NORTH CANTON, Ohio,
May 1, 2019 /PRNewswire/ -- The
Timken Company (NYSE: TKR; www.timken.com), a world leader in
engineered bearings and power transmission
products, today reported first-quarter 2019 sales
of $979.7 million, up 10.9 percent from the same period a
year ago. The increase was primarily driven by organic growth in
the Process Industries segment and the benefit of acquisitions,
partially offset by unfavorable foreign currency translation.
![The Timken Company Logo. (PRNewsfoto/The Timken Company) The Timken Company Logo. (PRNewsfoto/The Timken Company)](https://mma.prnewswire.com/media/647794/TIMKEN_COMPANY_Logo.jpg)
In the first quarter, Timken posted net income of $91.9
million or $1.19 per diluted share, versus net income
of $80.2 million or $1.02 per diluted share for
the same period a year ago. The year-over-year increase was driven
by higher volume, favorable price/mix, improved manufacturing
performance, lower selling, general and administrative (SG&A)
costs, and the benefit of acquisitions, partially offset by higher
material costs. The current period also included higher interest
expense, as well as higher income tax expense driven by discrete
tax adjustments in the current quarter.
Excluding special items (detailed in the attached tables),
adjusted net income in the first quarter of 2019
was $104.2 million or a record $1.35 per diluted share, versus adjusted net
income of $80 million or $1.01 per diluted share for
the same period in 2018. Cash from operations for the quarter was
$52.3 million, and free cash flow was
$36.1 million.
"We had an excellent start to the year, achieving strong revenue
growth, margin expansion and record adjusted earnings per share in
the first quarter," said Richard G.
Kyle, Timken president and chief executive officer. "We
continue to deliver profitable growth as a result of our focused
strategy, strong operating performance and diverse market and
product mix. Our recent acquisition of Diamond Chain further enhances our power
transmission portfolio, which now accounts for roughly one-third of
company revenues. Whether through innovation from within or
acquisition, we are profitably growing Timken's industrial
leadership position to create shareholder value that endures."
Among recent developments, the company:
- Earned recognition for the ninth time as one of the World's
Most Ethical Companies by Ethisphere, a global leader in defining
and advancing the standards of ethical business practices that fuel
corporate character, marketplace trust and business success;
- Returned $30 million of capital
to shareholders during the quarter with the payment of its 387th
consecutive quarterly dividend and the repurchase of approximately
210 thousand shares; and
- Completed the acquisition of Diamond
Chain, a leading supplier of high-performance roller chains
for industrial markets, and an excellent strategic fit with
Timken's existing Drives chain business.
First-Quarter 2019 Segment Results
Mobile Industries sales of $500 million
increased 2.4 percent compared with the same period a year ago,
driven primarily by organic growth in the aerospace sector and the
benefit of acquisitions net of divestitures, partially offset by
unfavorable currency.
Earnings before interest and taxes (EBIT) in the quarter
were $61.4 million or 12.3 percent of sales,
compared with EBIT of $51.1 million or 10.5 percent
of sales for the same period a year ago. The increase in EBIT
reflects favorable price/mix, improved manufacturing performance,
lower logistics and SG&A costs, and the benefit of acquisitions
net of divestitures, partially offset by higher material costs. The
current period also includes a $6
million charge for damage resulting from a flood that
occurred during the quarter at one of our U.S. warehouses.
Excluding special items (detailed in the attached tables),
adjusted EBIT in the quarter was $66 million
or 13.2 percent of sales, compared
with $51.8 million or 10.6 percent of sales in the
first quarter last year.
Process Industries reported sales
of $479.7 million, up 21.6 percent from the same period a
year ago. Acquisitions added revenue of $52.4 million in the quarter, or 13.3 percent.
Excluding acquisitions, revenue was up 8.3 percent with broad
organic growth across most sectors led by wind energy, industrial
distribution and heavy industries, partially offset by unfavorable
currency.
EBIT for the quarter was $106.2 million
or 22.1 percent of sales, compared with EBIT
of $81.6 million or 20.7 percent of sales for the
same period a year ago. The increase in EBIT was driven by higher
volume, favorable price/mix and the benefit of acquisitions,
partially offset by higher material costs. The current period also
included acquisition-related charges.
Excluding special items (detailed in the attached tables),
adjusted EBIT in the quarter was $109.8 million
or 22.9 percent of sales, compared
with $81.6 million or 20.7 percent of sales in the
first quarter last year.
2019 Outlook
The company expects 2019 revenue to be up approximately 8 to 10
percent in total versus 2018. This includes expected organic growth
of 3 to 5 percent plus the benefit of acquisitions including the
recently completed Diamond Chain
acquisition, partially offset by unfavorable foreign currency
translation.
"We continue to see growing demand across many industrial
sectors," said Kyle. "We expect to deliver solid revenue growth,
expanded margins, record earnings and strong cash flow in 2019,
further demonstrating the improvements in the company's market
position and earnings power. We remain focused on winning with
customers, driving operational excellence and investing for growth,
all of which will generate significant value for shareholders over
time."
Timken now anticipates increased 2019 earnings per diluted share
in the range of $4.95 to $5.15 for the full year on a GAAP basis.
Excluding special items (detailed in the attached tables), the
company expects record 2019 adjusted earnings per diluted share
ranging from $5.15 to $5.35.
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, May 1,
2019
|
|
11:00 a.m. Eastern
Time
|
|
Live Dial-In:
800-263-0877
|
|
or
323-794-2094
|
|
(Call in 10 minutes
prior to be included.)
|
|
Conference ID:
Timken's 1Q Earnings Call
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through
|
|
May 15,
2019:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
2572866
|
|
|
Live
Webcast:
|
http://investors.timken.com
|
About The Timken Company
The Timken Company (NYSE: TKR; www.timken.com) designs
a growing portfolio of engineered bearings and power transmission
products. With more than a century of knowledge and innovation, we
continuously improve the reliability and efficiency of global
machinery and equipment to move the world forward. Timken
posted $3.6 billion in sales in 2018
and employs more than 18,000 people globally, operating from 35
countries.
Certain statements in this release (including statements
regarding the company's forecasts, estimates, plans and
expectations) that are not historical in nature are
"forward-looking" statements within the meaning of the Private
Securities Litigation Reform Act of 1995. In particular, the
statements related to expectations regarding the company's future
financial performance, including information under the heading
"Outlook," are forward-looking.
The company cautions that actual results may differ
materially from those projected or implied in forward-looking
statements due to a variety of important factors, including: the
finalization of the company's financial statements for the first
quarter of 2019; 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 material and energy costs; the impact of changes to
the company's accounting methods; recent world events that have
increased the risks posed by international trade disputes, tariffs
and sanctions; weakness in global or regional
economic conditions and capital markets; the company's ability to
satisfy its obligations under its debt agreements and renew or
refinance borrowings on favorable terms; 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, including
realizing any accretion within expected timeframes or at all; 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; and the company's
ability to complete and achieve the benefits of announced plans,
programs, initiatives, acquisitions and capital investments.
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, 2018, 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:
Scott
Schroeder
234.262.6420
scott.schroeder@timken.com
Investor Relations:
Jason
Hershiser
234.262.7101
jason.hershiser@timken.com
The Timken
Company
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
(Unaudited)
|
|
|
(Dollars in millions,
except per share data)
|
Three Months
Ended
March 31,
|
|
2019
|
2018
|
|
|
|
Net sales
|
$
|
979.7
|
|
$
|
883.1
|
|
Cost of products
sold
|
677.1
|
|
618.2
|
|
Gross
Profit
|
302.6
|
|
264.9
|
|
Selling, general
& administrative expenses
|
152.7
|
|
148.6
|
|
Impairment and
restructuring charges
|
—
|
|
0.2
|
|
Operating
Income
|
149.9
|
|
116.1
|
|
Non-service pension
and other postretirement income
|
0.1
|
|
1.6
|
|
Other income,
net
|
3.3
|
|
0.7
|
|
Earnings Before
Interest and Taxes (EBIT) (1)
|
153.3
|
|
118.4
|
|
Interest expense,
net
|
(16.7)
|
|
(9.6)
|
|
Income Before
Income Taxes
|
136.6
|
|
108.8
|
|
Provision for income
taxes
|
41.3
|
|
28.3
|
|
Net
Income
|
95.3
|
|
80.5
|
|
Less: Net income
attributable to noncontrolling interest
|
3.4
|
|
0.3
|
|
Net Income
Attributable to The Timken Company
|
$
|
91.9
|
|
$
|
80.2
|
|
Net Income per
Common Share Attributable to The Timken Company
Common Shareholders
|
|
|
Basic Earnings per
share
|
$
|
1.21
|
|
$
|
1.03
|
|
|
|
|
Diluted Earnings per
share
|
$
|
1.19
|
|
$
|
1.02
|
|
|
|
|
Average Shares
Outstanding
|
75,986,285
|
|
77,734,153
|
|
Average Shares
Outstanding - assuming dilution
|
77,012,573
|
|
79,013,185
|
|
|
|
|
(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
March 31,
|
(Dollars in
millions)
|
2019
|
2018
|
|
|
|
Mobile
Industries
|
|
|
Net sales
|
$
|
500.0
|
|
$
|
488.5
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
61.4
|
|
$
|
51.1
|
|
EBIT Margin
(1)
|
12.3%
|
|
10.5%
|
|
Process
Industries
|
|
|
Net sales
|
$
|
479.7
|
|
$
|
394.6
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
106.2
|
|
$
|
81.6
|
|
EBIT Margin
(1)
|
22.1%
|
|
20.7%
|
|
Corporate
expense
|
$
|
(14.3)
|
|
$
|
(14.3)
|
|
|
|
|
Consolidated
|
|
|
Net sales
|
$
|
979.7
|
|
$
|
883.1
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
153.3
|
|
$
|
118.4
|
|
EBIT
Margin (1)
|
15.6%
|
|
13.4%
|
|
|
|
|
(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.
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
(Dollars in
millions)
|
(Unaudited)
|
|
|
|
March 31,
2019
|
|
December 31,
2018
|
ASSETS
|
|
|
|
Cash, cash
equivalents and restricted cash
|
$
|
240.1
|
|
|
$
|
133.1
|
|
Accounts receivable,
net
|
611.3
|
|
|
546.6
|
|
Unbilled
receivables
|
123.2
|
|
|
116.6
|
|
Inventories,
net
|
839.4
|
|
|
835.7
|
|
Other current
assets
|
105.6
|
|
|
105.2
|
|
Total Current
Assets
|
1,919.6
|
|
|
1,737.2
|
|
Property, plant and
equipment, net
|
896.2
|
|
|
912.1
|
|
Operating lease
assets (1)
|
114.9
|
|
|
—
|
|
Goodwill and other
intangible assets
|
1,667.1
|
|
|
1,693.7
|
|
Non-current pension
assets
|
10.4
|
|
|
6.2
|
|
Other
assets
|
72.5
|
|
|
96.0
|
|
Total
Assets
|
$
|
4,680.7
|
|
|
$
|
4,445.2
|
|
LIABILITIES
|
|
|
|
Accounts
payable
|
$
|
294.3
|
|
|
$
|
273.2
|
|
Short-term debt,
including current portion of long-term debt
|
35.0
|
|
|
43.0
|
|
Short-term operating
lease liabilities (1)
|
29.3
|
|
|
—
|
|
Income
taxes
|
41.8
|
|
|
23.5
|
|
Accrued
expenses
|
283.2
|
|
|
345.9
|
|
Total Current
Liabilities
|
683.6
|
|
|
685.6
|
|
Long-term
debt
|
1,746.5
|
|
|
1,638.6
|
|
Accrued pension
cost
|
161.6
|
|
|
161.3
|
|
Accrued
postretirement benefits cost
|
109.6
|
|
|
108.7
|
|
Long-term operating
lease liabilities (1)
|
71.1
|
|
|
—
|
|
Other non-current
liabilities
|
202.4
|
|
|
208.3
|
|
Total
Liabilities
|
2,974.8
|
|
|
2,802.5
|
|
EQUITY
|
|
|
|
The Timken Company
shareholders' equity
|
1,638.5
|
|
|
1,579.6
|
|
Noncontrolling
Interest
|
67.4
|
|
|
63.1
|
|
Total
Equity
|
1,705.9
|
|
|
1,642.7
|
|
Total Liabilities and
Equity
|
$
|
4,680.7
|
|
|
$
|
4,445.2
|
|
|
|
|
|
(1) Due to the adoption of the new
leasing standard, the Company recognized operating lease assets and
corresponding operating lease liabilities on the Consolidated
Balance Sheet at March 31, 2019. In conjunction with the adoption
of the new leasing standard, the Company reclassified $15.3 million
of lease assets related to purchase accounting adjustments from the
ABC Bearing acquisition from Other assets to Operating lease
assets. These assets do not have material corresponding lease
liabilities.
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
(Unaudited)
|
|
|
|
Three Months
Ended
March 31,
|
(Dollars in
millions)
|
2019
|
2018
|
Cash Provided by
(Used in)
|
|
|
OPERATING
ACTIVITIES
|
|
|
Net income
attributable to The Timken Company
|
$
|
91.9
|
|
$
|
80.2
|
|
Net income
attributable to noncontrolling interest
|
3.4
|
|
0.3
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
39.5
|
|
35.8
|
|
Stock-based
compensation expense
|
7.8
|
|
10.3
|
|
Pension and other
postretirement expense
|
2.9
|
|
2.0
|
|
Pension and other
postretirement benefit contributions
|
(4.9)
|
|
(6.1)
|
|
Changes in operating
assets and liabilities:
|
|
|
Accounts
receivable
|
(65.0)
|
|
(72.1)
|
|
Unbilled
receivables
|
(6.6)
|
|
(11.5)
|
|
Inventories
|
(4.1)
|
|
(53.8)
|
|
Accounts
payable
|
20.2
|
|
(2.3)
|
|
Accrued
expenses
|
(58.0)
|
|
(38.7)
|
|
Income
taxes
|
25.1
|
|
13.4
|
|
Other, net
|
0.1
|
|
(1.8)
|
|
Net Cash Provided by
(Used in) Operating Activities
|
$
|
52.3
|
|
$
|
(44.3)
|
|
INVESTING
ACTIVITIES
|
|
|
Capital
expenditures
|
$
|
(16.2)
|
|
$
|
(17.8)
|
|
Acquisitions, net of
cash received
|
(2.9)
|
|
—
|
|
Other, net
|
(0.5)
|
|
3.8
|
|
Net Cash Used in
Investing Activities
|
$
|
(19.6)
|
|
$
|
(14.0)
|
|
FINANCING
ACTIVITIES
|
|
|
Cash dividends paid
to shareholders
|
$
|
(21.3)
|
|
$
|
(21.1)
|
|
Purchase of treasury
shares
|
(8.3)
|
|
(22.7)
|
|
Proceeds from
exercise of stock options
|
1.0
|
|
8.4
|
|
Shares surrendered
for taxes
|
(6.4)
|
|
(4.4)
|
|
Net proceeds from
(payments on) credit facilities
|
116.2
|
|
(0.4)
|
|
Net (payments on)
proceeds from long-term debt
|
(7.8)
|
|
93.6
|
|
Other, net
|
—
|
|
(1.1)
|
|
Net Cash Provided by
Financing Activities
|
$
|
73.4
|
|
$
|
52.3
|
|
Effect of exchange
rate changes on cash
|
0.9
|
|
0.9
|
|
Increase (Decrease)
in Cash, Cash Equivalents and Restricted Cash
|
$
|
107.0
|
|
$
|
(5.1)
|
|
Cash, Cash
Equivalents and Restricted Cash at Beginning of Period
|
133.1
|
|
125.4
|
|
Cash, Cash
Equivalents and Restricted Cash at End of Period
|
$
|
240.1
|
|
$
|
120.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
March 31,
|
|
2019
|
|
EPS
|
2018
|
|
EPS
|
Net Income
Attributable to The Timken Company
|
$
|
91.9
|
|
|
$
|
1.19
|
|
$
|
80.2
|
|
|
$
|
1.02
|
|
|
|
|
|
|
|
|
Adjustments:
(1)
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization charges (2)
|
$
|
—
|
|
|
|
$
|
0.7
|
|
|
|
Property
loss and related expenses from flood damage
(3)
|
6.0
|
|
|
|
—
|
|
|
|
Acquisition-related charges
(4)
|
4.8
|
|
|
|
—
|
|
|
|
Gain on
sale of real estate (5)
|
(1.7)
|
|
|
|
—
|
|
|
|
Corporate
pension-related charges
|
—
|
|
|
|
0.2
|
|
|
|
Tax
indemnification and related items
|
0.5
|
|
|
|
0.3
|
|
|
|
Noncontrolling interest
(6)
|
0.1
|
|
|
|
—
|
|
|
|
Provision
for income taxes (7)
|
2.6
|
|
|
|
(1.4)
|
|
|
|
Total
Adjustments:
|
12.3
|
|
|
0.16
|
|
(0.2)
|
|
|
(0.01)
|
|
Adjusted Net Income
to The Timken Company
|
$
|
104.2
|
|
|
$
|
1.35
|
|
$
|
80.0
|
|
|
$
|
1.01
|
|
|
|
|
|
|
|
|
(1) Adjustments are pre-tax, with the
net tax provision 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 cost structure
periodically, 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)
Represents property loss and related expenses of $6.0 million (net
of expected insurance proceeds) resulting from flood damage caused
by heavy rainstorms in Knoxville, Tennessee, during the quarter
that impacted one of the Company's warehouses.
|
|
|
|
|
|
|
|
(4)
Acquisition-related charges in 2019 primarily related to the Rollon
S.p.A. ("Rollon") and The Diamond Chain Company ("Diamond Chain")
acquisitions, including transaction costs and inventory step-up
impact.
|
|
(5) The gain on sale of real estate
related to the sale of a manufacturing facility in Pulaski,
Tennessee during the first quarter of 2019. This amount was
recorded in other income.
|
|
|
|
|
|
|
|
(6)
Represents the noncontrolling interest impact of the adjustments
listed above.
|
|
|
|
|
|
|
|
(7)
Provision for income taxes includes the net tax
impact on pre-tax adjustments (listed above), the impact of
discrete tax items recorded during the respective periods, as well
as other 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 and EBITDA Margin, After
Adjustments, to Net Income as a Percentage of Sales, and EBIT and
EBITDA, 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,
adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA), adjusted EBIT margin and adjusted EBITDA
margin are useful to investors as they are representative of the
Company's core operations and are used in the management of the
business, including decisions concerning the allocation of
resources and assessment of performance.
|
|
|
|
|
|
(Dollars in
millions)
|
Three Months
Ended
March 31,
|
|
2019
|
Percentage to
Net Sales
|
2018
|
Percentage
to
Net Sales
|
Net Income
|
$
|
95.3
|
|
9.7%
|
|
$
|
80.5
|
|
9.1%
|
|
|
|
|
|
|
Provision for income
taxes
|
41.3
|
|
4.2%
|
|
28.3
|
|
3.2%
|
|
Interest
expense
|
18.0
|
|
1.8%
|
|
10.0
|
|
1.1%
|
|
Interest
income
|
(1.3)
|
|
(0.1)%
|
|
(0.4)
|
|
—%
|
|
Consolidated
EBIT
|
$
|
153.3
|
|
15.6%
|
|
$
|
118.4
|
|
13.4%
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Impairment, restructuring and
reorganization charges (1)
|
$
|
—
|
|
—%
|
|
$
|
0.7
|
|
0.1%
|
|
Property
loss and related expenses from flood damage
(2)
|
6.0
|
|
0.6%
|
|
—
|
|
—%
|
|
Acquisition-related charges
(3)
|
4.8
|
|
0.5%
|
|
—
|
|
—%
|
|
Gain on
sale of real estate (4)
|
(1.7)
|
|
(0.2)%
|
|
—
|
|
—%
|
|
Corporate
pension-related charges
|
—
|
|
—%
|
|
0.2
|
|
—%
|
|
Tax
indemnification and related items
|
0.5
|
|
0.1%
|
|
0.3
|
|
—%
|
|
Total
Adjustments
|
9.6
|
|
1.0%
|
|
1.2
|
|
0.1%
|
|
Adjusted
EBIT
|
$
|
162.9
|
|
16.6%
|
|
$
|
119.6
|
|
13.5%
|
|
Depreciation and
amortization
|
39.5
|
|
4.1%
|
|
35.8
|
|
4.1%
|
|
Adjusted
EBITDA
|
$
|
202.4
|
|
20.7%
|
|
$
|
155.4
|
|
17.6%
|
|
|
|
|
|
|
(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 cost structure
periodically, 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) Represents property loss and
related expenses of $6.0 million (net of expected insurance
proceeds) resulting from flood damage caused by heavy rainstorms in
Knoxville, Tennessee, during the quarter that impacted one of the
Company's warehouses.
|
|
|
|
|
|
(3)
Acquisition-related charges in 2019 primarily related to the Rollon
and Diamond Chain acquisitions, including transaction costs and
inventory step-up impact.
|
|
|
|
|
|
(4) The gain on sale of real estate
related to the sale of a manufacturing facility in Pulaski,
Tennessee during the first quarter of 2019. 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
March 31, 2019
|
Percentage
to Net
Sales
|
Three Months
Ended
March 31, 2018
|
Percentage
to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
|
61.4
|
|
12.3%
|
|
$
|
51.1
|
|
10.5%
|
|
Impairment, restructuring and
reorganization charges (1)
|
0.3
|
|
—%
|
|
0.7
|
|
0.1%
|
|
Gain on
sale of real estate (2)
|
(1.7)
|
|
(0.3)%
|
|
—
|
|
—%
|
|
Property
loss and related expenses from flood damage
(3)
|
6.0
|
|
1.2%
|
|
—
|
|
—%
|
|
Adjusted
EBIT
|
$
|
66.0
|
|
13.2%
|
|
$
|
51.8
|
|
10.6%
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
(Dollars in
millions)
|
Three Months
Ended
March 31, 2019
|
Percentage
to Net
Sales
|
Three Months
Ended
March 31, 2018
|
Percentage
to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
|
106.2
|
|
22.1%
|
|
$
|
81.6
|
|
20.7%
|
|
Impairment, restructuring and
reorganization charges (1)
|
(0.3)
|
|
—%
|
|
—
|
|
—%
|
|
Acquisition-related charges
(4)
|
3.9
|
|
0.8%
|
|
—
|
|
—%
|
|
Adjusted
EBIT
|
$
|
109.8
|
|
22.9%
|
|
$
|
81.6
|
|
20.7%
|
|
|
|
|
|
|
(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 cost structure
periodically, 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 sale of real estate
related to the sale of a manufacturing facility in Pulaski,
Tennessee during the first quarter of 2019. This amount was
recorded in other income.
|
|
|
|
|
|
(3) Represents property loss and
related expenses of $6.0 million (net of expected insurance
proceeds) resulting from flood damage caused by heavy rainstorms in
Knoxville, Tennessee, during the quarter that impacted one of the
Company's warehouses.
|
|
|
|
|
|
(4) Acquisition-related charges in
2019 primarily related to the Rollon and Diamond Chain
acquisitions, including 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)
|
|
|
|
March 31,
2019
|
December 31,
2018
|
Short-term debt,
including current portion of long-term debt
|
$
|
35.0
|
|
$
|
43.0
|
|
Long-term
debt
|
1,746.5
|
|
1,638.6
|
|
Total
Debt
|
$
|
1,781.5
|
|
$
|
1,681.6
|
|
Less: Cash, cash
equivalents and restricted cash
|
(240.1)
|
|
(133.1)
|
|
Net Debt
|
$
|
1,541.4
|
|
$
|
1,548.5
|
|
|
|
|
Total
Equity
|
$
|
1,705.9
|
|
$
|
1,642.7
|
|
|
|
|
Ratio of Net Debt to
Capital
|
47.5%
|
|
48.5%
|
|
|
|
|
Reconciliation of
Free Cash Flow to GAAP Net Cash Provided by Operating
Activities:
|
(Unaudited)
|
|
|
Management believes
that free cash flow is a non-GAAP measure that is useful to
investors because it is a meaningful indicator of cash generated
from operating activities available for the execution of its
business strategy.
|
|
|
|
(Dollars in
millions)
|
|
|
|
Three Months
Ended
March 31,
|
|
2019
|
2018
|
Net cash provided by
operating activities
|
$
|
52.3
|
|
$
|
(44.3)
|
|
Less: capital
expenditures
|
(16.2)
|
|
(17.8)
|
|
Free cash
flow
|
$
|
36.1
|
|
$
|
(62.1)
|
|
|
|
|
|
|
|
|
|
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 EBITDA 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)
|
Twelve Months
Ended
March 31, 2019
|
Twelve Months
Ended
December 31, 2018
|
Net Income
|
$
|
320.3
|
|
$
|
305.5
|
|
Provision for income
taxes
|
115.6
|
|
102.6
|
|
Interest
expense
|
59.7
|
|
51.7
|
|
Interest
income
|
(3.0)
|
|
(2.1)
|
|
Consolidated
EBIT
|
$
|
492.6
|
|
$
|
457.7
|
|
Adjustments:
|
|
|
Impairment, restructuring and
reorganization charges (1)
|
$
|
6.5
|
|
$
|
7.1
|
|
Acquisition-related charges
(2)
|
25.4
|
|
20.6
|
|
Gain on
sale of real estate (3)
|
(1.7)
|
|
—
|
|
Loss on
divestiture (4)
|
0.8
|
|
0.8
|
|
Corporate
pension-related charges (5)
|
12.6
|
|
12.8
|
|
Flood
property damage and expenses (6)
|
6.0
|
|
—
|
|
Tax
indemnification and related items
|
1.6
|
|
1.5
|
|
Total
Adjustments
|
51.2
|
|
42.8
|
|
Adjusted
EBIT
|
$
|
543.8
|
|
$
|
500.5
|
|
Depreciation and
amortization
|
149.7
|
|
146.0
|
|
Adjusted EBITDA
(7)
|
$
|
693.5
|
|
$
|
646.5
|
|
|
|
|
(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 cost structure
periodically, 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 2019 related to the ABC Bearings,
Cone Drive, Rollon and Diamond Chain acquisitions, including
transaction costs and inventory step-up impact. In 2018,
acquisition charges related to ABC Bearings, Cone Drive and Rollon
acquisitions.
|
|
|
|
(3) The gain on sale of real estate
related to the sale of a manufacturing facility in Pulaski,
Tennessee during the first quarter of 2019. This amount was
recorded in other income.
|
|
|
|
(4) Loss
on divestiture relates to the sale of the ICT Business, located in
Gorinchem, Netherlands.
|
|
|
|
(5)
Corporate pension-related charges represent curtailments and
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) Represents property loss and
related expenses of $6.0 million (net of expected insurance
proceeds) resulting from flood damage caused by heavy rainstorms in
Knoxville, Tennessee, during the quarter that impacted one of the
Company's warehouses.
|
|
|
|
(7) Twelve
months trailing adjusted EBITDA reflects results from acquired
companies from the acquisition date through March 31, 2019 and
December 31, 2018, respectively.
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted Earnings per Share to GAAP Earnings per Share for Full
Year 2019 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
|
$
|
4.95
|
|
|
$
|
5.15
|
|
|
|
|
|
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
|
$
|
5.15
|
|
|
$
|
5.35
|
|
|
|
|
|
(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 amounts will not be known until
incurred.
|
|
|
|
|
|
|
|
|
Reconciliation of
Free Cash Flow to GAAP Net Cash Provided by Operating Activities
for Full Year 2019 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
|
|
|
$
|
510.0
|
|
Less: capital
expenditures
|
|
|
(150.0)
|
|
Free cash
flow
|
|
|
$
|
360.0
|
|
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SOURCE The Timken Company