
|
|
|
|
|
|
|
|
|
|
|
(5) The gain on the sale of real
estate related to the sale of a manufacturing facility in South
Africa during the second quarter of 2017.
|
|
|
|
|
|
|
|
|
|
|
(6) 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 represented professional fees
associated with the implementation of a group annuity
contract.
|
|
|
|
|
|
|
|
|
|
|
(7) The
tax indemnification in 2017 represents a receivable from
TimkenSteel related to the settlement of certain tax liabilities
and pursuant to the Tax Sharing Agreement between the Company and
TimkenSteel dated June 30, 2014. This amount was recorded in
other income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
June 30, 2017
|
Percentage
to
Net
Sales
|
Three
Months
Ended
June 30, 2016
|
Percentage
to Net
Sales
|
|
Six Months
Ended
June 30,
2017
|
Percentage
to
Net
Sales
|
Six Months
Ended
June 30, 2016
|
Percentage
to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
|
34.4
|
|
8.4
|
%
|
$
|
37.4
|
|
10.2
|
%
|
|
$
|
65.2
|
|
8.2
|
%
|
$
|
69.4
|
|
9.2
|
%
|
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization charges (1)
|
3.2
|
|
0.8
|
%
|
2.3
|
|
0.6
|
%
|
|
7.2
|
|
0.9
|
%
|
9.4
|
|
1.3
|
%
|
Gain on
dissolution of subsidiary
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
(1.4)
|
|
(0.2)
|
%
|
Gain on
sale of real estate (2)
|
(2.0)
|
|
(0.5)
|
%
|
—
|
|
—
|
%
|
|
(2.0)
|
|
(0.2)
|
%
|
—
|
|
—
|
%
|
Health
care plan modification costs (3)
|
(0.4)
|
|
(0.1)
|
%
|
—
|
|
—
|
%
|
|
(0.4)
|
|
—
|
%
|
—
|
|
—
|
%
|
Acquisition related charges
(4)
|
0.7
|
|
0.2
|
%
|
—
|
|
—
|
%
|
|
0.7
|
|
0.1
|
%
|
—
|
|
—
|
%
|
Pension
related charges (5)
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
1.8
|
|
0.2
|
%
|
—
|
|
—
|
%
|
Adjusted
EBIT
|
$
|
35.9
|
|
8.8
|
%
|
$
|
39.7
|
|
10.8
|
%
|
|
$
|
72.5
|
|
9.2
|
%
|
$
|
77.4
|
|
10.3
|
%
|
|
|
|
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Three
Months
Ended
June 30, 2017
|
Percentage
to
Net
Sales
|
Three
Months
Ended
June 30, 2016
|
Percentage
to Net
Sales
|
|
Six Months
Ended
June 30,
2017
|
Percentage
to
Net
Sales
|
Six Months
Ended
June 30,
2016
|
Percentage
to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
|
60.2
|
|
17.6
|
%
|
$
|
47.9
|
|
15.7
|
%
|
|
$
|
103.2
|
|
15.6
|
%
|
$
|
81.7
|
|
13.5
|
%
|
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization charges (1)
|
0.1
|
|
—
|
%
|
1.0
|
|
0.3
|
%
|
|
0.1
|
|
—
|
%
|
4.6
|
|
0.7
|
%
|
Health
care plan modification costs (3)
|
(0.2)
|
|
—
|
%
|
—
|
|
—
|
%
|
|
(0.2)
|
|
—
|
%
|
—
|
|
—
|
%
|
Acquisition related charges
(4)
|
0.1
|
|
—
|
%
|
—
|
|
—
|
%
|
|
0.2
|
|
—
|
%
|
—
|
|
—
|
%
|
Pension
related charges (5)
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
1.1
|
|
0.1
|
%
|
—
|
|
—
|
%
|
Adjusted
EBIT
|
$
|
60.2
|
|
17.6
|
%
|
$
|
48.9
|
|
16.0
|
%
|
|
$
|
104.4
|
|
15.7
|
%
|
$
|
86.3
|
|
14.2
|
%
|
|
|
|
|
|
|
|
|
|
|
(1)
Impairment, restructuring and reorganization charges (including
items recorded in cost of products sold) relate to: (i) plant
closures; (ii) the rationalization of certain plants; and (iii)
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) The gain on the sale of real
estate related to the sale of a manufacturing facility in South
Africa during the second quarter of 2017.
|
|
|
|
|
|
|
|
|
|
|
(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
2017 relate to the acquisition of Groeneveld, Torsion Control
Products, PT Tech and EDT, including one-time transaction
costs.
|
|
|
|
|
|
|
|
|
|
|
(5)
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)
|
|
|
|
|
|
|
|
June 30,
2017
|
December 31,
2016
|
Short-term debt,
including current portion of long-term debt
|
|
|
$
|
54.5
|
|
$
|
24.2
|
|
Long-term
debt
|
|
|
947.1
|
|
635.0
|
|
Total
Debt
|
|
|
$
|
1,001.6
|
|
$
|
659.2
|
|
Less: Cash, cash
equivalents and restricted cash
|
|
|
(447.9)
|
|
(151.5)
|
|
Net Debt
|
|
|
$
|
553.7
|
|
$
|
507.7
|
|
|
|
|
|
|
Total
equity
|
|
|
$
|
1,419.6
|
|
$
|
1,310.9
|
|
|
|
|
|
|
Ratio of Total Debt
to Capital
|
|
|
41.4
|
%
|
33.5
|
%
|
Ratio of Net Debt to
Capital
|
|
|
28.1
|
%
|
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
June 30,
|
Six Months
Ended
June 30,
|
|
2017
|
2016
|
2017
|
2016
|
Net cash provided by
operating activities
|
$
|
67.8
|
|
$
|
155.5
|
|
$
|
114.5
|
|
$
|
204.1
|
|
Less: capital
expenditures
|
(20.6)
|
|
(26.2)
|
|
(39.9)
|
|
(50.4)
|
|
Free cash
flow
|
$
|
47.2
|
|
$
|
129.3
|
|
$
|
74.6
|
|
$
|
153.7
|
|
|
|
|
|
|
|
|
|
|
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
|
$
|
2.60
|
|
|
$
|
2.70
|
|
|
|
|
|
Forecasted
Adjustments:
|
|
|
|
Impairment, restructuring and
reorganization charges (1)
|
0.15
|
|
|
0.15
|
|
Pension
related charges (2)
|
0.05
|
|
|
0.05
|
|
Acquisition related charges
(3)
|
0.05
|
|
|
0.05
|
|
(Benefit)
provision for income taxes (4)
|
(0.35)
|
|
|
(0.35)
|
|
Total
Adjustments:
|
$
|
(0.10)
|
|
|
$
|
(0.10)
|
|
Forecasted full year
adjusted diluted earnings per share
|
$
|
2.50
|
|
|
$
|
2.60
|
|
|
|
|
|
(1) Impairment, restructuring and
reorganization 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.
|
|
|
|
|
(3)
Acquisition related charges in 2017, including one-time transaction
costs.
|
|
|
|
|
(4)
(Benefit) provision for income taxes includes the impact of
discrete tax items, including the net benefit of prior year tax
matters during the second quarter of 2017.
|
|
|
|
|
|
|
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
|
|
View original content with
multimedia:http://www.prnewswire.com/news-releases/timken-reports-strong-second-quarter-2017-results-raises-full-year-outlook-300493994.html
SOURCE The Timken Company