NORTH CANTON, Ohio,
Oct. 25, 2017 /PRNewswire/ -- The
Timken Company (NYSE: TKR; www.timken.com), a world leader in
engineered bearings and mechanical power transmission
products, today reported third-quarter 2017 sales
of $771.4 million, up 17.3 percent from the same period a
year ago. The results reflect higher demand across most end-market
sectors led by industrial distribution and off-highway, as well as
the benefit of acquisitions and currency.
In the third quarter, Timken posted net income
of $53.5 million or $0.68 per diluted share,
versus net income of $33.6 million or $0.43 per
diluted share for the same period a year ago. The year-over-year
increase in net income reflects the impact of higher volume,
favorable manufacturing performance, lower impairment and
restructuring charges, and the benefit of acquisitions and
currency. This was partially offset by higher material, logistics
and selling, general and administrative (SG&A) costs.
Excluding special items (detailed in the attached tables),
adjusted net income in the third quarter of 2017
was $55.9 million or $0.71 per diluted share,
up from $42.1 million
or $0.53 per diluted share for the same period in
2016.
"We reported strong revenue and earnings growth in the quarter
as we continued to see increased demand for our products and
services globally," said Richard G.
Kyle, Timken president and chief executive officer. "We
executed well, delivering strong organic growth and expanding
operating margins both sequentially and year-on-year. We also
strengthened Timken's strategic position with the completion of the
Groeneveld acquisition, our fifth acquisition in the last four
quarters. Our organic growth initiatives and recent acquisitions
are progressing well and will continue to deliver value for our
shareholders."
Third-Quarter 2017 Segment Results
Mobile Industries reported sales of $422.8 million,
up 19.7 percent compared with the same period a year ago, driven
primarily by the benefit of acquisitions, increased demand in the
off-highway and heavy truck sectors and favorable currency,
partially offset by lower automotive demand.
Earnings before interest and taxes (EBIT) in the quarter
were $34.9 million or 8.3 percent of sales,
compared with EBIT of $25.9 million
or 7.3 percent of sales for the same period a year ago.
The increase in EBIT primarily reflects the impact of higher
volume, favorable manufacturing performance, the benefit of
acquisitions and currency, and lower impairment and restructuring
charges, partially offset by unfavorable price/mix and higher
material, logistics and SG&A costs.
Excluding special items (detailed in the attached tables),
adjusted EBIT in the quarter was $37.6 million
or 8.9 percent of sales, compared
with $32.4 million or 9.2 percent of sales in the
third quarter last year.
Process Industries reported sales
of $348.6 million, up 14.6 percent from the same period a
year ago, driven primarily by increased demand in the industrial
distribution and heavy industries sectors, increased shipments in
wind energy and favorable currency.
EBIT for the quarter was $61.7 million
or 17.7 percent of sales, compared with EBIT
of $42 million or 13.8 percent of sales for the
same period a year ago. The increase in EBIT was driven by higher
volume and favorable manufacturing performance, partially offset by
higher material, logistics and SG&A costs. (Note: Adjusted EBIT
is not detailed here, as there were no special items affecting
Process Industries results in the current quarter.)
2017 Outlook
The company now expects 2017 revenue to be up approximately 12
percent in total versus 2016. Within its segments, the company
estimates for full-year 2017:
- Mobile Industries sales to be up approximately 13 percent,
driven by the benefit of acquisitions and currency, and improved
demand in the off-highway and heavy truck sectors, partially offset
by softer demand in the rail sector.
- Process Industries sales to be up approximately 11 percent,
reflecting growth across most end-market sectors led by industrial
distribution and the benefit of acquisitions and currency.
Timken now anticipates 2017 earnings per diluted share to range
from $2.78 to $2.83 for the full year
on a GAAP basis, which does not account for the mark-to-market
pension remeasurement in the fourth quarter.
Excluding special items (detailed in the attached tables), the
company expects 2017 adjusted earnings per diluted share to range
from $2.58 to $2.63.
"We continue to advance our strategy, and combined with the
strength in our end markets, we are forecasting to finish 2017 with
strong year-on-year performance improvement," said Kyle. "The
mid-point of our guidance implies almost a 30 percent increase in
fourth-quarter adjusted earnings per share and solid operating
margin expansion versus the prior year. Additionally, we expect to
start 2018 with a higher backlog, growing markets and a healthy
growth pipeline."
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, October
25, 2017
|
|
11 a.m. Eastern
Time
|
|
Live Dial-In:
888-389-5988 or 719-457-2654
|
|
(Call in 10 minutes
prior to be included.)
|
|
Conference ID:
Timken's 3Q Earnings Call
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through November 8, 2017:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
2507783
|
|
|
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® and Groeneveld®.
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 31
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 third
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
The Timken
Company
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
(Dollars in millions,
except per share data)
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2017
|
2016
|
|
2017
|
2016
|
|
|
|
|
|
|
Net sales
|
$
|
771.4
|
|
$
|
657.4
|
|
|
$
|
2,225.8
|
|
$
|
2,015.0
|
|
Cost of products
sold
|
554.4
|
|
487.7
|
|
|
1,626.5
|
|
1,477.7
|
|
Gross
Profit
|
217.0
|
|
169.7
|
|
|
599.3
|
|
537.3
|
|
Selling, general
& administrative expenses
|
134.0
|
|
107.3
|
|
|
377.4
|
|
332.6
|
|
Impairment and
restructuring charges
|
1.3
|
|
5.3
|
|
|
3.8
|
|
18.7
|
|
Operating
Income
|
81.7
|
|
57.1
|
|
|
218.1
|
|
186.0
|
|
Continued Dumping and
Subsidy Offset Act income (expense), net (1)
|
—
|
|
(0.2)
|
|
|
—
|
|
53.6
|
|
Other income
(expense), net
|
2.9
|
|
(0.1)
|
|
|
9.1
|
|
(1.8)
|
|
Earnings Before
Interest and Taxes (EBIT) (2)
|
84.6
|
|
56.8
|
|
|
227.2
|
|
237.8
|
|
Interest expense,
net
|
(9.4)
|
|
(7.6)
|
|
|
(24.5)
|
|
(24.0)
|
|
Income Before
Income Taxes
|
75.2
|
|
49.2
|
|
|
202.7
|
|
213.8
|
|
Provision for income
taxes
|
21.1
|
|
15.2
|
|
|
28.5
|
|
65.8
|
|
Net
Income
|
54.1
|
|
34.0
|
|
|
174.2
|
|
148.0
|
|
Less: Net income
attributable to noncontrolling interest
|
0.6
|
|
0.4
|
|
|
—
|
|
0.3
|
|
Net Income
Attributable to The Timken Company
|
$
|
53.5
|
|
$
|
33.6
|
|
|
$
|
174.2
|
|
$
|
147.7
|
|
|
|
|
|
|
|
Net Income per
Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
|
|
|
Basic Earnings per
share
|
$
|
0.69
|
|
$
|
0.43
|
|
|
$
|
2.24
|
|
$
|
1.87
|
|
|
|
|
|
|
|
Diluted Earnings per
share
|
$
|
0.68
|
|
$
|
0.43
|
|
|
$
|
2.21
|
|
$
|
1.86
|
|
|
|
|
|
|
|
Average Shares
Outstanding
|
77,694,974
|
|
77,935,783
|
|
|
77,766,828
|
|
78,808,179
|
|
Average Shares
Outstanding - assuming dilution
|
78,804,296
|
|
78,617,476
|
|
|
78,889,930
|
|
79,471,756
|
|
|
|
|
|
|
|
(1) U.S.
Continued Dumping and Subsidy Offset Act ("CDSOA") income
(expense), 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
September 30,
|
|
Nine Months
Ended
September 30,
|
(Dollars in
millions)
|
2017
|
2016
|
|
2017
|
2016
|
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
|
Net sales
|
$
|
422.8
|
|
$
|
353.1
|
|
|
$
|
1,214.2
|
|
$
|
1,104.1
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
34.9
|
|
$
|
25.9
|
|
|
$
|
100.1
|
|
$
|
95.3
|
|
EBIT Margin
(1)
|
8.3
|
%
|
7.3
|
%
|
|
8.2
|
%
|
8.6
|
%
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
Net sales
|
$
|
348.6
|
|
$
|
304.3
|
|
|
$
|
1,011.6
|
|
$
|
910.9
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
61.7
|
|
$
|
42.0
|
|
|
$
|
164.9
|
|
$
|
123.7
|
|
EBIT Margin
(1)
|
17.7
|
%
|
13.8
|
%
|
|
16.3
|
%
|
13.6
|
%
|
|
|
|
|
|
|
Corporate
expense
|
$
|
(12.0)
|
|
$
|
(10.9)
|
|
|
$
|
(37.8)
|
|
$
|
(34.8)
|
|
CDSOA income
(expense), net (2)
|
—
|
|
(0.2)
|
|
|
—
|
|
53.6
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
Net sales
|
$
|
771.4
|
|
$
|
657.4
|
|
|
$
|
2,225.8
|
|
$
|
2,015.0
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
84.6
|
|
$
|
56.8
|
|
|
$
|
227.2
|
|
$
|
237.8
|
|
EBIT
Margin (1)
|
11.0
|
%
|
8.6
|
%
|
|
10.2
|
%
|
11.8
|
%
|
|
|
|
|
|
|
(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 (expense), 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)
|
|
|
|
September 30,
2017
|
|
December 31,
2016
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
137.2
|
|
|
$
|
148.8
|
|
Restricted
cash
|
3.3
|
|
|
2.7
|
|
Accounts
receivable
|
542.2
|
|
|
438.0
|
|
Inventories,
net
|
687.5
|
|
|
553.7
|
|
Other current
assets
|
104.1
|
|
|
68.7
|
|
Total Current
Assets
|
1,474.3
|
|
|
1,211.9
|
|
Property, plant and
equipment, net
|
842.2
|
|
|
804.4
|
|
Goodwill and other
intangible assets
|
939.2
|
|
|
628.5
|
|
Non-current pension
assets
|
31.6
|
|
|
32.1
|
|
Other
assets
|
76.3
|
|
|
86.3
|
|
Total
Assets
|
$
|
3,363.6
|
|
|
$
|
2,763.2
|
|
|
|
|
|
LIABILITIES
|
|
|
|
Accounts
payable
|
$
|
248.1
|
|
|
$
|
176.2
|
|
Short-term debt,
including current portion of long-term debt
|
46.1
|
|
|
24.2
|
|
Income
taxes
|
7.4
|
|
|
16.9
|
|
Accrued
expenses
|
267.1
|
|
|
235.4
|
|
Total Current
Liabilities
|
568.7
|
|
|
452.7
|
|
|
|
|
|
Long-term
debt
|
959.8
|
|
|
635.0
|
|
Accrued pension
cost
|
160.3
|
|
|
154.7
|
|
Accrued
postretirement benefits cost
|
126.7
|
|
|
131.5
|
|
Other non-current
liabilities
|
92.2
|
|
|
78.4
|
|
Total
Liabilities
|
1,907.7
|
|
|
1,452.3
|
|
|
|
|
|
EQUITY
|
|
|
|
The Timken Company
shareholders' equity
|
1,423.0
|
|
|
1,279.7
|
|
Noncontrolling
Interest
|
32.9
|
|
|
31.2
|
|
Total
Equity
|
1,455.9
|
|
|
1,310.9
|
|
Total Liabilities and
Equity
|
$
|
3,363.6
|
|
|
$
|
2,763.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
September 30,
|
Nine Months
Ended
September 30,
|
(Dollars in
millions)
|
2017
|
2016
|
2017
|
2016
|
Cash Provided by
(Used in)
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net income
attributable to The Timken Company
|
$
|
53.5
|
|
$
|
33.6
|
|
$
|
174.2
|
|
$
|
147.7
|
|
Net income
attributable to noncontrolling interest
|
0.6
|
|
0.4
|
|
—
|
|
0.3
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
35.7
|
|
33.3
|
|
102.5
|
|
98.3
|
|
Impairment
charges
|
—
|
|
1.2
|
|
—
|
|
3.8
|
|
CDSOA
receivable
|
—
|
|
6.2
|
|
—
|
|
—
|
|
Pension and other
postretirement expense
|
2.7
|
|
4.8
|
|
12.6
|
|
14.5
|
|
Pension and other
postretirement benefit contributions and payments
|
(4.1)
|
|
(8.0)
|
|
(16.3)
|
|
(22.3)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
(15.6)
|
|
7.5
|
|
(61.6)
|
|
12.2
|
|
Inventories
|
(47.3)
|
|
(5.4)
|
|
(85.4)
|
|
(13.6)
|
|
Accounts
payable
|
5.2
|
|
2.5
|
|
55.7
|
|
15.0
|
|
Accrued
expenses
|
13.9
|
|
(8.6)
|
|
15.9
|
|
(17.5)
|
|
Income
taxes
|
(3.1)
|
|
(1.7)
|
|
(52.1)
|
|
27.5
|
|
Other, net
|
(13.1)
|
|
8.8
|
|
(2.6)
|
|
12.8
|
|
Net Cash Provided by
Operating Activities
|
$
|
28.4
|
|
$
|
74.6
|
|
$
|
142.9
|
|
$
|
278.7
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Capital
expenditures
|
$
|
(22.6)
|
|
$
|
(34.0)
|
|
$
|
(62.5)
|
|
$
|
(84.4)
|
|
Acquisitions
|
(283.1)
|
|
(62.1)
|
|
(347.2)
|
|
(62.8)
|
|
Other, net
|
7.2
|
|
3.8
|
|
2.3
|
|
3.9
|
|
Net Cash Used in
Investing Activities
|
$
|
(298.5)
|
|
$
|
(92.3)
|
|
$
|
(407.4)
|
|
$
|
(143.3)
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Cash dividends paid
to shareholders
|
$
|
(21.0)
|
|
$
|
(20.3)
|
|
$
|
(62.4)
|
|
$
|
(61.4)
|
|
Purchase of treasury
shares
|
(14.0)
|
|
(15.1)
|
|
(41.0)
|
|
(83.3)
|
|
Proceeds from
exercise of stock options
|
2.0
|
|
0.3
|
|
27.7
|
|
0.7
|
|
Shares surrendered
for taxes
|
(1.4)
|
|
(0.1)
|
|
(10.8)
|
|
(1.6)
|
|
Net proceeds
(payments) from credit facilities
|
(304.5)
|
|
43.4
|
|
27.6
|
|
19.0
|
|
Net proceeds
(payments) from long-term debt
|
299.4
|
|
(15.1)
|
|
299.4
|
|
(15.1)
|
|
Other, net
|
(4.1)
|
|
(2.8)
|
|
(4.2)
|
|
2.0
|
|
Net Cash Provided by
(Used in) Financing Activities
|
$
|
(43.6)
|
|
$
|
(9.7)
|
|
$
|
236.3
|
|
$
|
(139.7)
|
|
Effect of exchange
rate changes on cash
|
5.8
|
|
0.4
|
|
16.6
|
|
3.7
|
|
Decrease in Cash and
Cash Equivalents
|
$
|
(307.9)
|
|
$
|
(27.0)
|
|
$
|
(11.6)
|
|
$
|
(0.6)
|
|
Cash and Cash
Equivalents at Beginning of Period
|
445.1
|
|
156.0
|
|
148.8
|
|
129.6
|
|
Cash and Cash
Equivalents at End of Period
|
$
|
137.2
|
|
$
|
129.0
|
|
$
|
137.2
|
|
$
|
129.0
|
|
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
September 30,
|
|
Nine Months
Ended
September 30,
|
|
|
2017
|
|
EPS
|
2016
|
|
EPS
|
|
2017
|
|
EPS
|
2016
|
|
EPS
|
Net Income
Attributable to The Timken Company
|
|
$
|
53.5
|
|
|
$
|
0.68
|
|
$
|
33.6
|
|
|
$
|
0.43
|
|
|
$
|
174.2
|
|
|
$
|
2.21
|
|
$
|
147.7
|
|
|
$
|
1.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization charges (2)
|
|
$
|
2.6
|
|
|
|
$
|
7.3
|
|
|
|
|
$
|
10.5
|
|
|
|
$
|
21.4
|
|
|
|
Acquisition related charges
(3)
|
|
4.4
|
|
|
|
2.5
|
|
|
|
|
6.9
|
|
|
|
3.3
|
|
|
|
Gain on
sale of real estate (4)
|
|
(1.6)
|
|
|
|
—
|
|
|
|
|
(3.6)
|
|
|
|
—
|
|
|
|
Pension
related charges (5)
|
|
—
|
|
|
|
0.1
|
|
|
|
|
4.4
|
|
|
|
1.3
|
|
|
|
CDSOA
(income) expense, net (6)
|
|
—
|
|
|
|
0.2
|
|
|
|
|
—
|
|
|
|
(53.6)
|
|
|
|
Health
care plan modification costs (7)
|
|
—
|
|
|
|
—
|
|
|
|
|
(0.7)
|
|
|
|
—
|
|
|
|
(Gain)
loss on dissolution of subsidiary
|
|
—
|
|
|
|
0.9
|
|
|
|
|
—
|
|
|
|
(0.5)
|
|
|
|
Tax
indemnification (8)
|
|
—
|
|
|
|
—
|
|
|
|
|
(1.0)
|
|
|
|
—
|
|
|
|
(Benefit)
provision for income taxes (9)
|
|
(3.0)
|
|
|
|
(2.5)
|
|
|
|
|
(37.1)
|
|
|
|
9.2
|
|
|
|
Total
Adjustments:
|
|
2.4
|
|
|
0.03
|
|
8.5
|
|
|
0.10
|
|
|
(20.6)
|
|
|
(0.26)
|
|
(18.9)
|
|
|
(0.24)
|
|
Adjusted Net Income
from The Timken Company
|
|
$
|
55.9
|
|
|
$
|
0.71
|
|
$
|
42.1
|
|
|
$
|
0.53
|
|
|
$
|
153.6
|
|
|
$
|
1.95
|
|
$
|
128.8
|
|
|
$
|
1.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 and a manufacturing facility in Altavista, Virgina during
the second and third quarter of 2017, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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) expense, 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
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2017
|
Percentage
to
Net Sales
|
2016
|
Percentage
to
Net Sales
|
|
2017
|
Percentage
to
Net Sales
|
2016
|
Percentage
to
Net Sales
|
Net Income
|
$
|
54.1
|
|
7.0
|
%
|
$
|
34.0
|
|
5.2
|
%
|
|
$
|
174.2
|
|
7.8
|
%
|
$
|
148.0
|
|
7.3
|
%
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
21.1
|
|
2.7
|
%
|
15.2
|
|
2.3
|
%
|
|
28.5
|
|
1.3
|
%
|
65.8
|
|
3.3
|
%
|
Interest
expense
|
10.1
|
|
1.3
|
%
|
8.0
|
|
1.2
|
%
|
|
26.5
|
|
1.2
|
%
|
25.1
|
|
1.3
|
%
|
Interest
income
|
(0.7)
|
|
—
|
%
|
(0.4)
|
|
(0.1)
|
%
|
|
(2.0)
|
|
(0.1)
|
%
|
(1.1)
|
|
(0.1)
|
%
|
Consolidated
EBIT
|
$
|
84.6
|
|
11.0
|
%
|
$
|
56.8
|
|
8.6
|
%
|
|
$
|
227.2
|
|
10.2
|
%
|
$
|
237.8
|
|
11.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization charges (1)
|
$
|
2.6
|
|
0.3
|
%
|
$
|
7.3
|
|
1.2
|
%
|
|
$
|
10.5
|
|
0.4
|
%
|
$
|
21.4
|
|
1.1
|
%
|
CDSOA
(income) expense, net (2)
|
—
|
|
—
|
%
|
0.2
|
|
—
|
%
|
|
—
|
|
—
|
%
|
(53.6)
|
|
(2.7)
|
%
|
Health
care plan modification costs (3)
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
(0.7)
|
|
—
|
%
|
—
|
|
—
|
%
|
Acquisition related charges
(4)
|
4.4
|
|
0.6
|
%
|
2.5
|
|
0.4
|
%
|
|
6.9
|
|
0.3
|
%
|
3.3
|
|
0.1
|
%
|
Gain on
sale of real estate (5)
|
(1.6)
|
|
(0.2)
|
%
|
—
|
|
—
|
%
|
|
(3.6)
|
|
(0.2)
|
%
|
—
|
|
—
|
%
|
Pension
related charges (6)
|
—
|
|
—
|
%
|
0.1
|
|
—
|
%
|
|
4.4
|
|
0.2
|
%
|
1.3
|
|
0.1
|
%
|
Tax
indemnification (7)
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
(1.0)
|
|
—
|
%
|
—
|
|
—
|
%
|
(Gain)
loss on dissolution of subsidiary
|
—
|
|
—
|
%
|
0.9
|
|
0.1
|
%
|
|
—
|
|
—
|
%
|
(0.5)
|
|
—
|
%
|
Total
Adjustments
|
5.4
|
|
0.7
|
%
|
11.0
|
|
1.7
|
%
|
|
16.5
|
|
0.7
|
%
|
(28.1)
|
|
(1.4)
|
%
|
Adjusted
EBIT
|
$
|
90.0
|
|
11.7
|
%
|
$
|
67.8
|
|
10.3
|
%
|
|
$
|
243.7
|
|
10.9
|
%
|
$
|
209.7
|
|
10.4
|
%
|
|
|
|
|
|
|
|
|
|
|
(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) expense, 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 and a manufacturing facility in Altavista, Virgina during
the second and third quarter of 2017, respectively.
|
|
|
|
|
|
|
|
|
|
|
(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
September
30, 2017
|
Percentage
to Net
Sales
|
Three Months
Ended
September
30, 2016
|
Percentage
to Net
Sales
|
|
Nine Months
Ended
September
30, 2017
|
Percentage
to Net
Sales
|
Nine Months
Ended
September
30, 2016
|
Percentage
to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
|
34.9
|
|
8.3
|
%
|
$
|
25.9
|
|
7.3
|
%
|
|
$
|
100.1
|
|
8.2
|
%
|
$
|
95.3
|
|
8.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization
charges (1)
|
2.6
|
|
0.6
|
%
|
6.5
|
|
1.9
|
%
|
|
9.8
|
|
0.8
|
%
|
15.9
|
|
1.4
|
%
|
Gain on
dissolution of subsidiary
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
(1.4)
|
|
(0.1)
|
%
|
Gain on
sale of real estate (2)
|
(1.6)
|
|
(0.4)
|
%
|
—
|
|
—
|
%
|
|
(3.6)
|
|
(0.2)
|
%
|
—
|
|
—
|
%
|
Health
care plan modification costs (3)
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
(0.4)
|
|
—
|
%
|
—
|
|
—
|
%
|
Acquisition related charges
(4)
|
1.7
|
|
0.4
|
%
|
—
|
|
—
|
%
|
|
2.4
|
|
0.2
|
%
|
—
|
|
—
|
%
|
Pension
related charges (5)
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
1.8
|
|
0.1
|
%
|
—
|
|
—
|
%
|
Adjusted
EBIT
|
$
|
37.6
|
|
8.9
|
%
|
$
|
32.4
|
|
9.2
|
%
|
|
$
|
110.1
|
|
9.1
|
%
|
$
|
109.8
|
|
9.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Three Months
Ended
September
30, 2017
|
Percentage
to Net
Sales
|
Three Months
Ended
September
30, 2016
|
Percentage
to Net
Sales
|
|
Nine Months
Ended
September
30, 2017
|
Percentage
to Net
Sales
|
Nine Months
Ended
September
30, 2016
|
Percentage
to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
|
61.7
|
|
17.7
|
%
|
$
|
42.0
|
|
13.8
|
%
|
|
$
|
164.9
|
|
16.3
|
%
|
$
|
123.7
|
|
13.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization
charges (1)
|
—
|
|
—
|
%
|
0.9
|
|
0.3
|
%
|
|
0.1
|
|
—
|
%
|
5.5
|
|
0.6
|
%
|
Loss on
dissolution/divestment of subsidiary (2)
|
—
|
|
—
|
%
|
0.9
|
|
0.3
|
%
|
|
—
|
|
—
|
%
|
0.9
|
|
0.1
|
%
|
Health
care plan modification costs (3)
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
(0.2)
|
|
—
|
%
|
—
|
|
—
|
%
|
Acquisition related charges
(4)
|
—
|
|
—
|
%
|
1.7
|
|
0.6
|
%
|
|
0.2
|
|
—
|
%
|
1.7
|
|
0.2
|
%
|
Pension
related charges (5)
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
1.1
|
|
0.1
|
%
|
—
|
|
—
|
%
|
Adjusted
EBIT
|
$
|
61.7
|
|
17.7
|
%
|
$
|
45.5
|
|
15.0
|
%
|
|
$
|
166.1
|
|
16.4
|
%
|
$
|
131.8
|
|
14.5
|
%
|
|
|
|
|
|
|
|
|
|
|
(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) The gain on the sale of real
estate related to the sale of a manufacturing facility in South
Africa and a manufacturing facility in Altavista, Virgina during
the second and third quarter of 2017, respectively.
|
|
|
|
|
|
|
|
|
|
|
(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)
|
|
|
|
|
|
|
|
September 30,
2017
|
December 31,
2016
|
Short-term debt,
including current portion of long-term debt
|
|
|
$
|
46.1
|
|
$
|
24.2
|
|
Long-term
debt
|
|
|
959.8
|
|
635.0
|
|
Total
Debt
|
|
|
$
|
1,005.9
|
|
$
|
659.2
|
|
Less: Cash, cash
equivalents and restricted cash
|
|
|
(140.5)
|
|
(151.5)
|
|
Net Debt
|
|
|
$
|
865.4
|
|
$
|
507.7
|
|
|
|
|
|
|
Total
equity
|
|
|
$
|
1,455.9
|
|
$
|
1,310.9
|
|
|
|
|
|
|
Ratio of Total Debt
to Capital
|
|
|
40.9
|
%
|
33.5
|
%
|
Ratio of Net Debt to
Capital
|
|
|
37.3
|
%
|
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
September 30,
|
Nine Months
Ended
September 30,
|
|
2017
|
2016
|
2017
|
2016
|
Net cash provided by
operating activities
|
$
|
28.4
|
|
$
|
74.6
|
|
$
|
142.9
|
|
$
|
278.7
|
|
Less: capital
expenditures
|
(22.6)
|
|
(34.0)
|
|
(62.5)
|
|
(84.4)
|
|
Free cash
flow
|
$
|
5.8
|
|
$
|
40.6
|
|
$
|
80.4
|
|
$
|
194.3
|
|
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
|
$
|
2.78
|
|
|
$
|
2.83
|
|
|
|
|
|
Forecasted
Adjustments:
|
|
|
|
Impairment, restructuring and
reorganization charges (1)
|
0.10
|
|
|
0.10
|
|
Pension
related charges (2)
|
0.05
|
|
|
0.05
|
|
Acquisition related charges
(3)
|
0.05
|
|
|
0.05
|
|
(Benefit)
provision for income taxes (4)
|
(0.40)
|
|
|
(0.40)
|
|
Total
Adjustments:
|
$
|
(0.20)
|
|
|
$
|
(0.20)
|
|
Forecasted full year
adjusted diluted earnings per share
|
$
|
2.58
|
|
|
$
|
2.63
|
|
|
|
|
|
(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. The full year 2017 outlook
does not account for the annual remeasurement because the amount
will not be known until the fourth quarter.
|
|
|
|
|
(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
|
|
|
$
|
280.0
|
|
Less: capital
expenditures
|
|
|
(100.0)
|
|
Free cash
flow
|
|
|
$
|
180.0
|
|
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SOURCE The Timken Company