NORTH CANTON, Ohio,
July 31, 2018 /PRNewswire/
-- The Timken Company (NYSE: TKR; www.timken.com), a world
leader in engineered bearings and power transmission
products, today reported second-quarter 2018 sales
of $906.3 million, up approximately 21 percent from the
same period a year ago. The increase was driven by continued
strength across most end markets, as well as the benefit of
acquisitions and currency.
In the second quarter, Timken posted net income
of $91 million or $1.16 per diluted share,
versus net income of $82.5 million or $1.04 per
diluted share for the same period a year ago. In the quarter, the
company benefitted from higher volume, favorable price/mix and
manufacturing performance, and the impact of acquisitions, which
were partially offset by higher material, logistics and selling,
general and administrative (SG&A) costs. The year-ago period
also included a large tax benefit.
Excluding special items (detailed in the attached tables),
adjusted net income in the second quarter of 2018
was $87.2 million or a record $1.11 per diluted share, versus net income
of $54 million or $0.68 per diluted share for the
same period in 2017.
"We delivered an outstanding quarter and remain on track for an
excellent year," said Richard G.
Kyle, Timken president and chief executive officer. "We are
successfully growing our business organically, and the acquisitions
we completed last year are performing at high levels. As a result,
we posted significant revenue gains, expanded operating margins and
reported record earnings per share. In addition, we further
advanced our strategy, announcing plans to add Cone Drive and
Rollon to our Timken portfolio of strong industrial brands."
Cash from operations for the quarter was $102.1 million, and free cash flow was
$80.3 million. The company ended the
quarter with net debt of $899.8
million, or 36.7 percent of capital.
Among recent developments, the company:
- Announced that it will acquire Cone Drive, a leader in
precision drives, and Rollon, a leader in linear motion, further
expanding the company's portfolio and strengthening its presence in
attractive markets around the world,
- Increased the company's quarterly dividend by 4 percent to
28 cents per share, and
- Returned $49 million in capital
to shareholders in the second quarter through the repurchase of
570,000 shares and the payment of its 384th consecutive quarterly
dividend.
Second-Quarter 2018 Segment Results
Mobile Industries reported sales of $489.1 million,
up 19.8 percent compared with the same period a year ago.
Acquisitions added revenue of $30.7
million in the quarter, or 7.5 percent. Excluding
acquisitions, revenue was up 12.2 percent, driven primarily by
increased demand in the off-highway, rail and heavy truck
sectors.
Earnings before interest and taxes (EBIT) in the quarter
were $54.5 million or 11.1 percent of sales,
compared with EBIT of $34.4 million or 8.4 percent
of sales for the same period a year ago. The increase in EBIT
reflects the impact of higher volume, favorable price/mix and
manufacturing performance, and the benefit of acquisitions,
partially offset by higher material and SG&A costs.
Excluding special items (detailed in the attached tables),
adjusted EBIT in the quarter was $54.9
million or 11.2 percent of sales, compared
with $35.9 million or 8.8 percent of sales in the
second quarter last year.
Process Industries sales of $417.2 million
increased 21.9 percent from the same period a year ago, driven by
broad strength across the distribution, original equipment and
services sectors, as well as the impact of favorable pricing and
currency.
EBIT for the quarter was $90.6 million
or 21.7 percent of sales, compared with EBIT
of $60.2 million or 17.6 percent of sales for
the same period a year ago. The increase in EBIT was driven by
higher volume and favorable price/mix, partially offset by higher
material, logistics and SG&A costs.
Excluding special items (detailed in the attached tables),
adjusted EBIT in the quarter was $90.8
million or 21.8 percent of sales, compared
with $60.2 million or 17.6 percent of sales in the
second quarter last year.
2018 Outlook
"We continue to see strong growth in our markets and are
successfully capturing new business," said Kyle. "As we advance our
strategy, we are expanding our industry-leading portfolio to serve
existing and new customers in attractive end markets around the
world. We are raising our outlook for the year, despite currency
and trade headwinds, and we remain confident in the company's
future."
The company now expects 2018 revenue to be up approximately 21
percent in total versus 2017. This includes expected organic growth
of approximately 15 percent plus the benefit of acquisitions,
including the recently announced Cone Drive and Rollon
acquisitions. Within its segments, the company estimates for
full-year 2018:
- Mobile Industries sales to be up approximately 18 percent,
driven primarily by organic growth in the off-highway, heavy truck
and rail sectors, as well as the benefit of acquisitions.
- Process Industries sales to be up approximately 25 percent,
reflecting strong demand across the distribution, original
equipment and services sectors, as well as the benefit of
acquisitions and favorable currency.
Timken now anticipates 2018 earnings per diluted share of
$3.90 to $4.00 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 $4.10 to $4.20, which at the midpoint represents an
increase of 58 percent from 2017.
Conference Call Information
Timken will host a conference call today at 11 a.m. Eastern
Time to review its financial results. Presentation materials will
be available online in advance of the call for interested investors
and securities analysts.
|
Conference
Call:
|
Tuesday, July 31,
2018
|
|
|
11 a.m. Eastern
Time
|
|
|
Live Dial-In:
800-239-9838
|
|
|
or
323-794-2551
|
|
|
(Call in 10 minutes
prior to be included.)
|
|
|
Conference ID:
Timken's 2Q Earnings Call
|
|
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through
|
|
|
August 14,
2018:
|
|
|
888-203-1112 or
719-457-0820
|
|
|
Replay Passcode:
7883233
|
|
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|
|
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, automated
lubrication systems, belts, chain, couplings and related products,
and offers a spectrum of powertrain rebuild and repair services.
The leading authority on tapered roller bearings, Timken today
applies its deep knowledge of metallurgy, tribology and mechanical
power transmission across a variety of bearings and related systems
to improve the 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®, Groeneveld®, Drives® and
Lovejoy®. 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 second
quarter of 2018; 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; recent world events
that have increased the risks posted by international trade
disputes, tariffs and sanctions; 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
and assets 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, acquisitions and capital investments; the actual
impact of the Tax Cuts and Jobs Act of 2017 on the full-year 2018
global effective tax rate; 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, 2017, 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
June 30,
|
|
Six Months
Ended
June 30,
|
|
2018
|
2017
|
|
2018
|
2017
|
|
|
|
|
|
|
Net sales
|
$
|
906.3
|
|
$
|
750.6
|
|
|
$
|
1,789.4
|
|
$
|
1,454.4
|
|
Cost of products
sold
|
638.9
|
|
549.5
|
|
|
1,257.1
|
|
1,071.1
|
|
Gross
Profit
|
267.4
|
|
201.1
|
|
|
532.3
|
|
383.3
|
|
Selling, general
& administrative expenses
|
141.8
|
|
123.9
|
|
|
290.4
|
|
241.5
|
|
Impairment and
restructuring charges
|
0.3
|
|
0.8
|
|
|
0.5
|
|
2.5
|
|
Operating
Income
|
125.3
|
|
76.4
|
|
|
241.4
|
|
139.3
|
|
Other income,
net
|
7.0
|
|
5.3
|
|
|
9.3
|
|
3.3
|
|
Earnings Before
Interest and Taxes (EBIT) (1)
|
132.3
|
|
81.7
|
|
|
250.7
|
|
142.6
|
|
Interest expense,
net
|
(10.2)
|
|
(7.8)
|
|
|
(19.8)
|
|
(15.1)
|
|
Income Before
Income Taxes
|
122.1
|
|
73.9
|
|
|
230.9
|
|
127.5
|
|
Provision (benefit)
for income taxes
|
30.2
|
|
(8.1)
|
|
|
58.5
|
|
7.4
|
|
Net
Income
|
91.9
|
|
82.0
|
|
|
172.4
|
|
120.1
|
|
Less: Net income
(loss) attributable to noncontrolling interest
|
0.9
|
|
(0.5)
|
|
|
1.2
|
|
(0.6)
|
|
Net Income
Attributable to The Timken Company
|
$
|
91.0
|
|
$
|
82.5
|
|
|
$
|
171.2
|
|
$
|
120.7
|
|
Net Income per
Common Share Attributable to The Timken Company
Common Shareholders
|
|
|
|
|
|
Basic Earnings per
share
|
$
|
1.18
|
|
$
|
1.06
|
|
|
$
|
2.21
|
|
$
|
1.55
|
|
|
|
|
|
|
|
Diluted Earnings per
share
|
$
|
1.16
|
|
$
|
1.04
|
|
|
$
|
2.17
|
|
$
|
1.53
|
|
|
|
|
|
|
|
Average Shares
Outstanding
|
77,360,159
|
|
77,931,576
|
|
|
77,544,365
|
|
77,814,438
|
|
Average Shares
Outstanding - assuming dilution
|
78,496,298
|
|
79,029,397
|
|
|
78,751,951
|
|
78,944,429
|
|
|
|
|
|
|
|
(1) 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)
|
2018
|
2017
|
|
2018
|
2017
|
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
|
Net sales
|
$
|
489.1
|
|
$
|
408.4
|
|
|
$
|
977.6
|
|
$
|
791.4
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
54.5
|
|
$
|
34.4
|
|
|
$
|
105.6
|
|
$
|
67.0
|
|
EBIT Margin
(1)
|
11.1
|
%
|
8.4
|
%
|
|
10.8
|
%
|
8.5
|
%
|
Process
Industries
|
|
|
|
|
|
Net sales
|
$
|
417.2
|
|
$
|
342.2
|
|
|
$
|
811.8
|
|
$
|
663.0
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
90.6
|
|
$
|
60.2
|
|
|
$
|
172.2
|
|
$
|
104.3
|
|
EBIT Margin
(1)
|
21.7
|
%
|
17.6
|
%
|
|
21.2
|
%
|
15.7
|
%
|
Corporate
expense
|
$
|
(15.2)
|
|
$
|
(12.9)
|
|
|
$
|
(29.5)
|
|
$
|
(24.3)
|
|
Pension related
charges (2)
|
2.4
|
|
—
|
|
|
2.4
|
|
(4.4)
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
Net sales
|
$
|
906.3
|
|
$
|
750.6
|
|
|
$
|
1,789.4
|
|
$
|
1,454.4
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
132.3
|
|
$
|
81.7
|
|
|
$
|
250.7
|
|
$
|
142.6
|
|
EBIT
Margin (1)
|
14.6
|
%
|
10.9
|
%
|
|
14.0
|
%
|
9.8
|
%
|
|
|
|
|
|
|
(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 core operations of the segments and Company,
respectively.
|
|
|
|
|
|
|
(2)
Pension related charges represent actuarial (gains) and 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.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
(Dollars in
millions)
|
(Unaudited)
|
|
|
|
June 30,
2018
|
|
December 31,
2017
|
ASSETS
|
|
|
|
Cash, cash
equivalents and restricted cash
|
$
|
146.6
|
|
|
$
|
125.4
|
|
Accounts receivable,
net
|
530.2
|
|
|
524.9
|
|
Contract
assets
|
127.5
|
|
|
—
|
|
Inventories,
net
|
777.4
|
|
|
738.9
|
|
Other current
assets
|
118.1
|
|
|
110.9
|
|
Total Current
Assets
|
1,699.8
|
|
|
1,500.1
|
|
Property, plant and
equipment, net
|
834.5
|
|
|
864.2
|
|
Goodwill and other
intangible assets
|
882.7
|
|
|
932.4
|
|
Non-current pension
assets
|
26.0
|
|
|
19.7
|
|
Other
assets
|
85.0
|
|
|
86.0
|
|
Total
Assets
|
$
|
3,528.0
|
|
|
$
|
3,402.4
|
|
LIABILITIES
|
|
|
|
Accounts
payable
|
$
|
253.2
|
|
|
$
|
265.2
|
|
Short-term debt,
including current portion of long-term debt
|
165.0
|
|
|
108.1
|
|
Income
taxes
|
15.1
|
|
|
9.8
|
|
Accrued
expenses
|
277.9
|
|
|
288.6
|
|
Total Current
Liabilities
|
711.2
|
|
|
671.7
|
|
Long-term
debt
|
881.4
|
|
|
854.2
|
|
Accrued pension
cost
|
165.7
|
|
|
167.3
|
|
Accrued
postretirement benefits cost
|
122.2
|
|
|
122.6
|
|
Other non-current
liabilities
|
95.2
|
|
|
111.7
|
|
Total
Liabilities
|
1,975.7
|
|
|
1,927.5
|
|
EQUITY
|
|
|
|
The Timken Company
shareholders' equity
|
1,521.8
|
|
|
1,442.7
|
|
Noncontrolling
Interest
|
30.5
|
|
|
32.2
|
|
Total Equity
|
1,552.3
|
|
|
1,474.9
|
|
Total Liabilities and
Equity
|
$
|
3,528.0
|
|
|
$
|
3,402.4
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
June 30,
|
Six Months
Ended
June 30,
|
(Dollars in
millions)
|
2018
|
2017
|
2018
|
2017
|
Cash Provided by
(Used in)
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net income
attributable to The Timken Company
|
$
|
91.0
|
|
$
|
82.5
|
|
$
|
171.2
|
|
$
|
120.7
|
|
Net income (loss)
attributable to noncontrolling interest
|
0.9
|
|
(0.5)
|
|
1.2
|
|
(0.6)
|
|
Adjustments to
reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
Depreciation and
amortization
|
35.0
|
|
33.9
|
|
70.8
|
|
66.8
|
|
Stock-based
compensation expense
|
7.5
|
|
4.8
|
|
17.8
|
|
10.4
|
|
Pension and other
postretirement expense
|
(0.4)
|
|
2.7
|
|
1.6
|
|
9.9
|
|
Pension and other
postretirement benefit contributions
|
(2.7)
|
|
(6.1)
|
|
(8.8)
|
|
(12.2)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
(14.3)
|
|
4.3
|
|
(86.4)
|
|
(46.0)
|
|
Contract
assets
|
(16.3)
|
|
—
|
|
(27.8)
|
|
—
|
|
Inventories
|
(26.1)
|
|
(31.6)
|
|
(79.9)
|
|
(38.1)
|
|
Accounts
payable
|
(6.1)
|
|
1.9
|
|
(8.4)
|
|
50.5
|
|
Accrued
expenses
|
36.3
|
|
30.4
|
|
(2.4)
|
|
2.0
|
|
Income
taxes
|
(17.1)
|
|
(57.2)
|
|
(3.7)
|
|
(49.0)
|
|
Other, net
|
14.4
|
|
2.7
|
|
12.6
|
|
0.1
|
|
Net Cash Provided by
Operating Activities
|
$
|
102.1
|
|
$
|
67.8
|
|
$
|
57.8
|
|
$
|
114.5
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Capital
expenditures
|
$
|
(21.8)
|
|
$
|
(20.6)
|
|
$
|
(39.6)
|
|
$
|
(39.9)
|
|
Acquisitions, net of
cash received
|
—
|
|
(63.5)
|
|
—
|
|
(64.1)
|
|
Other, net
|
(0.2)
|
|
2.1
|
|
3.6
|
|
(4.9)
|
|
Net Cash Used in
Investing Activities
|
$
|
(22.0)
|
|
$
|
(82.0)
|
|
$
|
(36.0)
|
|
$
|
(108.9)
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Cash dividends paid
to shareholders
|
$
|
(21.6)
|
|
$
|
(21.1)
|
|
$
|
(42.7)
|
|
$
|
(41.4)
|
|
Purchase of treasury
shares
|
(26.9)
|
|
(18.9)
|
|
(49.6)
|
|
(27.0)
|
|
Proceeds from
exercise of stock options
|
2.2
|
|
9.1
|
|
10.6
|
|
25.7
|
|
Shares surrendered
for taxes
|
(0.6)
|
|
(1.2)
|
|
(5.0)
|
|
(9.4)
|
|
Net proceeds from
credit facilities
|
10.2
|
|
355.1
|
|
103.8
|
|
332.5
|
|
Net payments on
long-term debt
|
(7.8)
|
|
(0.1)
|
|
(8.2)
|
|
(0.4)
|
|
Other, net
|
0.1
|
|
—
|
|
(1.0)
|
|
—
|
|
Net Cash Provided by
(Used in) Financing Activities
|
$
|
(44.4)
|
|
$
|
322.9
|
|
$
|
7.9
|
|
$
|
280.0
|
|
Effect of exchange
rate changes on cash
|
(9.4)
|
|
6.8
|
|
(8.5)
|
|
10.7
|
|
Increase in Cash,
Cash Equivalents and Restricted Cash
|
$
|
26.3
|
|
$
|
315.5
|
|
$
|
21.2
|
|
$
|
296.3
|
|
Cash, Cash
Equivalents and Restricted Cash at Beginning of Period
|
120.3
|
|
132.4
|
|
125.4
|
|
151.6
|
|
Cash, Cash
Equivalents and Restricted Cash at End of Period
|
$
|
146.6
|
|
$
|
447.9
|
|
$
|
146.6
|
|
$
|
447.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliations of
Adjusted Net Income to GAAP Net Income and Adjusted Earnings Per
Share to GAAP Earnings 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,
|
|
|
2018
|
|
EPS
|
2017
|
|
EPS
|
|
2018
|
|
EPS
|
2017
|
|
EPS
|
Net Income
Attributable to The Timken Company
|
|
$
|
91.0
|
|
|
$
|
1.16
|
|
$
|
82.5
|
|
|
$
|
1.04
|
|
|
$
|
171.2
|
|
|
$
|
2.17
|
|
$
|
120.7
|
|
|
$
|
1.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and reorganization charges
(2)
|
|
$
|
0.7
|
|
|
|
$
|
3.3
|
|
|
|
|
$
|
1.4
|
|
|
|
$
|
7.9
|
|
|
|
Acquisition related charges
(3)
|
|
0.2
|
|
|
|
2.4
|
|
|
|
|
0.2
|
|
|
|
2.5
|
|
|
|
Gain on
sale of real estate (4)
|
|
—
|
|
|
|
(2.0)
|
|
|
|
|
—
|
|
|
|
(2.0)
|
|
|
|
Pension
related charges (5)
|
|
(2.4)
|
|
|
|
—
|
|
|
|
|
(2.2)
|
|
|
|
4.4
|
|
|
|
Health
care plan modification costs
|
|
—
|
|
|
|
(0.7)
|
|
|
|
|
—
|
|
|
|
(0.7)
|
|
|
|
Tax
indemnification
|
|
—
|
|
|
|
(1.0)
|
|
|
|
|
0.3
|
|
|
|
(1.0)
|
|
|
|
Provision
for income taxes (6)
|
|
(2.3)
|
|
|
|
(30.5)
|
|
|
|
|
(3.7)
|
|
|
|
(34.1)
|
|
|
|
Total
Adjustments:
|
|
(3.8)
|
|
|
(0.05)
|
|
(28.5)
|
|
|
(0.36)
|
|
|
(4.0)
|
|
|
(0.05)
|
|
(23.0)
|
|
|
(0.29)
|
|
Adjusted Net Income
to The Timken Company
|
|
$
|
87.2
|
|
|
$
|
1.11
|
|
$
|
54.0
|
|
|
$
|
0.68
|
|
|
$
|
167.2
|
|
|
$
|
2.12
|
|
$
|
97.7
|
|
|
$
|
1.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Adjustments are pre-tax, with the
net tax provision listed separately.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
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 2018 relate to the ABC Bearings Limited ("ABC
Bearings") acquisition. In 2017, acquisition charges 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 during the second quarter of 2017. This amount was recorded
in other income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
Pension related charges represent actuarial (gains) and 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.
|
|
|
|
|
|
|
|
|
(6)
Provision for income taxes includes the net tax
impact on pre-tax adjustments, the impact of discrete tax items
recorded during the respective periods, as well as adjustments to
reflect the use of one overall effective tax rate on adjusted
pre-tax income in interim periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
EBIT to GAAP Net Income, and EBIT Margin, After Adjustments, to Net
Income as a Percentage of Sales and EBIT, After Adjustments, to Net
Income:
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
The following
reconciliation is provided as additional relevant information about
the Company's performance deemed useful to investors.
Management believes consolidated earnings 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 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,
|
|
2018
|
Percentage to
Net Sales
|
2017
|
Percentage
to
Net Sales
|
|
2018
|
Percentage to
Net Sales
|
2017
|
Percentage to
Net Sales
|
Net Income
|
$
|
91.9
|
|
10.1
|
%
|
$
|
82.0
|
|
10.9
|
%
|
|
$
|
172.4
|
|
9.6
|
%
|
$
|
120.1
|
|
8.3
|
%
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit)
for income taxes
|
30.2
|
|
3.3
|
%
|
(8.1)
|
|
(1.1)
|
%
|
|
58.5
|
|
3.3
|
%
|
7.4
|
|
0.5
|
%
|
Interest
expense
|
10.7
|
|
1.2
|
%
|
8.5
|
|
1.1
|
%
|
|
20.7
|
|
1.2
|
%
|
16.4
|
|
1.1
|
%
|
Interest
income
|
(0.5)
|
|
—
|
%
|
(0.7)
|
|
—
|
%
|
|
(0.9)
|
|
(0.1)
|
%
|
(1.3)
|
|
(0.1)
|
%
|
Consolidated
EBIT
|
$
|
132.3
|
|
14.6
|
%
|
$
|
81.7
|
|
10.9
|
%
|
|
$
|
250.7
|
|
14.0
|
%
|
$
|
142.6
|
|
9.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Restructuring and reorganization charges
(1)
|
$
|
0.7
|
|
0.1
|
%
|
$
|
3.3
|
|
0.4
|
%
|
|
$
|
1.4
|
|
0.1
|
%
|
$
|
7.9
|
|
0.5
|
%
|
Health
care plan modification costs
|
—
|
|
—
|
%
|
(0.7)
|
|
(0.1)
|
%
|
|
—
|
|
—
|
%
|
(0.7)
|
|
—
|
%
|
Acquisition related charges
(2)
|
0.2
|
|
—
|
%
|
2.4
|
|
0.3
|
%
|
|
0.2
|
|
—
|
%
|
2.5
|
|
0.2
|
%
|
Gain on
sale of real estate (3)
|
—
|
|
—
|
%
|
(2.0)
|
|
(0.2)
|
%
|
|
—
|
|
—
|
%
|
(2.0)
|
|
(0.1)
|
%
|
Pension
related charges (4)
|
(2.4)
|
|
(0.3)
|
%
|
—
|
|
—
|
%
|
|
(2.2)
|
|
(0.1)
|
%
|
4.4
|
|
0.3
|
%
|
Tax
indemnification
|
—
|
|
—
|
%
|
(1.0)
|
|
(0.1)
|
%
|
|
0.3
|
|
—
|
%
|
(1.0)
|
|
(0.1)
|
%
|
Total
Adjustments
|
(1.5)
|
|
(0.2)
|
%
|
2.0
|
|
0.3
|
%
|
|
(0.3)
|
|
—
|
%
|
11.1
|
|
0.8
|
%
|
Adjusted
EBIT
|
$
|
130.8
|
|
14.4
|
%
|
$
|
83.7
|
|
11.2
|
%
|
|
$
|
250.4
|
|
14.0
|
%
|
$
|
153.7
|
|
10.6
|
%
|
|
|
|
|
|
|
|
|
|
|
(1)
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) Acquisition
related charges in 2018 relate to the ABC Bearings
acquisition. In 2017, acquisition charges relate to the Groeneveld,
Torsion Control Products, PT Tech and EDT acquisitions, including
one-time transaction costs and inventory step-up
impact.
|
|
|
|
|
|
|
|
|
|
|
(3) 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. This amount was recorded
in other income.
|
|
|
|
|
|
|
|
|
|
|
(4)
Pension related charges represent actuarial (gains) and 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
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, 2018
|
Percentage
to Net Sales
|
Three
Months Ended
June 30,
2017
|
Percentage
to Net Sales
|
|
Six
Months
Ended
June 30,
2018
|
Percentage
to Net Sales
|
Six
Months
Ended
June 30,
2017
|
Percentage
to Net Sales
|
Earnings before
interest and taxes (EBIT)
|
$
|
54.5
|
|
11.1
|
%
|
$
|
34.4
|
|
8.4
|
%
|
|
$
|
105.6
|
|
10.8
|
%
|
$
|
67.0
|
|
8.5
|
%
|
Restructuring and reorganization charges
(1)
|
0.4
|
|
0.1
|
%
|
3.2
|
|
0.8
|
%
|
|
1.1
|
|
0.1
|
%
|
7.2
|
|
0.9
|
%
|
Gain on
sale of real estate (2)
|
—
|
|
—
|
%
|
(2.0)
|
|
(0.5)
|
%
|
|
—
|
|
—
|
%
|
(2.0)
|
|
(0.3)
|
%
|
Health
care plan modification costs (3)
|
—
|
|
—
|
%
|
(0.4)
|
|
(0.1)
|
%
|
|
—
|
|
—
|
%
|
(0.4)
|
|
—
|
%
|
Acquisition related charges
(4)
|
—
|
|
—
|
%
|
0.7
|
|
0.2
|
%
|
|
—
|
|
—
|
%
|
0.7
|
|
0.1
|
%
|
Adjusted
EBIT
|
$
|
54.9
|
|
11.2
|
%
|
$
|
35.9
|
|
8.8
|
%
|
|
$
|
106.7
|
|
10.9
|
%
|
$
|
72.5
|
|
9.2
|
%
|
|
|
|
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Three Months
Ended
June 30, 2018
|
Percentage to Net
Sales
|
Three
Months Ended
June 30,
2017
|
Percentage to Net
Sales
|
|
Six
Months
Ended
June 30,
2018
|
Percentage to Net
Sales
|
Six
Months
Ended
June 30,
2017
|
Percentage to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
|
90.6
|
|
21.7
|
%
|
$
|
60.2
|
|
17.6
|
%
|
|
$
|
172.2
|
|
21.2
|
%
|
$
|
104.3
|
|
15.7
|
%
|
Restructuring and reorganization charges
(1)
|
0.2
|
|
0.1
|
%
|
0.1
|
|
—
|
%
|
|
0.2
|
|
—
|
%
|
0.1
|
|
—
|
%
|
Health
care plan modification costs (3)
|
—
|
|
—
|
%
|
(0.2)
|
|
—
|
%
|
|
—
|
|
—
|
%
|
(0.2)
|
|
—
|
%
|
Acquisition related charges
(4)
|
—
|
|
—
|
%
|
0.1
|
|
—
|
%
|
|
—
|
|
—
|
%
|
0.2
|
|
—
|
%
|
Adjusted
EBIT
|
$
|
90.8
|
|
21.8
|
%
|
$
|
60.2
|
|
17.6
|
%
|
|
$
|
172.4
|
|
21.2
|
%
|
$
|
104.4
|
|
15.7
|
%
|
|
|
|
|
|
|
|
|
|
|
(1)
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. This amount was 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
2018
|
December 31,
2017
|
Short-term debt,
including current portion of long-term debt
|
|
|
$
|
165.0
|
|
$
|
108.1
|
|
Long-term
debt
|
|
|
881.4
|
|
854.2
|
|
Total
Debt
|
|
|
$
|
1,046.4
|
|
$
|
962.3
|
|
Less: Cash, cash
equivalents and restricted cash
|
|
|
(146.6)
|
|
(125.4)
|
|
Net Debt
|
|
|
$
|
899.8
|
|
$
|
836.9
|
|
|
|
|
|
|
Total
Equity
|
|
|
$
|
1,552.3
|
|
$
|
1,474.9
|
|
|
|
|
|
|
Ratio of Total Debt
to Capital
|
|
|
40.3
|
%
|
39.5
|
%
|
Ratio of Net Debt to
Capital
|
|
|
36.7
|
%
|
36.2
|
%
|
|
|
|
|
|
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,
|
|
2018
|
2017
|
2018
|
2017
|
Net cash provided by
operating activities
|
$
|
102.1
|
|
$
|
67.8
|
|
$
|
57.8
|
|
$
|
114.5
|
|
Less: capital
expenditures
|
(21.8)
|
|
(20.6)
|
|
(39.6)
|
|
(39.9)
|
|
Free cash
flow
|
$
|
80.3
|
|
$
|
47.2
|
|
$
|
18.2
|
|
$
|
74.6
|
|
|
|
Reconciliation of
EBIT, EBIT, After Adjustments, and EBITDA, After Adjustments, to
GAAP Net Income:
|
(Unaudited)
|
The following
reconciliation is provided as additional relevant information about
the Company's performance deemed useful to investors.
Management believes consolidated earnings 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 to consolidated EBIT.
Management also believes that non-GAAP measures of adjusted EBIT
and adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) is 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)
|
Twelve Months
Ended
June 30, 2018
|
Net Income
|
$
|
254.6
|
Provision for income
taxes
|
108.7
|
Interest
expense
|
41.4
|
Interest
income
|
(2.5)
|
Consolidated
EBIT
|
$
|
402.2
|
Adjustments:
|
|
Restructuring and reorganization charges
(1)
|
$
|
6.6
|
Acquisition related charges
(2)
|
6.7
|
Gain on
sale of real estate (3)
|
(1.6)
|
Pension
related charges (4)
|
11.5
|
Tax
indemnification
|
0.3
|
Total
Adjustments
|
23.5
|
Adjusted
EBIT
|
$
|
425.7
|
Adjusted depreciation
and amortization (5)
|
141.4
|
Adjusted
EBITDA
|
$
|
567.1
|
|
(1)
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)
Acquisition related charges in 2018 relate to the ABC Bearings
acquisition. In 2017, acquisition charges relate to the Groeneveld,
Torsion Control Products, PT Tech and EDT acquisitions, including
one-time transaction costs and inventory step-up impact.
|
|
(3) The gain on the sale of real
estate related to the sale of a manufacturing facility in
Altavista, Virgina during the third quarter of 2017. This amount
was recorded in other income.
|
|
(4)
Pension related charges represent actuarial (gains) and 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.
|
|
(5)
Adjusted deprecation and amortization removes the impact of
deprecation recognized in reorganization charges.
|
|
|
|
|
|
|
|
|
|
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
|
$
|
3.90
|
|
|
$
|
4.00
|
|
|
|
|
|
Forecasted
Adjustments:
|
|
|
|
Restructuring and other special items,
net (1)
|
0.20
|
|
|
0.20
|
|
Total
Adjustments:
|
$
|
0.20
|
|
|
$
|
0.20
|
|
Forecasted full year
adjusted diluted earnings per share
|
$
|
4.10
|
|
|
$
|
4.20
|
|
|
|
|
|
(1) Restructuring and other special
items, net do not include the impact of any potential
mark-to-market pension and other postretirement remeasurement
adjustment, because the amount will not be known until
incurred.
|
|
|
|
|
|
|
|
|
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
|
|
|
$
|
370.0
|
|
Less: capital
expenditures
|
|
|
(120.0)
|
|
Free cash
flow
|
|
|
$
|
250.0
|
|
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SOURCE The Timken Company