NORTH CANTON, Ohio,
Feb. 4, 2021 /PRNewswire/ -- The
Timken Company (NYSE: TKR; www.timken.com), a world leader in
engineered bearings and power transmission
products, today reported fourth-quarter 2020 sales
of $891.7 million, down 0.5 percent from the same period
a year ago, as the net impact of lower demand offset the favorable
impact of acquisitions, currency translation and pricing.
Timken posted net income of $53.1 million
or $0.69 per diluted share in the fourth quarter, versus
net income of $113.5 million or $1.48 per
diluted share for the same period a year ago. The year-over-year
decrease in GAAP net income was primarily driven by the net
unfavorable impact of special items (detailed in the attached
tables), including pension remeasurements and discrete taxes.
Excluding special items, adjusted net income in the fourth
quarter was $65.0 million or $0.84 per diluted
share versus adjusted net income of $64.3 million or $0.84 per diluted
share for the same period in 2019. The slight increase in adjusted
net income reflects lower operating expenses resulting from cost
reduction initiatives and reduced interest and tax expense, which
offset the impact of lower volume and unfavorable price/mix and
currency.
Net cash from operations for the fourth quarter was $120.5 million, and free cash flow was
$84.6 million. During the quarter,
Timken returned $29 million of cash
to shareholders with the payment of its 394th consecutive quarterly
dividend and the repurchase of 100 thousand shares of company
stock. Timken also completed the acquisition of the assets of
Aurora Bearing Company, which builds on the company's global
leadership in engineered bearings.
"Fourth quarter revenue came in above our expectations, and we
generated strong cash flow to finish out a solid year in a
turbulent market environment," said Richard
G. Kyle, Timken president and chief executive officer. "Our
full-year operating margin performance was very good despite the
decline in revenue from the global pandemic. In 2020, Timken
demonstrated its resiliency and ability to generate strong
financial performance through challenging end markets. During the
COVID-19 pandemic, we prioritized employee safety, served
customers, reduced costs and strengthened our financial position,
while investing for future growth. This performance demonstrates
the power of Timken – a more diverse, higher-performing industrial
company."
2020 Full-Year Results and Highlights
For 2020, sales were $3.5 billion,
down 7.3 percent compared with 2019. The decline was driven by
lower demand in most end markets, due to the broad economic
slowdown caused by COVID-19, and unfavorable currency, partially
offset by significant growth in renewable energy and the favorable
impact of acquisitions.
Net income was $284.5 million or
$3.72 per diluted share for the year,
compared with net income of $362.1
million or a record $4.71 per
diluted share a year ago. The year-over-year decline reflects the
impact of lower volume and related manufacturing utilization,
unfavorable currency, and the net unfavorable impact from special
items (detailed in the attached tables), partially offset by lower
selling, general and administrative (SG&A) expenses resulting
from cost reduction initiatives, lower material and logistics costs
and the benefit of acquisitions.
Excluding special items, adjusted net income was $313.1 million or adjusted earnings of
$4.10 per diluted share in 2020. This
compares with adjusted net income of $353.8
million or record adjusted earnings of $4.60 per diluted share in 2019.
Timken generated strong cash flow in 2020, with net cash from
operations for the full year of $577.6
million, and free cash flow of $456.0
million. During the year, the company reduced gross debt by
$166 million and net debt by
$276 million. The company ended the
year with net debt to adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA) at 1.9 times compared to 2.1
times at the end of 2019.
Additionally, Timken paid dividends totaling $1.13 per share in 2020, which represents its
seventh consecutive year of annual dividend increases, and
repurchased 1.1 million shares of company stock. Between dividends
and share repurchases, the company returned a total of $136 million of cash to shareholders in 2020.
Renewable energy sales increased significantly in 2020 and is
now the company's largest individual sector at over 12 percent of
total sales. During the year, Timken announced more than
$75 million in capital investments to
increase the company's renewable energy capabilities across its
global footprint. This latest round of investments strengthens
Timken's commitment to the renewable energy sector and reinforces
the company's positive long-term growth outlook for its wind and
solar business.
Fourth-Quarter 2020 Segment Results
Process Industries sales of $458.0 million
increased 1.5 percent from the same period a year ago. The
year-over-year increase was driven primarily by strong growth in
renewable energy, higher marine revenue, the favorable impact of
currency translation, positive pricing and the benefit of
acquisitions, partially offset by lower revenue in distribution and
other industrial sectors.
EBITDA for the quarter was $99.9 million
or 21.8 percent of sales, compared with EBITDA
of $96.8 million or 21.5 percent of sales for
the same period a year ago. The increase in EBITDA was driven
primarily by the impact of cost reduction initiatives and favorable
manufacturing performance, partially offset by the impact of lower
volume and the unfavorable impact of price/mix and currency.
Excluding special items (detailed in the attached tables),
adjusted EBITDA in the quarter was $102.4 million
or 22.4 percent of sales, compared
with $98.3 million or 21.8 percent of sales in the
fourth quarter last year.
Mobile Industries sales of $433.7 million
decreased 2.6 percent compared with the same period a year ago. The
decline was driven primarily by lower shipments in the rail,
aerospace and automotive sectors, partially offset by growth in the
off-highway and heavy truck sectors and the benefit of
acquisitions.
EBITDA for the quarter was $54.6 million
or 12.6 percent of sales, compared with EBITDA
of $57.5 million or 12.9 percent of sales for the
same period a year ago. The decrease in EBITDA reflects the impact
of lower volume and the unfavorable impact of price/mix and
currency, partially offset by the impact of cost reduction
initiatives and the net favorable impact from special items
(detailed in the attached tables) in the quarter.
Excluding special items, adjusted EBITDA in the quarter
was $53.9 million or 12.4 percent of sales,
compared with $60.3 million or 13.5 percent of sales
in the fourth quarter last year.
2021 Outlook
Timken anticipates 2021 earnings per diluted share to range from
$4.45 to $4.85 for the full year on a GAAP basis.
Excluding special items (detailed in the attached tables), the
company expects 2021 adjusted earnings per diluted share ranging
from $4.70 to $5.10, which at the midpoint is up almost 20
percent versus 2020. At the midpoint of the outlook, the company
expects 2021 revenue to be up approximately 12 percent in total
versus 2020.
"We plan to deliver strong sales and earnings growth in 2021,
driven by improving industrial markets, an active pipeline of new
business wins and continued outgrowth in sectors like renewable
energy and marine," said Kyle. "While we anticipate some near-term
uncertainty and supply chain challenges related to the COVID-19
pandemic, we are seeing sequential strengthening in our business to
start the year and we believe a sustainable industrial expansion is
underway. Timken expects to deliver another year of solid margin
performance and cash generation, while maintaining industry-leading
customer service. We are well-positioned for the opportunities that
lie ahead as we continue to advance Timken as a global industrial
leader in 2021 and beyond."
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:
|
Thursday, February 4,
2021
|
|
11:00 a.m. Eastern
Time
|
|
Live Dial-In:
800-458-4121
|
|
Or +1
323-794-2093
|
|
(Call in 10 minutes
prior to be included.)
|
|
Conference ID:
Timken's 4Q Earnings Call
|
|
Or Click to Join:
http://tmkn.biz/3rYiKC8
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through
|
|
February 18,
2021:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
7727792
|
|
|
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 $3.5 billion in sales in 2020
and employs more than 17,000 people globally, operating from 42
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 and cost reduction measures, including
information under the heading "2021 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 2020; the company's ability to respond to
the changes in its end markets that could affect demand for the
company's products or services; 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; political
risks associated with government instability; 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; the introduction of new
disruptive technologies; unplanned plant shutdowns; the effects of
government-imposed restrictions meant to address climate change;
unanticipated litigation, claims, investigations or assessments;
the company's ability to maintain positive relations with unions
and works councils; negative impacts to the company's business,
results of operations, financial position or liquidity as a result
of COVID-19 or other epidemics and associated governmental measures
such as restrictions on travel and manufacturing operations; 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, 2019, 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:
Neil
Frohnapple
234.262.2310
neil.frohnapple@timken.com
The Timken
Company
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
(Dollars in
millions, except share data) (Unaudited)
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2020
|
2019
|
|
2020
|
2019
|
Net sales
|
$
|
891.7
|
|
$
|
896.2
|
|
|
$
|
3,513.2
|
|
$
|
3,789.9
|
|
Cost of products
sold
|
654.7
|
|
640.2
|
|
|
2,503.3
|
|
2,648.1
|
|
Gross
Profit
|
237.0
|
|
256.0
|
|
|
1,009.9
|
|
1,141.8
|
|
Selling, general
& administrative expenses
|
135.7
|
|
159.2
|
|
|
533.8
|
|
618.6
|
|
Impairment and
restructuring charges
|
2.5
|
|
3.3
|
|
|
21.2
|
|
6.8
|
|
Operating
Income
|
98.8
|
|
93.5
|
|
|
454.9
|
|
516.4
|
|
Non-service pension
and other postretirement (expense) income
|
(18.2)
|
|
24.3
|
|
|
(4.7)
|
|
10.2
|
|
Other (expense)
income, net
|
(2.1)
|
|
2.5
|
|
|
(1.1)
|
|
13.0
|
|
Acquisition-related
gain
|
11.1
|
|
—
|
|
|
11.1
|
|
—
|
|
Interest expense,
net
|
(14.6)
|
|
(15.2)
|
|
|
(63.9)
|
|
(67.2)
|
|
Income Before
Income Taxes
|
75.0
|
|
105.1
|
|
|
396.3
|
|
472.4
|
|
Provision for
(benefit from) income taxes
|
19.7
|
|
(12.7)
|
|
|
103.9
|
|
97.7
|
|
Net
Income
|
55.3
|
|
117.8
|
|
|
292.4
|
|
374.7
|
|
Less: Net income
attributable to noncontrolling interest
|
2.2
|
|
4.3
|
|
|
7.9
|
|
12.6
|
|
Net Income
Attributable to The Timken Company
|
$
|
53.1
|
|
$
|
113.5
|
|
|
$
|
284.5
|
|
$
|
362.1
|
|
Net Income per
Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
|
|
|
Basic Earnings per
share
|
$
|
0.70
|
|
$
|
1.51
|
|
|
$
|
3.78
|
|
$
|
4.78
|
|
|
|
|
|
|
|
Diluted Earnings per
share
|
$
|
0.69
|
|
$
|
1.48
|
|
|
$
|
3.72
|
|
$
|
4.71
|
|
|
|
|
|
|
|
Average Shares
Outstanding
|
75,518,839
|
|
75,383,088
|
|
|
75,354,280
|
|
75,758,123
|
|
Average Shares
Outstanding - assuming dilution
|
77,177,124
|
|
76,823,213
|
|
|
76,401,366
|
|
76,896,565
|
|
BUSINESS
SEGMENTS
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
December 31,
|
Twelve Months
Ended
December 31,
|
(Dollars in
millions)
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
Net sales
|
$
|
433.7
|
|
$
|
445.1
|
|
$
|
1,671.6
|
|
$
|
1,893.9
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
54.6
|
|
$
|
57.5
|
|
$
|
232.5
|
|
$
|
284.9
|
|
EBITDA Margin
(1)
|
12.6
|
%
|
12.9
|
%
|
13.9
|
%
|
15.0
|
%
|
Process
Industries
|
|
|
|
|
Net sales
|
$
|
458.0
|
|
$
|
451.1
|
|
$
|
1,841.6
|
|
$
|
1,896.0
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
99.9
|
|
$
|
96.8
|
|
$
|
442.9
|
|
$
|
466.6
|
|
EBITDA Margin
(1)
|
21.8
|
%
|
21.5
|
%
|
24.0
|
%
|
24.6
|
%
|
Corporate earnings
before interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
(12.5)
|
|
$
|
(14.8)
|
|
$
|
(40.7)
|
|
$
|
(55.4)
|
|
Corporate pension and
other postretirement benefit related (expense) income
(2)
|
(21.6)
|
|
21.0
|
|
(18.5)
|
|
4.1
|
|
Acquisition-related
gain (3)
|
11.1
|
|
—
|
|
11.1
|
|
—
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
Net sales
|
$
|
891.7
|
|
$
|
896.2
|
|
$
|
3,513.2
|
|
$
|
3,789.9
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
131.5
|
|
$
|
160.5
|
|
$
|
627.3
|
|
$
|
700.2
|
|
EBITDA Margin
(1)
|
14.7
|
%
|
17.9
|
%
|
17.9
|
%
|
18.5
|
%
|
|
|
|
|
|
(1) EBITDA
is a non-GAAP measure defined as operating income plus other income
(expense) and excluding depreciation and amortization. EBITDA
Margin is a non-GAAP measure defined as EBITDA as a percentage of
net sales. EBITDA and EBITDA 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 EBITDA and
EBITDA Margin is useful to investors as these measures are
representative of the core operations of the segments and Company,
respectively.
|
|
|
|
|
|
(2)
Corporate pension and other postretirement benefit related
(expense) income primarily represent actuarial (losses) and gains
that resulted from the remeasurement of plan assets and obligations
as a result of changes in assumptions. The Company recognizes
actuarial (losses) and gains in connection with the annual
remeasurement in the fourth quarter, or if specific events trigger
a remeasurement. Refer to the Retirement Benefit Plans and Other
Postretirement Benefit Plans footnotes within the Company's annual
reports on Form 10-K and quarterly reports on Form 10-Q for
additional discussion.
|
|
|
|
|
|
(3) The
acquisition-related gain represents a bargain purchase price gain
on the acquisition of the assets of Aurora Bearing Company
("Aurora") acquired on November 30, 2020.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Dollars in
millions)
|
(Unaudited)
|
|
|
|
December 31,
2020
|
|
December 31,
2019
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
320.3
|
|
|
$
|
209.5
|
|
Restricted
cash
|
0.8
|
|
|
6.7
|
|
Accounts receivable,
net
|
581.1
|
|
|
545.1
|
|
Unbilled
receivables
|
110.9
|
|
|
129.2
|
|
Inventories,
net
|
841.3
|
|
|
842.0
|
|
Other current
assets
|
145.9
|
|
|
142.1
|
|
Total Current
Assets
|
2,000.3
|
|
|
1,874.6
|
|
Property, plant and
equipment, net
|
1,035.6
|
|
|
989.2
|
|
Operating lease
assets
|
118.2
|
|
|
114.1
|
|
Goodwill and other
intangible assets
|
1,789.0
|
|
|
1,752.2
|
|
Non-current pension
assets
|
2.0
|
|
|
3.4
|
|
Non-current other
postretirement benefit assets
|
—
|
|
|
36.6
|
|
Other
assets
|
96.5
|
|
|
89.8
|
|
Total
Assets
|
$
|
5,041.6
|
|
|
$
|
4,859.9
|
|
LIABILITIES
|
|
|
|
Accounts
payable
|
$
|
351.4
|
|
|
$
|
301.7
|
|
Short-term debt,
including current portion of long-term debt
|
130.7
|
|
|
82.0
|
|
Short-term operating
lease liabilities
|
27.2
|
|
|
28.3
|
|
Income
taxes
|
16.1
|
|
|
17.8
|
|
Accrued
expenses
|
322.6
|
|
|
306.8
|
|
Total Current
Liabilities
|
848.0
|
|
|
736.6
|
|
Long-term
debt
|
1,433.9
|
|
|
1,648.1
|
|
Accrued pension
benefits
|
163.0
|
|
|
165.1
|
|
Accrued
postretirement benefits
|
41.3
|
|
|
31.8
|
|
Long-term operating
lease liabilities
|
75.5
|
|
|
71.3
|
|
Other non-current
liabilities
|
254.7
|
|
|
252.2
|
|
Total
Liabilities
|
2,816.4
|
|
|
2,905.1
|
|
EQUITY
|
|
|
|
The Timken Company
shareholders' equity
|
2,152.9
|
|
|
1,868.2
|
|
Noncontrolling
Interest
|
72.3
|
|
|
86.6
|
|
Total
Equity
|
2,225.2
|
|
|
1,954.8
|
|
Total Liabilities and
Equity
|
$
|
5,041.6
|
|
|
$
|
4,859.9
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
(Dollars in
millions)
|
2020
|
2019
|
|
2020
|
2019
|
Cash Provided by
(Used in)
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
Net Income
|
$
|
55.3
|
|
$
|
117.8
|
|
|
$
|
292.4
|
|
$
|
374.7
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
41.9
|
|
40.2
|
|
|
167.1
|
|
160.6
|
|
Stock-based
compensation expense
|
4.0
|
|
6.4
|
|
|
23.2
|
|
27.1
|
|
Pension and other
postretirement expense (income)
|
21.3
|
|
(21.0)
|
|
|
17.4
|
|
2.2
|
|
Pension and other
postretirement benefit contributions and payments
|
(7.7)
|
|
(6.3)
|
|
|
(20.6)
|
|
(43.4)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
7.0
|
|
30.5
|
|
|
(20.7)
|
|
24.1
|
|
Unbilled
receivables
|
30.4
|
|
22.4
|
|
|
18.5
|
|
(12.6)
|
|
Inventories
|
(20.5)
|
|
12.9
|
|
|
27.4
|
|
50.7
|
|
Accounts
payable
|
19.8
|
|
27.3
|
|
|
22.6
|
|
19.9
|
|
Accrued
expenses
|
5.7
|
|
1.9
|
|
|
55.1
|
|
(26.8)
|
|
Income
taxes
|
(20.4)
|
|
(33.8)
|
|
|
(14.7)
|
|
(23.1)
|
|
Other,
net
|
(16.3)
|
|
(3.0)
|
|
|
9.9
|
|
(3.3)
|
|
Net Cash Provided by
Operating Activities
|
$
|
120.5
|
|
$
|
195.3
|
|
|
$
|
577.6
|
|
$
|
550.1
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
Capital
expenditures
|
$
|
(35.9)
|
|
$
|
(57.7)
|
|
|
$
|
(121.6)
|
|
$
|
(140.6)
|
|
Acquisitions, net of
cash received
|
(17.3)
|
|
(143.8)
|
|
|
(24.0)
|
|
(226.5)
|
|
Investments,
net
|
1.0
|
|
(4.3)
|
|
|
(9.4)
|
|
(4.2)
|
|
Other, net
|
0.1
|
|
3.1
|
|
|
1.5
|
|
6.3
|
|
Net Cash Used in
Investing Activities
|
$
|
(52.1)
|
|
$
|
(202.7)
|
|
|
$
|
(153.5)
|
|
$
|
(365.0)
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
Cash dividends paid
to shareholders
|
$
|
(22.0)
|
|
$
|
(21.1)
|
|
|
$
|
(87.0)
|
|
$
|
(84.9)
|
|
Purchase of treasury
shares
|
(7.0)
|
|
(6.6)
|
|
|
(49.3)
|
|
(62.7)
|
|
Proceeds from
exercise of stock options
|
19.2
|
|
17.6
|
|
|
37.4
|
|
27.5
|
|
Payments related to
tax withholding for stock-based compensation
|
(4.0)
|
|
(6.1)
|
|
|
(16.0)
|
|
(15.4)
|
|
Net (payments)
proceeds from credit facilities
|
(55.5)
|
|
55.2
|
|
|
(131.5)
|
|
97.0
|
|
Net payments on
long-term debt
|
(2.9)
|
|
(2.3)
|
|
|
(66.1)
|
|
(60.0)
|
|
Other, net
|
(1.2)
|
|
—
|
|
|
(18.6)
|
|
(2.2)
|
|
Net Cash (Used in)
Provided by Financing Activities
|
$
|
(73.4)
|
|
$
|
36.7
|
|
|
$
|
(331.1)
|
|
$
|
(100.7)
|
|
Effect of exchange
rate changes on cash
|
12.1
|
|
5.0
|
|
|
11.9
|
|
(1.4)
|
|
Increase in Cash,
Cash Equivalents and Restricted Cash
|
$
|
7.1
|
|
$
|
34.3
|
|
|
$
|
104.9
|
|
$
|
83.0
|
|
Cash, Cash
Equivalents and Restricted Cash at Beginning of Period
|
314.0
|
|
181.9
|
|
|
216.2
|
|
133.1
|
|
Cash, Cash
Equivalents and Restricted Cash at End of Period
|
$
|
321.1
|
|
$
|
216.2
|
|
|
$
|
321.1
|
|
$
|
216.1
|
|
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
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2020
|
|
EPS
|
2019
|
|
EPS
|
|
2020
|
|
EPS
|
2019
|
|
EPS
|
Net Income
Attributable to The Timken Company
|
$
|
53.1
|
|
|
$
|
0.69
|
|
$
|
113.5
|
|
|
$
|
1.48
|
|
|
$
|
284.5
|
|
|
$
|
3.72
|
|
$
|
362.1
|
|
|
$
|
4.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization charges (2)
|
$
|
4.1
|
|
|
|
$
|
5.3
|
|
|
|
|
$
|
29.0
|
|
|
|
$
|
9.8
|
|
|
|
Property
(recoveries) losses and related expenses (3)
|
(1.7)
|
|
|
|
1.1
|
|
|
|
|
(5.5)
|
|
|
|
7.6
|
|
|
|
Acquisition-related charges
(4)
|
—
|
|
|
|
4.7
|
|
|
|
|
3.7
|
|
|
|
15.5
|
|
|
|
Acquisition-related gain
(5)
|
(11.1)
|
|
|
|
—
|
|
|
|
|
(11.1)
|
|
|
|
—
|
|
|
|
Brazil
legal matter (6)
|
—
|
|
|
|
(1.5)
|
|
|
|
|
—
|
|
|
|
1.8
|
|
|
|
Gain on
sale of real estate
|
(0.4)
|
|
|
|
(2.8)
|
|
|
|
|
(0.4)
|
|
|
|
(4.5)
|
|
|
|
Corporate
pension and other postretirement benefit related expense (income)
(7)
|
21.6
|
|
|
|
(21.0)
|
|
|
|
|
18.5
|
|
|
|
(4.1)
|
|
|
|
Tax
indemnification and related items
|
0.5
|
|
|
|
0.2
|
|
|
|
|
0.5
|
|
|
|
0.7
|
|
|
|
Noncontrolling interest of above
adjustments
|
(0.1)
|
|
|
|
(0.4)
|
|
|
|
|
(0.1)
|
|
|
|
(0.5)
|
|
|
|
Provision
for income taxes (8)
|
(1.0)
|
|
|
|
(34.8)
|
|
|
|
|
(6.0)
|
|
|
|
(34.6)
|
|
|
|
Total
Adjustments:
|
11.9
|
|
|
0.15
|
|
(49.2)
|
|
|
(0.64)
|
|
|
28.6
|
|
|
0.38
|
|
(8.3)
|
|
|
(0.11)
|
|
Adjusted Net Income
Attributable to The Timken Company
|
$
|
65.0
|
|
|
$
|
0.84
|
|
$
|
64.3
|
|
|
$
|
0.84
|
|
|
$
|
313.1
|
|
|
$
|
4.10
|
|
$
|
353.8
|
|
|
$
|
4.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, (iii)
severance related to cost reduction initiatives and (iv) related
depreciation and amortization. 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 during the periods
presented (net of insurance recoveries received in 2020) resulting
from property loss that occurred during the first quarter of 2019
at one of the Company's warehouses in Knoxville, Tennessee and
during the third quarter of 2019 at one of the Company's warehouses
in Yantai, China.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)
Acquisition-related charges in 2020 primarily related to the BEKA
Lubrication ("BEKA") and Aurora acquisitions, including transaction
costs and inventory step-up impact. Acquisition-related charges in
2019 primarily related to the Rollon S.p.A. ("Rollon"), The Diamond
Chain Company ("Diamond Chain"), and BEKA acquisitions, including
transaction costs and inventory step-up impact. Acquisition-related
charges in 2019 also include transaction costs related to the
acquisition of the joint venture partner's interest in Timken-XEMC
(Hunan) Bearing Co., Ltd.
|
|
|
|
|
|
|
|
|
(5) The
acquisition-related gain represents a bargain purchase price gain
on the acquisition of the assets of Aurora acquired on November 30,
2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) The
Brazil legal matter represents expense recorded to establish a
liability associated with an investigation into alleged antitrust
violations in the bearing industry that was settled in the fourth
quarter of 2019.
|
|
|
|
|
|
|
|
|
(7)
Corporate pension and other postretirement benefit related expense
(income) represent actuarial losses and (gains) that resulted from
the remeasurement of plan assets and obligations as a result of
changes in assumptions. The Company recognizes actuarial losses and
(gains) in connection with the annual remeasurement in the fourth
quarter, or if specific events trigger a remeasurement. Refer to
the Retirement Benefit Plans and Other Postretirement Benefit Plans
footnotes within the Company's annual reports on Form 10-K and
quarterly reports on Form 10-Q for additional
discussion.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8)
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, including the reduction of
a valuation allowance in the
fourth quarter of
2019 of $39.2 million, 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
EBITDA to GAAP Net Income, EBITDA Margin to Net Income as a
Percentage of Sales, and EBITDA Margin, After Adjustments, to Net
Income as a Percentage of Sales, 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,
taxes, depreciation and amortization (EBITDA) 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 EBITDA. Management also believes that
adjusted EBITDA, adjusted EBITDA margin and 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
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2020
|
Percentage
to
Net Sales
|
2019
|
Percentage
to
Net Sales
|
|
2020
|
Percentage
to
Net Sales
|
2019
|
Percentage
to
Net Sales
|
Net Income
|
$
|
55.3
|
|
6.2
|
%
|
$
|
117.8
|
|
13.1
|
%
|
|
$
|
292.4
|
|
8.3
|
%
|
$
|
374.7
|
|
9.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
19.7
|
|
|
(12.7)
|
|
|
|
103.9
|
|
|
97.7
|
|
|
Interest
expense
|
15.3
|
|
|
16.6
|
|
|
|
67.6
|
|
|
72.1
|
|
|
Interest
income
|
(0.7)
|
|
|
(1.4)
|
|
|
|
(3.7)
|
|
|
(4.9)
|
|
|
Depreciation and
amortization
|
41.9
|
|
|
40.2
|
|
|
|
167.1
|
|
|
160.6
|
|
|
Consolidated
EBITDA
|
$
|
131.5
|
|
14.7
|
%
|
$
|
160.5
|
|
17.9
|
%
|
|
$
|
627.3
|
|
17.9
|
%
|
$
|
700.2
|
|
18.5
|
%
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization charges (1)
|
$
|
3.8
|
|
|
$
|
4.6
|
|
|
|
$
|
25.9
|
|
|
$
|
9.1
|
|
|
Property
(recoveries) losses and related expenses (2)
|
(1.7)
|
|
|
1.1
|
|
|
|
(5.5)
|
|
|
7.6
|
|
|
Acquisition-related charges
(3)
|
—
|
|
|
4.7
|
|
|
|
3.7
|
|
|
15.5
|
|
|
Acquisition-related gain
(4)
|
(11.1)
|
|
|
—
|
|
|
|
(11.1)
|
|
|
—
|
|
|
Brazil
legal matter (5)
|
—
|
|
|
(1.5)
|
|
|
|
—
|
|
|
1.8
|
|
|
Gain on
sale of real estate
|
(0.4)
|
|
|
(2.8)
|
|
|
|
(0.4)
|
|
|
(4.5)
|
|
|
Corporate
pension and other postretirement benefit related
expense (income)
(6)
|
21.6
|
|
|
(21.0)
|
|
|
|
18.5
|
|
|
(4.1)
|
|
|
Tax
indemnification and related items
|
0.5
|
|
|
0.2
|
|
|
|
0.5
|
|
|
0.7
|
|
|
Total
Adjustments
|
12.7
|
|
1.5
|
%
|
(14.7)
|
|
(1.6)
|
%
|
|
31.6
|
|
0.9
|
%
|
26.1
|
|
0.7
|
%
|
Adjusted
EBITDA
|
$
|
144.2
|
|
16.2
|
%
|
$
|
145.8
|
|
16.3
|
%
|
|
$
|
658.9
|
|
18.8
|
%
|
$
|
726.3
|
|
19.2
|
%
|
|
|
|
|
|
|
|
|
|
|
(1)
Impairment, restructuring and reorganization charges (including
items recorded in cost of products sold) relate to: (i) plant
closures; (ii) the rationalization of certain plants and (iii)
severance related to cost reduction initiatives. The Company
re-assesses its operating footprint and 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 during the periods
presented (net of insurance recoveries received in 2020) resulting
from property loss that occurred during the first quarter of 2019
at one of the Company's warehouses in Knoxville, Tennessee and
during the third quarter of 2019 at one of the Company's warehouses
in Yantai, China.
|
|
|
|
|
|
|
|
|
|
|
(3)
Acquisition-related charges in the 2020 primarily related to the
BEKA and Aurora acquisitions, including transaction costs and
inventory step-up impact. Acquisition-related charges in 2019
primarily related to the Rollon, Diamond Chain and BEKA
acquisitions, including transaction costs and inventory step-up
impact.
|
|
|
|
|
|
|
|
|
|
|
(4) The
acquisition-related gain represents a bargain purchase price gain
on the acquisition of the assets of Aurora acquired on November 30,
2020.
|
|
|
|
|
|
|
|
|
|
|
(5) The
Brazil legal matter represents expense recorded to establish a
liability associated with an investigation into alleged antitrust
violations in the bearing industry that was settled in the fourth
quarter of 2019.
|
|
|
|
|
|
|
|
|
|
|
(6)
Corporate pension and other postretirement benefit related expense
(income) represent actuarial losses and (gains) that resulted from
the remeasurement of plan assets and obligations as a result of
changes in assumptions. The Company recognizes actuarial losses and
(gains) in connection with the annual remeasurement in the fourth
quarter, or if specific events trigger a remeasurement. Refer to
the Retirement Benefit Plans and Other Postretirement Benefit Plans
footnotes within the Company's annual reports on Form 10-K and
quarterly reports on Form 10-Q for additional
discussion.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
segment EBITDA Margin, After Adjustments, to segment EBITDA as a
Percentage of Sales and segment EBITDA, After Adjustments, to
segment EBITDA:
|
(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 EBITDA and adjusted EBITDA 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
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
(Dollars in
millions)
|
2020
|
Percentage
to Net
Sales
|
2019
|
Percentage
to Net
Sales
|
|
2020
|
Percentage
to Net
Sales
|
2019
|
Percentage
to Net
Sales
|
Earnings before
interest, taxes, depreciation and amortization
(EBITDA)
|
$
|
54.6
|
|
12.6
|
%
|
$
|
57.5
|
|
12.9
|
%
|
|
$
|
232.5
|
|
13.9
|
%
|
$
|
284.9
|
|
15.0
|
%
|
Impairment, restructuring and
reorganization charges (1)
|
1.1
|
|
|
3.1
|
|
|
|
11.3
|
|
|
5.2
|
|
|
Gain on
sale of real estate
|
(0.4)
|
|
|
(2.8)
|
|
|
|
(0.4)
|
|
|
(4.5)
|
|
|
Property
(recoveries) losses and related expenses (2)
|
(1.7)
|
|
|
1.1
|
|
|
|
(5.5)
|
|
|
7.6
|
|
|
Acquisition-related charges
(3)
|
—
|
|
|
1.4
|
|
|
|
2.1
|
|
|
1.5
|
|
|
Tax
indemnification
|
0.3
|
|
|
—
|
|
|
|
0.3
|
|
|
—
|
|
|
Adjusted
EBITDA
|
$
|
53.9
|
|
12.4
|
%
|
$
|
60.3
|
|
13.5
|
%
|
|
$
|
240.3
|
|
14.4
|
%
|
$
|
294.7
|
|
15.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
(Dollars in
millions)
|
2020
|
Percentage
to Net
Sales
|
2019
|
Percentage
to Net
Sales
|
|
2020
|
Percentage
to Net
Sales
|
2019
|
Percentage
to Net
Sales
|
Earnings before
interest, taxes, depreciation and amortization
(EBITDA)
|
$
|
99.9
|
|
21.8
|
%
|
$
|
96.8
|
|
21.5
|
%
|
|
$
|
442.9
|
|
24.0
|
%
|
$
|
466.6
|
|
24.6
|
%
|
Impairment, restructuring and
reorganization charges (1)
|
2.5
|
|
|
1.1
|
|
|
|
14.0
|
|
|
3.5
|
|
|
Acquisition-related charges
(3)
|
—
|
|
|
0.4
|
|
|
|
1.0
|
|
|
8.3
|
|
|
Adjusted
EBITDA
|
$
|
102.4
|
|
22.4
|
%
|
$
|
98.3
|
|
21.8
|
%
|
|
$
|
457.9
|
|
24.9
|
%
|
$
|
478.4
|
|
25.2
|
%
|
|
|
|
|
|
|
|
|
|
|
(1)
Impairment, restructuring and reorganization charges (including
items recorded in cost of products sold) relate to: (i) plant
closures; (ii) the rationalization of certain plants and (iii)
severance related to cost reduction initiatives. The Company
re-assesses its operating footprint and 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 during the periods
presented (net of insurance recoveries received in 2020) resulting
from property loss that occurred during the first quarter of 2019
at one of the Company's warehouses in Knoxville, Tennessee and
during the third quarter of 2019 at one of the Company's warehouses
in Yantai, China.
|
|
|
|
|
|
|
|
|
|
|
(3)
Acquisition-related charges in the 2020 primarily related to the
inventory step-up impact of the BEKA and Aurora acquisitions.
Acquisition-related charges in 2019 primarily related to the
inventory step-up impact of the Rollon, Diamond Chain and BEKA
acquisitions.
|
Reconciliation of
Total Debt to Net Debt, the Ratio of Net Debt to Capital, and the
Ratio of Net Debt to Adjusted EBITDA:
|
(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 net debt to capital, is a non-GAAP measure defined as
total debt less cash and cash equivalents plus total shareholders'
equity. Management believes Net Debt, the Ratio of Net Debt to
Capital, Adjusted EBITDA (see below), and the Ratio of Net Debt to
Adjusted EBITDA 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,
2020
|
December 31,
2019
|
Short-term debt,
including current portion of long-term debt
|
$
|
130.7
|
|
$
|
82.0
|
|
Long-term
debt
|
|
|
1,433.9
|
|
1,648.1
|
|
Total
Debt
|
|
|
$
|
1,564.6
|
|
$
|
1,730.1
|
|
Less: Cash and cash
equivalents
|
|
|
(320.3)
|
|
(209.5)
|
|
Net Debt
|
|
|
$
|
1,244.3
|
|
$
|
1,520.6
|
|
|
|
|
|
|
Total
Equity
|
|
|
$
|
2,225.2
|
|
$
|
1,954.8
|
|
|
|
|
|
|
Ratio of Net Debt to
Capital
|
|
|
35.9
|
%
|
43.8
|
%
|
|
|
|
|
|
Adjusted EBITDA for
the Twelve Months Ended
|
|
|
$
|
658.9
|
|
$
|
726.3
|
|
|
|
|
|
|
Ratio of Net Debt to
Adjusted EBITDA
|
|
|
1.9
|
|
2.1
|
|
|
|
|
|
|
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,
|
|
2020
|
2019
|
2020
|
2019
|
Net cash provided by
operating activities
|
$
|
120.5
|
|
$
|
195.3
|
|
$
|
577.6
|
|
$
|
550.1
|
|
Less: capital
expenditures
|
(35.9)
|
|
(57.7)
|
|
(121.6)
|
|
(140.6)
|
|
Free cash
flow
|
$
|
84.6
|
|
$
|
137.6
|
|
$
|
456.0
|
|
$
|
409.5
|
|
Reconciliation of
Adjusted Earnings per Share to GAAP Earnings per Share for Full
Year 2021 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
|
$
|
4.45
|
|
|
$
|
4.85
|
|
|
|
|
|
Forecasted
Adjustments:
|
|
|
|
Restructuring and other special items,
net (1)
|
0.25
|
|
|
0.25
|
|
Total
Adjustments:
|
$
|
0.25
|
|
|
$
|
0.25
|
|
Forecasted full year
adjusted diluted earnings per share
|
$
|
4.70
|
|
|
$
|
5.10
|
|
|
|
|
|
(1)
Restructuring and other special items, net do not include the
impact of any potential mark-to-market pension and other
postretirement remeasurement adjustments, 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 2021 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
|
|
|
$
|
450.0
|
|
Less: capital
expenditures
|
|
|
(150.0)
|
|
Free cash
flow
|
|
|
$
|
300.0
|
|
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SOURCE The Timken Company