NORTH CANTON, Ohio,
Feb. 7, 2018 /PRNewswire/ --
The Timken Company (NYSE: TKR; www.timken.com), a world leader in
engineered bearings and mechanical power transmission
products, today reported fourth-quarter 2017 sales
of $778 million, up 18.8 percent from the same period a
year ago. The increase was driven by organic growth across most
end-market sectors led by off-highway and industrial distribution,
as well as the benefit of acquisitions and currency.
![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 fourth quarter, Timken posted net income
of $29.2 million or $0.37 per diluted share,
versus a net loss of $(6.9) million
or $(0.09) per basic share for the same period a year
ago. The change year-over-year reflects improved performance across
the business, as well as lower pension-related and impairment and
restructuring charges, partially offset by lower CDSOA
income1 and higher income tax expense. The higher income
tax expense was driven by one-time charges of $35.3 million recorded as a result of the
enactment of the Tax Cuts and Jobs Act of 2017, partially offset by
discrete and other tax benefits recorded during the period.
Excluding special items (detailed in the attached tables),
adjusted net income in the fourth quarter of 2017
was $53.9 million or $0.68 per diluted share,
up from $40.2 million
or $0.51 per diluted share for the same period in 2016.
The improvement reflects higher volume, favorable manufacturing
performance and the benefit of acquisitions, partially offset by
unfavorable price/mix and higher operating costs.
"Our strong fourth-quarter results capped an excellent 2017 for
The Timken Company," said Richard G.
Kyle, Timken president and chief executive officer. "We
posted solid revenue growth each quarter, responded well to our
customers' increased demand for Timken products and services and
delivered significantly improved financial results. We advanced our
strategy across all fronts, and we move into 2018 a stronger
company well prepared to capitalize on the expected continued
growth in our end markets."
1 Represents funds received by the company under the
U.S. Continued Dumping and Subsidy Offset Act (CDSOA).
2017 Full-Year Results
For 2017, sales were $3 billion,
up 12.5 percent compared with 2016. The increase was driven by
organic growth across most end-market sectors led by off-highway,
industrial distribution and heavy truck, and the benefit of
acquisitions and currency, partially offset by lower demand in the
rail sector.
Net income was $203.4 million or
$2.58 per diluted share for the year,
compared with net income of $140.8
million or $1.78 per diluted
share a year ago. The change year-over-year reflects improved
performance across the business, as well as lower pension-related
and impairment and restructuring charges, and a lower income tax
rate driven primarily by net discrete and other tax benefits
recorded during the year, partially offset by lower CDSOA
income1.
Excluding special items (detailed in the attached tables),
adjusted net income was $207.5 million or $2.63 per diluted share in 2017. This compares
with $169 million or $2.13 per diluted share in 2016. The improvement
in adjusted net income reflects higher volume, favorable
manufacturing performance and the benefit of acquisitions and
currency, partially offset by unfavorable price/mix and higher
operating costs.
Among significant accomplishments during the year, the company
expanded its mechanical power transmission portfolio and geographic
reach. The additions of Torsion Control Products, Groeneveld
Lubrication Solutions and PT Tech advanced the company's position
in industrial couplings and lubrication systems, and introduced
industrial clutches and brakes to the Timken portfolio. The company
also furthered its leadership position in engineered bearings,
opening a state-of-the-art manufacturing plant in Romania and entering into a definitive
agreement to acquire ABC Bearings in India. Additionally, the company increased its
quarterly dividend in May and repurchased nearly one million shares
of stock, returning a total of $127
million to shareholders during the year.
Fourth-Quarter 2017 Segment Results
Mobile Industries reported sales of $425.8 million,
up 24.4 percent compared with the same period a year ago.
Acquisitions added revenue of $42.7
million in the quarter, or 12.5 percent. Excluding
acquisitions, revenue was up 11.9 percent, driven primarily by
increased demand in the off-highway, heavy truck and automotive
sectors, and favorable currency.
Earnings before interest and taxes (EBIT) in the quarter
were $32 million or 7.5 percent of sales,
compared with a loss of $(8.2) million
or (2.4) percent of sales for the same period a year ago.
The increase in EBIT reflects the impact of higher volume,
favorable manufacturing performance and the benefit of
acquisitions, partially offset by unfavorable price/mix and higher
logistics, material and SG&A costs. The current period
also reflects lower pension-related and impairment and
restructuring charges.
Excluding special items (detailed in the attached tables),
adjusted EBIT in the quarter was $41.4 million
or 9.7 percent of sales, compared
with $28.8 million or 8.4 percent of sales in the
fourth quarter last year.
Process Industries sales of $352.2 million
increased 12.7 percent from the same period a year ago, driven
primarily by strong demand in the industrial distribution and
general industrial sectors, increased military marine revenue and
favorable currency.
EBIT for the quarter was $55.6 million
or 15.8 percent of sales, compared with EBIT
of $25.8 million or 8.3 percent of sales for
the same period a year ago. The increase in EBIT was driven by
higher volume, favorable manufacturing performance and lower
pension-related charges, partially offset by unfavorable price/mix
and higher logistics and SG&A costs.
Excluding special items (detailed in the attached tables),
adjusted EBIT in the quarter was $56.5 million
or 16 percent of sales, compared
with $47.1 million or 15.1 percent of sales in the
fourth quarter last year.
2018 Outlook
The company expects 2018 revenue to be up approximately 9
to 10 percent in total versus 2017. This includes expected organic
growth of 5 to 6 percent plus the benefit of acquisitions made
during 2017 and favorable currency. Within its segments, the
company estimates for full-year 2018:
- Mobile Industries sales to be up approximately 9 to 11 percent,
driven primarily by organic growth in the off-highway and heavy
truck sectors, as well as the benefit of acquisitions and favorable
currency.
- Process Industries sales to be up approximately 8
to 10 percent, reflecting growth in the industrial
distribution, services and general industrial sectors, and
favorable currency.
"We enter 2018 with broad strength across our end markets," said
Kyle. "We will continue to focus on serving our customers,
developing innovative product solutions, operating with excellence
and building a stronger Timken Company. We expect our
execution combined with robust markets will result in another year
of strong revenue and earnings growth with margin expansion."
Timken anticipates 2018 earnings per diluted share to range from
$3.05 to $3.15 for the full year on a GAAP basis.
Excluding special items (detailed in the attached tables), the
company expects 2018 adjusted earnings per diluted share to range
from $3.20 to $3.30.
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, Feb. 7,
2018
|
|
11 a.m. Eastern
Time
|
|
Live Dial-In:
800-289-0438 or 323-794-2423
|
|
(Call in 10 minutes
prior to be included.)
|
|
Conference ID:
Timken's 4Q Earnings Call
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through Feb. 21, 2018:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
5181556
|
|
|
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 $3 billion in sales in 2017. With more than
15,000 employees operating from 33 countries, Timken makes the
world more productive and keeps industry in motion.
Certain statements in this release (including statements
regarding the company's forecasts, estimates, plans and
expectations) that are not historical in nature are
"forward-looking" statements within the meaning of the Private
Securities Litigation Reform Act of 1995. In particular, the
statements related to expectations regarding the company's future
financial performance, including information under the heading
"Outlook," are forward-looking.
The company cautions that actual results may differ
materially from those projected or implied in forward-looking
statements due to a variety of important factors, including: the
finalization of the company's financial statements for the fourth
quarter and full-year of 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, including the actual
impact of the adoption of mark-to-market accounting;
weakness in global or regional economic conditions and capital
markets; fluctuations in currency valuations; changes in the
expected costs associated with product warranty claims; the ability
to achieve satisfactory operating results in the integration of
acquired companies; the impact on operations of general economic
conditions; fluctuations in customer demand; the impact on the
company's pension obligations due to changes in interest rates,
investment performance and other tactics designed to reduce risk;
the company's ability to complete and achieve the benefits of
announced plans, programs, initiatives, and capital investments;
and retention of CDSOA 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
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2017
|
2016
|
|
2017
|
2016
|
|
|
|
|
|
|
Net sales
|
$
|
778.0
|
|
$
|
654.8
|
|
|
$
|
3,003.8
|
|
$
|
2,669.8
|
|
Cost of products
sold
|
566.9
|
|
523.6
|
|
|
2,193.4
|
|
2,001.3
|
|
Gross
Profit
|
211.1
|
|
131.2
|
|
|
810.4
|
|
668.5
|
|
Selling, general
& administrative expenses
|
144.0
|
|
139.7
|
|
|
521.4
|
|
472.3
|
|
Impairment and
restructuring charges
|
0.5
|
|
3.0
|
|
|
4.3
|
|
21.7
|
|
Operating Income
(Loss)
|
66.6
|
|
(11.5)
|
|
|
284.7
|
|
174.5
|
|
Continued Dumping and
Subsidy Offset Act income (1)
|
—
|
|
6.0
|
|
|
—
|
|
59.6
|
|
Other income
(expense), net
|
0.3
|
|
0.9
|
|
|
9.4
|
|
(0.9)
|
|
Earnings (Loss)
Before Interest and Taxes (EBIT) (2)
|
66.9
|
|
(4.6)
|
|
|
294.1
|
|
233.2
|
|
Interest expense,
net
|
(9.7)
|
|
(7.6)
|
|
|
(34.2)
|
|
(31.6)
|
|
Income (Loss)
Before Income Taxes
|
57.2
|
|
(12.2)
|
|
|
259.9
|
|
201.6
|
|
Provision (benefit)
for income taxes
|
29.1
|
|
(5.3)
|
|
|
57.6
|
|
60.5
|
|
Net Income
(Loss)
|
28.1
|
|
(6.9)
|
|
|
202.3
|
|
141.1
|
|
Less: Net (loss)
income attributable to noncontrolling interest
|
(1.1)
|
|
—
|
|
|
(1.1)
|
|
0.3
|
|
Net Income (Loss)
Attributable to The Timken Company
|
$
|
29.2
|
|
$
|
(6.9)
|
|
|
$
|
203.4
|
|
$
|
140.8
|
|
|
|
|
|
|
|
Net Income per
Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
|
|
|
Basic Earnings (Loss) per
share
|
$
|
0.38
|
|
$
|
(0.09)
|
|
|
$
|
2.62
|
|
$
|
1.79
|
|
|
|
|
|
|
|
Diluted Earnings (Loss)
per share
|
$
|
0.37
|
|
$
|
(0.09)
|
|
|
$
|
2.58
|
|
$
|
1.78
|
|
|
|
|
|
|
|
Average Shares
Outstanding
|
77,622,730
|
|
77,599,869
|
|
|
77,736,398
|
|
78,516,029
|
|
Average Shares
Outstanding - assuming dilution
|
78,952,427
|
|
77,599,869
|
|
|
78,911,149
|
|
79,234,324
|
|
|
|
|
|
|
|
(1) U.S.
Continued Dumping and Subsidy Offset Act ("CDSOA") income,
represents the amount of funds received by the Company from monies
collected by U.S. Customs and Border Protection ("U.S. Customs") on
entries of merchandise subject to anti-dumping orders that entered
the U.S. prior to October 1, 2007.
|
|
|
|
|
|
|
(2) EBIT is a non-GAAP measure
defined as operating income plus other income (expense). EBIT is an
important financial measure used in the management of the business,
including decisions concerning the allocation of resources and
assessment of performance. Management believes that reporting EBIT
is useful to investors as this measure is representative of the
Company's core operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BUSINESS
SEGMENTS
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
(Dollars in
millions)
|
2017
|
2016
|
|
2017
|
2016
|
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
|
Net sales
|
$
|
425.8
|
|
$
|
342.3
|
|
|
$
|
1,640.0
|
|
$
|
1,446.4
|
|
Earnings (loss)
before interest and taxes (EBIT) (1)
|
$
|
32.0
|
|
$
|
(8.2)
|
|
|
$
|
132.1
|
|
$
|
87.1
|
|
EBIT Margin
(1)
|
|
7.5%
|
|
(2.4)%
|
|
|
8.1%
|
|
6.0%
|
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
Net sales
|
$
|
352.2
|
|
$
|
312.5
|
|
|
$
|
1,363.8
|
|
$
|
1,223.4
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
55.6
|
|
$
|
25.8
|
|
|
$
|
220.5
|
|
$
|
149.5
|
|
EBIT Margin
(1)
|
15.8%
|
|
8.3%
|
|
|
16.2%
|
|
12.2%
|
|
|
|
|
|
|
|
Corporate
expense
|
$
|
(20.7)
|
|
$
|
(28.2)
|
|
|
$
|
(58.5)
|
|
$
|
(63.0)
|
|
CDSOA income
(2)
|
—
|
|
6.0
|
|
|
—
|
|
59.6
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
Net sales
|
$
|
778.0
|
|
$
|
654.8
|
|
|
$
|
3,003.8
|
|
$
|
2,669.8
|
|
Earnings (loss)
before interest and taxes (EBIT) (1)
|
$
|
66.9
|
|
$
|
(4.6)
|
|
|
$
|
294.1
|
|
$
|
233.2
|
|
EBIT
Margin (1)
|
8.6%
|
|
(0.7)%
|
|
|
9.8%
|
|
8.7%
|
|
|
|
|
|
|
|
(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 core operations of the segments and Company,
respectively.
|
|
|
|
|
|
|
(2) CDSOA
income, represents the amount of funds received by the Company from
monies collected by U.S. Customs on entries of merchandise subject
to anti-dumping orders that entered the U.S. prior to October 1,
2007.
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
(Dollars in
millions)
|
(Unaudited)
|
|
|
|
December 31,
2017
|
|
December 31,
2016
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
121.6
|
|
|
$
|
148.8
|
|
Restricted
cash
|
3.8
|
|
|
2.7
|
|
Accounts
receivable
|
524.9
|
|
|
438.0
|
|
Inventories,
net
|
738.9
|
|
|
553.7
|
|
Other current
assets
|
110.9
|
|
|
68.7
|
|
Total Current
Assets
|
1,500.1
|
|
|
1,211.9
|
|
Property, plant and
equipment, net
|
864.2
|
|
|
804.4
|
|
Goodwill and other
intangible assets
|
932.4
|
|
|
628.5
|
|
Non-current pension
assets
|
19.7
|
|
|
32.1
|
|
Other
assets
|
86.0
|
|
|
86.3
|
|
Total
Assets
|
$
|
3,402.4
|
|
|
$
|
2,763.2
|
|
|
|
|
|
LIABILITIES
|
|
|
|
Accounts
payable
|
$
|
265.2
|
|
|
$
|
176.2
|
|
Short-term debt,
including current portion of long-term debt
|
108.1
|
|
|
24.2
|
|
Income
taxes
|
9.8
|
|
|
16.9
|
|
Accrued
expenses
|
288.6
|
|
|
235.4
|
|
Total Current
Liabilities
|
671.7
|
|
|
452.7
|
|
|
|
|
|
Long-term
debt
|
854.2
|
|
|
635.0
|
|
Accrued pension
cost
|
167.3
|
|
|
154.7
|
|
Accrued
postretirement benefits cost
|
122.6
|
|
|
131.5
|
|
Other non-current
liabilities
|
111.7
|
|
|
78.4
|
|
Total
Liabilities
|
1,927.5
|
|
|
1,452.3
|
|
|
|
|
|
EQUITY
|
|
|
|
The Timken Company
shareholders' equity
|
1,442.7
|
|
|
1,279.7
|
|
Noncontrolling
Interest
|
32.2
|
|
|
31.2
|
|
Total
Equity
|
1,474.9
|
|
|
1,310.9
|
|
Total Liabilities and
Equity
|
$
|
3,402.4
|
|
|
$
|
2,763.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
December 31,
|
Twelve Months
Ended
December 31,
|
(Dollars in
millions)
|
2017
|
2016
|
2017
|
2016
|
Cash Provided by
(Used in)
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net income (loss)
attributable to The Timken Company
|
$
|
29.2
|
|
$
|
(6.9)
|
|
$
|
203.4
|
|
$
|
140.8
|
|
Net (loss) income
attributable to noncontrolling interest
|
(1.1)
|
|
—
|
|
(1.1)
|
|
0.3
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
35.2
|
|
33.4
|
|
137.7
|
|
131.7
|
|
Impairment
charges
|
0.1
|
|
0.1
|
|
0.1
|
|
3.9
|
|
Pension and other
postretirement expense
|
16.3
|
|
69.5
|
|
28.9
|
|
84.0
|
|
Pension and other
postretirement benefit contributions and payments
|
(7.6)
|
|
(2.4)
|
|
(23.9)
|
|
(24.7)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
19.3
|
|
8.1
|
|
(42.3)
|
|
20.3
|
|
Inventories
|
(46.7)
|
|
23.7
|
|
(132.1)
|
|
10.1
|
|
Accounts
payable
|
15.0
|
|
(2.8)
|
|
70.7
|
|
12.2
|
|
Accrued
expenses
|
20.4
|
|
14.7
|
|
36.3
|
|
(2.8)
|
|
Income
taxes
|
15.5
|
|
(19.0)
|
|
(36.6)
|
|
8.5
|
|
Other, net
|
(1.7)
|
|
6.8
|
|
(4.3)
|
|
19.6
|
|
Net Cash Provided by
Operating Activities
|
$
|
93.9
|
|
$
|
125.2
|
|
$
|
236.8
|
|
$
|
403.9
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Capital
expenditures
|
$
|
(42.2)
|
|
$
|
(53.1)
|
|
$
|
(104.7)
|
|
$
|
(137.5)
|
|
Acquisitions
|
0.4
|
|
(9.8)
|
|
(346.8)
|
|
(72.6)
|
|
Other, net
|
0.5
|
|
(4.8)
|
|
2.8
|
|
(0.9)
|
|
Net Cash Used in
Investing Activities
|
$
|
(41.3)
|
|
$
|
(67.7)
|
|
$
|
(448.7)
|
|
$
|
(211.0)
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Cash dividends paid
to shareholders
|
$
|
(20.9)
|
|
$
|
(20.2)
|
|
$
|
(83.3)
|
|
$
|
(81.6)
|
|
Purchase of treasury
shares
|
(2.4)
|
|
(17.7)
|
|
(43.4)
|
|
(101.0)
|
|
Proceeds from
exercise of stock options
|
5.2
|
|
3.6
|
|
32.9
|
|
4.3
|
|
Shares surrendered
for taxes
|
(0.6)
|
|
(0.3)
|
|
(11.4)
|
|
(1.9)
|
|
Net (payments)
proceeds from credit facilities
|
(44.7)
|
|
(1.4)
|
|
(16.6)
|
|
17.6
|
|
Net proceeds
(payments) from long-term debt
|
(5.1)
|
|
(0.2)
|
|
293.8
|
|
(15.3)
|
|
Other, net
|
(0.8)
|
|
4.6
|
|
(5.0)
|
|
6.6
|
|
Net Cash Provided by
(Used in) Financing Activities
|
$
|
(69.3)
|
|
$
|
(31.6)
|
|
$
|
167.0
|
|
$
|
(171.3)
|
|
Effect of exchange
rate changes on cash
|
1.1
|
|
(6.1)
|
|
17.7
|
|
(2.4)
|
|
(Decrease) Increase
in Cash and Cash Equivalents
|
$
|
(15.6)
|
|
$
|
19.8
|
|
$
|
(27.2)
|
|
$
|
19.2
|
|
Cash and Cash
Equivalents at Beginning of Period
|
137.2
|
|
129.0
|
|
148.8
|
|
129.6
|
|
Cash and Cash
Equivalents at End of Period
|
$
|
121.6
|
|
$
|
148.8
|
|
$
|
121.6
|
|
$
|
148.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
2017
|
|
EPS
|
2016
|
|
EPS
|
|
2017
|
|
EPS
|
2016
|
|
EPS
|
Net Income (Loss)
Attributable to The Timken Company
|
|
$
|
29.2
|
|
|
$
|
0.37
|
|
$
|
(6.9)
|
|
|
$
|
(0.09)
|
|
|
$
|
203.4
|
|
|
$
|
2.58
|
|
$
|
140.8
|
|
|
$
|
1.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization charges (2)
|
|
$
|
2.6
|
|
|
|
$
|
6.6
|
|
|
|
|
$
|
13.1
|
|
|
|
$
|
28.0
|
|
|
|
Acquisition related charges
(3)
|
|
2.1
|
|
|
|
0.9
|
|
|
|
|
9.0
|
|
|
|
4.2
|
|
|
|
Gain on
sale of real estate (4)
|
|
—
|
|
|
|
—
|
|
|
|
|
(3.6)
|
|
|
|
—
|
|
|
|
Pension
related charges (5)
|
|
13.7
|
|
|
|
65.7
|
|
|
|
|
18.1
|
|
|
|
67.0
|
|
|
|
CDSOA
income(6)
|
|
—
|
|
|
|
(6.0)
|
|
|
|
|
—
|
|
|
|
(59.6)
|
|
|
|
Health
care plan modification costs (7)
|
|
—
|
|
|
|
2.9
|
|
|
|
|
(0.7)
|
|
|
|
2.9
|
|
|
|
Gain on
dissolution of subsidiary
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(0.5)
|
|
|
|
Tax
indemnification (8)
|
|
—
|
|
|
|
—
|
|
|
|
|
(1.0)
|
|
|
|
—
|
|
|
|
Provision
(benefit) for income taxes (9)
|
|
6.3
|
|
|
|
(23.0)
|
|
|
|
|
(30.8)
|
|
|
|
(13.8)
|
|
|
|
Total
Adjustments:
|
|
24.7
|
|
|
0.31
|
|
47.1
|
|
|
0.60
|
|
|
4.1
|
|
|
0.05
|
|
28.2
|
|
|
0.35
|
|
Adjusted Net Income
from The Timken Company
|
|
$
|
53.9
|
|
|
$
|
0.68
|
|
$
|
40.2
|
|
|
$
|
0.51
|
|
|
$
|
207.5
|
|
|
$
|
2.63
|
|
$
|
169.0
|
|
|
$
|
2.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 Groeneveld Group
("Groeneveld"), Torsion Control Products, Inc. ("Torsion Control
Products"), PT Tech, Inc. ("PT Tech") and EDT Corp. ("EDT")
acquisitions, including one-time transaction costs and inventory
step-up impact.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. These amounts
were recorded in other income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. Pension related charges in
2016 also included professional fees associated with the
implementation of a group annuity contract.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) CDSOA
income represents the amount of funds received by the Company from
monies collected by U.S. Customs on entries of merchandise subject
to anti-dumping orders that entered the U.S. prior to October 1,
2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) Health
care plan modification costs represent one-time charges associated
with a redesign in medical insurance options available for active
associates. In connection with the redesign, the Company
elected to pay certain unused reimbursement account balances to
associates impacted by the change in available options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) The
tax indemnification in 2017 represents a receivable from
TimkenSteel Corporation related to the settlement of certain tax
liabilities and pursuant to a tax sharing agreement between the
Company and TimkenSteel Corporation dated June 30, 2014. This
amount was recorded in other
income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9)
Provision (benefit) for income taxes includes the net tax impact on
pre-tax adjustments and the impact of discrete and other unusual
tax items recorded during the respective periods, including charges
related to U.S. tax reform in the fourth quarter of
2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2017
|
Percentage to
Net Sales
|
2016
|
Percentage to Net
Sales
|
|
2017
|
Percentage to
Net Sales
|
2016
|
Percentage to
Net Sales
|
Net Income
(Loss)
|
$
|
28.1
|
|
3.6
|
%
|
$
|
(6.9)
|
|
(1.1)
|
%
|
|
$
|
202.3
|
|
6.7
|
%
|
$
|
141.1
|
|
5.3
|
%
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit)
for income taxes
|
29.1
|
|
3.7
|
%
|
(5.3)
|
|
(0.8)
|
%
|
|
57.6
|
|
1.9
|
%
|
60.5
|
|
2.3
|
%
|
Interest
expense
|
10.6
|
|
1.4
|
%
|
8.4
|
|
1.3
|
%
|
|
37.1
|
|
1.3
|
%
|
33.5
|
|
1.2
|
%
|
Interest
income
|
(0.9)
|
|
(0.1)
|
%
|
(0.8)
|
|
(0.1)
|
%
|
|
(2.9)
|
|
(0.1)
|
%
|
(1.9)
|
|
(0.1)
|
%
|
Consolidated
EBIT
|
$
|
66.9
|
|
8.6
|
%
|
$
|
(4.6)
|
|
(0.7)
|
%
|
|
$
|
294.1
|
|
9.8
|
%
|
$
|
233.2
|
|
8.7
|
%
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization charges (1)
|
$
|
2.6
|
|
0.3
|
%
|
$
|
6.6
|
|
1.1
|
%
|
|
$
|
13.1
|
|
0.4
|
%
|
$
|
28.0
|
|
1.1
|
%
|
CDSOA
income (2)
|
—
|
|
—
|
%
|
(6.0)
|
|
(0.9)
|
%
|
|
—
|
|
—
|
%
|
(59.6)
|
|
(2.3)
|
%
|
Health
care plan modification costs (3)
|
—
|
|
—
|
%
|
2.9
|
|
0.4
|
%
|
|
(0.7)
|
|
—
|
%
|
2.9
|
|
0.1
|
%
|
Acquisition related charges
(4)
|
2.1
|
|
0.3
|
%
|
0.9
|
|
0.1
|
%
|
|
9.0
|
|
0.3
|
%
|
4.2
|
|
0.1
|
%
|
Gain on
sale of real estate (5)
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
(3.6)
|
|
(0.1)
|
%
|
—
|
|
—
|
%
|
Pension
related charges (6)
|
13.7
|
|
1.8
|
%
|
65.7
|
|
10.0
|
%
|
|
18.1
|
|
0.6
|
%
|
67.0
|
|
2.6
|
%
|
Tax
indemnification (7)
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
(1.0)
|
|
—
|
%
|
—
|
|
—
|
%
|
Gain on
dissolution of subsidiary
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
(0.5)
|
|
—
|
%
|
Total
Adjustments
|
18.4
|
|
2.4
|
%
|
70.1
|
|
10.7
|
%
|
|
34.9
|
|
1.2
|
%
|
42.0
|
|
1.6
|
%
|
Adjusted
EBIT
|
$
|
85.3
|
|
11.0
|
%
|
$
|
65.5
|
|
10.0
|
%
|
|
$
|
329.0
|
|
11.0
|
%
|
$
|
275.2
|
|
10.3
|
%
|
|
|
|
|
|
|
|
|
|
|
(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 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 Groeneveld,
Torsion Control Products, PT Tech and EDT acquisitions, including
one-time transaction costs and inventory step-up impact.
|
|
|
|
|
|
|
|
|
|
|
(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. These amounts
were recorded in other income.
|
|
|
|
|
|
|
|
|
|
|
(6)
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. Pension related charges in
2016 also included professional fees associated with the
implementation of a group annuity contract.
|
|
|
|
|
|
|
|
|
|
|
(7) The
tax indemnification in 2017 represents a receivable from
TimkenSteel Corporation related to the settlement of certain tax
liabilities and pursuant to a tax sharing agreement between the
Company and TimkenSteel Corporation 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
December
31, 2017
|
Percentage
to Net
Sales
|
Three Months
Ended
December
31, 2016
|
Percentage
to Net
Sales
|
|
Twelve Months
Ended
December
31, 2017
|
Percentage
to Net
Sales
|
Twelve Months
Ended
December
31, 2016
|
Percentage
to Net
Sales
|
Earnings (loss)
before interest and taxes (EBIT)
|
$
|
32.0
|
|
7.5
|
%
|
$
|
(8.2)
|
|
(2.4)
|
%
|
|
$
|
132.1
|
|
8.1
|
%
|
$
|
87.1
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization
charges (1)
|
2.4
|
|
0.6
|
%
|
5.6
|
|
1.6
|
%
|
|
12.2
|
|
0.7
|
%
|
21.5
|
|
1.5
|
%
|
Gain on
dissolution of subsidiary
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
(1.4)
|
|
(0.1)
|
%
|
Gain on
sale of real estate (2)
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
(3.6)
|
|
(0.2)
|
%
|
—
|
|
—
|
%
|
Health
care plan modification costs (3)
|
—
|
|
—
|
%
|
1.7
|
|
0.5
|
%
|
|
(0.4)
|
|
—
|
%
|
1.7
|
|
0.1
|
%
|
Acquisition related charges
(4)
|
2.0
|
|
0.4
|
%
|
—
|
|
—
|
%
|
|
4.4
|
|
0.2
|
%
|
—
|
|
—
|
%
|
Pension
related charges (5)
|
5.0
|
|
1.2
|
%
|
29.7
|
|
8.7
|
%
|
|
6.8
|
|
0.4
|
%
|
29.7
|
|
2.1
|
%
|
Adjusted
EBIT
|
$
|
41.4
|
|
9.7
|
%
|
$
|
28.8
|
|
8.4
|
%
|
|
$
|
151.5
|
|
9.2
|
%
|
$
|
138.6
|
|
9.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Three Months
Ended
December
31, 2017
|
Percentage
to Net
Sales
|
Three Months
Ended
December
31, 2016
|
Percentage
to Net
Sales
|
|
Twelve Months
Ended
December
31, 2017
|
Percentage
to Net
Sales
|
Twelve Months
Ended
December
31, 2016
|
Percentage
to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
|
55.6
|
|
15.8
|
%
|
$
|
25.8
|
|
8.3
|
%
|
|
$
|
220.5
|
|
16.2
|
%
|
$
|
149.5
|
|
12.2
|
%
|
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization
charges (1)
|
0.2
|
|
—
|
%
|
1.2
|
|
0.4
|
%
|
|
0.3
|
|
—
|
%
|
6.7
|
|
0.5
|
%
|
Loss on
dissolution/divestment of subsidiary (2)
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
0.9
|
|
0.1
|
%
|
Health
care plan modification costs (3)
|
—
|
|
—
|
%
|
0.7
|
|
0.2
|
%
|
|
(0.2)
|
|
—
|
%
|
0.7
|
|
0.1
|
%
|
Acquisition related charges
(4)
|
—
|
|
—
|
%
|
0.7
|
|
0.2
|
%
|
|
0.2
|
|
—
|
%
|
2.4
|
|
0.2
|
%
|
Pension
related charges (5)
|
0.7
|
|
0.2
|
%
|
18.7
|
|
6.0
|
%
|
|
1.8
|
|
0.1
|
%
|
18.7
|
|
1.5
|
%
|
Adjusted
EBIT
|
$
|
56.5
|
|
16.0
|
%
|
$
|
47.1
|
|
15.1
|
%
|
|
$
|
222.6
|
|
16.3
|
%
|
$
|
178.9
|
|
14.6
|
%
|
|
|
|
|
|
|
|
|
|
|
(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. These amounts
were recorded in other income.
|
|
|
|
|
|
|
|
|
|
|
(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 Groeneveld, Torsion Control Products, PT Tech
and EDT acquisitions, including one-time transaction costs and
inventory step-up impact.
|
|
|
|
|
|
|
|
|
|
|
(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)
|
|
|
|
|
|
|
|
December 31,
2017
|
December 31,
2016
|
Short-term debt,
including current portion of long-term debt
|
|
|
$
|
108.1
|
|
$
|
24.2
|
|
Long-term
debt
|
|
|
854.2
|
|
635.0
|
|
Total
Debt
|
|
|
$
|
962.3
|
|
$
|
659.2
|
|
Less: Cash, cash
equivalents and restricted cash
|
|
|
(125.4)
|
|
(151.5)
|
|
Net Debt
|
|
|
$
|
836.9
|
|
$
|
507.7
|
|
|
|
|
|
|
Total
equity
|
|
|
$
|
1,474.9
|
|
$
|
1,310.9
|
|
|
|
|
|
|
Ratio of Total Debt
to Capital
|
|
|
39.5
|
%
|
33.5
|
%
|
Ratio of Net Debt to
Capital
|
|
|
36.2
|
%
|
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
December 31,
|
Twelve Months
Ended
December 31,
|
|
2017
|
2016
|
2017
|
2016
|
Net cash provided by
operating activities
|
$
|
93.9
|
|
$
|
125.2
|
|
$
|
236.8
|
|
$
|
403.9
|
|
Less: capital
expenditures
|
(42.2)
|
|
(53.1)
|
|
(104.7)
|
|
(137.5)
|
|
Free cash
flow
|
$
|
51.7
|
|
$
|
72.1
|
|
$
|
132.1
|
|
$
|
266.4
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted Earnings per Share to GAAP Earnings per Share for Full
Year 2018 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
|
$
|
3.05
|
|
|
$
|
3.15
|
|
|
|
|
|
Forecasted
Adjustments:
|
|
|
|
Impairment, restructuring and
reorganization charges (1)
|
0.15
|
|
|
0.15
|
|
Total
Adjustments:
|
$
|
0.15
|
|
|
$
|
0.15
|
|
Forecasted full year
adjusted diluted earnings per share
|
$
|
3.20
|
|
|
$
|
3.30
|
|
|
|
|
|
(1) Impairment, restructuring and
reorganization charges relate to severance and other cost reduction
initiatives, net of tax.
|
|
|
|
|
|
|
|
|
Reconciliation of
Free Cash Flow to GAAP Net Cash Provided by Operating Activities
for Full Year 2018 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
|
|
|
$
|
350.0
|
|
Less: capital
expenditures
|
|
|
(125.0)
|
|
Free cash
flow
|
|
|
$
|
225.0
|
|
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SOURCE The Timken Company