- Sales of $1.14 billion, up
nearly 10 percent in total and 14 percent organically from last
year
- Third-quarter earnings per diluted share of $1.18 on a GAAP basis, with adjusted EPS of
$1.52
- Raises adjusted earnings outlook; now expects 2022 GAAP
earnings per diluted share of $5.15
to $5.30 and adjusted EPS of
$5.80 to $5.95
NORTH
CANTON, Ohio, Oct. 26,
2022 /PRNewswire/ -- The Timken Company (NYSE:
TKR; www.timken.com), a global leader in engineered bearings and
industrial motion products, today reported third-quarter 2022
sales of $1.14 billion, up 9.6 percent from the same
period a year ago. The increase was driven primarily by growth
across most end-market sectors led by industrial distribution and
off-highway, and the impact of higher pricing, partially offset by
unfavorable foreign currency translation. Organically,
third-quarter sales were up 13.6 percent versus the prior year.
![The Timken Company Logo. (PRNewsFoto/The Timken Company) (PRNewsFoto/) (PRNewsFoto/) The Timken Company Logo. (PRNewsFoto/The Timken Company) (PRNewsFoto/) (PRNewsFoto/)](https://mma.prnewswire.com/media/333357/the_timken_company_logo.jpg)
Timken posted net income in the third quarter
of $87.0 million or $1.18 per diluted share. This compares to
net income of $88.1 million or $1.14 per diluted
share for the same period a year ago. The slight year-on-year
decrease in net income reflects the net unfavorable impact of
special items (detailed in the attached tables), higher operating
costs and a higher tax rate, offset by positive price/mix and the
favorable impact of higher volume. Current-period special items
include an impairment charge related to the anticipated divestiture
of the company's Aerospace Drive Systems (ADS) business.
Excluding special items, adjusted net income in the third
quarter was $112.6 million or
$1.52 per diluted share, a record for
the third quarter. This compares to adjusted net income of
$91.0 million or $1.18 per diluted share for the same period in
2021.
Net cash from operations for the third quarter was $145.2 million, and free cash flow was
$97.9 million. Timken ended the third
quarter with net debt to adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA) at 1.8 times. During the
quarter, the company returned $71.8
million of cash to shareholders through dividends and the
repurchase of 750 thousand shares of company stock.
"Timken delivered excellent performance again in the third
quarter, achieving double-digit organic revenue growth and solid
year-over-year margin expansion," said Richard G. Kyle, Timken president and chief
executive officer. "As we outlined at our recent Investor Day, our
strong results reflect the successful execution of our strategy and
proven business model, the diversity of our portfolio and
attractive end-market mix, and our consistent and disciplined
approach to capital allocation."
Among other recent developments,
- In September, Timken reached an agreement to acquire GGB
Bearings, a global supplier of highly engineered and customized
plain bearings and a leader in metal polymer bearings. GGB Bearings
revenue is expected to be around $200
million in 2022. The acquisition remains on track to close
in the fourth quarter;
- The company published its annual Corporate Social
Responsibility (CSR) report, which included a 2030 target to reduce
aggregate Scope 1 and Scope 2 greenhouse gas emissions intensity by
50 percent[i];
- Timken held its 2022 Investor Day on September 28 in New
York City, where the company highlighted past performance,
provided new long-term financial targets and outlined opportunities
to drive further shareholder value; and
- Earlier this month, Timken reached an agreement to divest ADS,
a supplier of drive system components and sub-assemblies for
military and civil rotorcraft applications. ADS revenue is expected
to be around $50 million in 2022.
Timken expects to close on the sale of ADS in the fourth
quarter.
Third-Quarter 2022 Segment Results
Process Industries sales of $609.5 million
increased 10.8 percent from the same period a year ago. The
increase was driven primarily by growth across most sectors led by
distribution, general industrial and heavy industries, as well as
the impact of higher pricing and the benefit of acquisitions,
partially offset by lower revenue in the renewable energy sector
and unfavorable foreign currency translation.
EBITDA for the quarter was $165.3 million
or 27.1 percent of sales, compared with EBITDA
of $129.7 million or 23.6 percent of sales for
the same period a year ago. The increase in EBITDA was driven
primarily by positive price/mix and the favorable impact of higher
volume, partially offset by higher operating costs.
Excluding special items (detailed in the attached tables),
adjusted EBITDA in the quarter was $166.7 million
or 27.4 percent of sales, compared
with $130.7 million or 23.8 percent of sales in the
third quarter last year.
Mobile Industries sales of $526.9 million
increased 8.1 percent compared with the same period a year ago. The
increase was driven primarily by higher shipments across most
sectors led by off-highway and automotive, and the impact of higher
pricing, partially offset by unfavorable foreign currency
translation.
EBITDA for the quarter was $20.0 million
or 3.8 percent of sales, compared with EBITDA
of $53.2 million or 10.9 percent of sales for the
same period a year ago. The decrease in EBITDA was driven primarily
by higher operating costs and the ADS impairment charge, partially
offset by positive price/mix and the favorable impact of higher
volume.
Excluding special items (detailed in the attached tables),
adjusted EBITDA in the quarter was $55.1 million
or 10.5 percent of sales, compared
with $58.2 million or 11.9 percent of sales in the
third quarter last year.
2022 Outlook
Timken now anticipates 2022 earnings per diluted share to range
from $5.15 to $5.30 for the full year on a GAAP basis.
Excluding special items, the company is increasing its 2022
adjusted earnings outlook to a range of $5.80 to $5.95 per
share, which represents around 25 percent growth versus 2021 at the
midpoint. The company now expects 2022 revenue to be up
approximately 9 percent in total at the midpoint from 2021.
"Timken is raising its 2022 outlook to reflect strength in
market demand as well as our improving performance," said Kyle. "We
are seeing positive momentum as we approach 2023, and we are
continuing to improve our operational execution in a dynamic
environment. Our backlog is at a high level, price-cost remains
positive, and we are confident in our ability to create value with
the GGB Bearings acquisition. Our team remains focused on executing
our proven strategy to scale our position as a diversified
industrial leader and deliver top-quartile financial
performance."
Conference Call Information
Timken will host a conference call today at 11 a.m. Eastern
Time to review its financial results. Presentation materials will
be available online in advance of the call for interested investors
and securities analysts.
Conference
Call:
|
Wednesday, October 26,
2022
|
|
11:00 a.m. Eastern
Time
|
|
Live Dial-In:
833-927-1758
|
|
Or
646-904-5544
|
|
Access Code:
721564
|
|
(Call in 10 minutes
prior to be included.)
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through
|
|
Nov. 9,
2022:
|
|
866-813-9403 or
929-458-6194
|
|
Replay Passcode:
883154
|
|
|
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 industrial motion 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 $4.1 billion in sales in 2021 and employs more
than 18,000 people globally, operating from 43 countries. Timken
has been recognized among America's Most Responsible Companies by
Newsweek, the World's Most Ethical Companies® by Ethisphere
and America's Best Employers, America's Best Employers for New
Graduates and America's Best Employers for Women by Forbes.
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
"2022 Outlook," are forward-looking.
The company cautions that actual results may differ
materially from those projected or implied in forward-looking
statements due to a variety of important factors, including: the
finalization of the company's financial statements for the third
quarter of 2022; 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;
logistical issues associated with port closures or congestion,
delays or increased 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 general economic conditions and
capital markets; the impact of inflation on employee expenses,
shipping costs, raw material costs, energy and fuel prices, and
other production costs; the company's ability to satisfy its
obligations under its debt agreements and renew or refinance
borrowings on favorable terms in a rising interest rate
environment; 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, synergies,
and expected cashflow generation within expected timeframes or at
all; 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 and
commercial requirements meant to address climate change;
unanticipated litigation, claims, investigations or assessments;
the company's ability to maintain positive relations with unions
and works councils; the company's ability to compete for skilled
labor; negative impacts to the company's operations or financial
position as a result of COVID-19 or other epidemics and associated
governmental measures; 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, 2021,
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
______________________________
|
i
|
Based off of a 2018
baseline.
|
The Timken Company
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
|
|
|
|
|
|
(Dollars in millions, except share data)
(Unaudited)
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2022
|
2021
|
|
2022
|
2021
|
Net sales
|
$
|
1,136.4
|
|
$
|
1,037.3
|
|
|
$
|
3,414.7
|
|
$
|
3,125.6
|
|
Cost of products
sold
|
813.6
|
|
769.4
|
|
|
2,422.7
|
|
2,256.2
|
|
Gross Profit
|
322.8
|
|
267.9
|
|
|
992.0
|
|
869.4
|
|
Selling, general &
administrative expenses
|
159.8
|
|
140.7
|
|
|
469.8
|
|
434.2
|
|
Impairment and
restructuring charges
|
31.3
|
|
2.9
|
|
|
42.3
|
|
8.2
|
|
Operating Income
|
131.7
|
|
124.3
|
|
|
479.9
|
|
427.0
|
|
Non-service pension and
other postretirement income (expense)
|
1.3
|
|
0.5
|
|
|
(5.3)
|
|
5.9
|
|
Other income,
net
|
2.3
|
|
1.5
|
|
|
1.4
|
|
0.3
|
|
Interest expense,
net
|
(18.2)
|
|
(14.3)
|
|
|
(49.2)
|
|
(43.3)
|
|
Income Before Income Taxes
|
117.1
|
|
112.0
|
|
|
426.8
|
|
389.9
|
|
Provision for income
taxes
|
26.7
|
|
20.4
|
|
|
108.9
|
|
75.1
|
|
Net Income
|
90.4
|
|
91.6
|
|
|
317.9
|
|
314.8
|
|
Less: Net income
attributable to noncontrolling interest
|
3.4
|
|
3.5
|
|
|
7.7
|
|
8.6
|
|
Net Income Attributable to The Timken
Company
|
$
|
87.0
|
|
$
|
88.1
|
|
|
$
|
310.2
|
|
$
|
306.2
|
|
|
|
|
|
|
|
Net Income per Common Share Attributable to The
Timken Company Common Shareholders
|
|
|
|
|
|
Basic Earnings per
share
|
$
|
1.19
|
|
$
|
1.16
|
|
|
$
|
4.20
|
|
$
|
4.03
|
|
Diluted Earnings per
share
|
$
|
1.18
|
|
$
|
1.14
|
|
|
$
|
4.16
|
|
$
|
3.97
|
|
|
|
|
|
|
|
Average Shares Outstanding
|
73,177,956
|
|
76,068,582
|
|
|
73,890,483
|
|
75,980,355
|
|
Average Shares Outstanding - assuming
dilution
|
73,866,743
|
|
77,023,973
|
|
|
74,548,711
|
|
77,157,614
|
|
BUSINESS SEGMENTS
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
(Dollars in
millions)
|
2022
|
2021
|
2022
|
2021
|
|
|
|
|
|
Mobile Industries
|
|
|
|
|
Net sales
|
$
|
526.9
|
|
$
|
487.3
|
|
$
|
1,610.9
|
|
$
|
1,486.0
|
|
Earnings before
interest, taxes, depreciation and amortization
(EBITDA) (1)
|
$
|
20.0
|
|
$
|
53.2
|
|
$
|
164.2
|
|
$
|
200.1
|
|
EBITDA
Margin (1)
|
3.8
|
%
|
10.9
|
%
|
10.2
|
%
|
13.5
|
%
|
Process Industries
|
|
|
|
|
Net sales
|
$
|
609.5
|
|
$
|
550.0
|
|
$
|
1,803.8
|
|
$
|
1,639.6
|
|
Earnings before
interest, taxes, depreciation and amortization
(EBITDA) (1)
|
$
|
165.3
|
|
$
|
129.7
|
|
$
|
484.4
|
|
$
|
401.9
|
|
EBITDA
Margin (1)
|
27.1
|
%
|
23.6
|
%
|
26.9
|
%
|
24.5
|
%
|
Unallocated corporate
expense
|
$
|
(9.1)
|
|
$
|
(11.7)
|
|
$
|
(35.4)
|
|
$
|
(34.9)
|
|
Corporate pension and
other postretirement benefit related
expense (2)
|
(1.0)
|
|
(3.9)
|
|
(15.2)
|
|
(8.3)
|
|
Acquisition-related
gain (3)
|
—
|
|
0.3
|
|
—
|
|
0.9
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
Net sales
|
$
|
1,136.4
|
|
$
|
1,037.3
|
|
$
|
3,414.7
|
|
$
|
3,125.6
|
|
Earnings before
interest, taxes, depreciation and amortization
(EBITDA) (1)
|
$
|
175.2
|
|
$
|
167.6
|
|
$
|
598.0
|
|
$
|
559.7
|
|
EBITDA
Margin (1)
|
15.4
|
%
|
16.2
|
%
|
17.5
|
%
|
17.9
|
%
|
|
|
|
|
|
(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 primarily represents
actuarial (losses) and gains that resulted from the remeasurement
of plan assets and obligations as a result of changes in
assumptions or experience. 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") that closed on November
30, 2020.
|
CONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
|
(Dollars in
millions)
|
(Unaudited)
|
|
|
|
September 30,
2022
|
|
December 31,
2021
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
300.9
|
|
|
$
|
257.1
|
|
Restricted
cash
|
0.7
|
|
|
0.8
|
|
Accounts receivable,
net
|
735.5
|
|
|
626.4
|
|
Unbilled
receivables
|
83.6
|
|
|
104.5
|
|
Inventories,
net
|
1,132.6
|
|
|
1,042.7
|
|
Other current
assets
|
200.2
|
|
|
182.0
|
|
Total Current
Assets
|
2,453.5
|
|
|
2,213.5
|
|
Property, plant and
equipment, net
|
1,069.0
|
|
|
1,055.3
|
|
Operating lease
assets
|
102.4
|
|
|
118.9
|
|
Goodwill and other
intangible assets
|
1,573.8
|
|
|
1,691.5
|
|
Other assets
|
83.2
|
|
|
91.5
|
|
Total Assets
|
$
|
5,281.9
|
|
|
$
|
5,170.7
|
|
LIABILITIES
|
|
|
|
Accounts
payable
|
$
|
373.4
|
|
|
$
|
430.0
|
|
Short-term debt,
including current portion of long-term debt
|
371.8
|
|
|
53.8
|
|
Income taxes
|
27.6
|
|
|
26.2
|
|
Accrued
expenses
|
436.2
|
|
|
386.6
|
|
Total Current
Liabilities
|
1,209.0
|
|
|
896.6
|
|
Long-term
debt
|
1,411.3
|
|
|
1,411.1
|
|
Accrued pension
benefits
|
162.0
|
|
|
155.6
|
|
Accrued postretirement
benefits
|
44.2
|
|
|
45.8
|
|
Long-term operating
lease liabilities
|
67.1
|
|
|
77.6
|
|
Other non-current
liabilities
|
209.5
|
|
|
206.3
|
|
Total
Liabilities
|
3,103.1
|
|
|
2,793.0
|
|
EQUITY
|
|
|
|
The Timken Company
shareholders' equity
|
2,093.6
|
|
|
2,294.9
|
|
Noncontrolling
interest
|
85.2
|
|
|
82.8
|
|
Total Equity
|
2,178.8
|
|
|
2,377.7
|
|
Total Liabilities and
Equity
|
$
|
5,281.9
|
|
|
$
|
5,170.7
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
(Dollars in
millions)
|
2022
|
2021
|
|
2022
|
2021
|
Cash Provided by (Used
in)
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
Net Income
|
$
|
90.4
|
|
$
|
91.6
|
|
|
$
|
317.9
|
|
$
|
314.8
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
39.9
|
|
41.3
|
|
|
122.0
|
|
126.5
|
|
Impairment
charges
|
29.5
|
|
—
|
|
|
38.3
|
|
4.5
|
|
Stock-based
compensation expense
|
6.7
|
|
3.1
|
|
|
22.3
|
|
15.6
|
|
Pension and other
postretirement expense
|
0.7
|
|
2.4
|
|
|
11.9
|
|
2.9
|
|
Pension and other
postretirement benefit contributions and payments
|
(3.4)
|
|
(3.2)
|
|
|
(11.5)
|
|
(18.2)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
(7.7)
|
|
(1.7)
|
|
|
(157.0)
|
|
(127.5)
|
|
Unbilled
receivables
|
(2.3)
|
|
14.7
|
|
|
(5.2)
|
|
25.1
|
|
Inventories
|
(21.0)
|
|
(62.8)
|
|
|
(147.1)
|
|
(144.2)
|
|
Accounts
payable
|
(6.5)
|
|
19.3
|
|
|
(12.6)
|
|
60.5
|
|
Accrued
expenses
|
29.2
|
|
19.4
|
|
|
45.8
|
|
50.2
|
|
Income
taxes
|
(6.5)
|
|
0.7
|
|
|
7.3
|
|
(6.7)
|
|
Other,
net
|
(3.8)
|
|
(19.0)
|
|
|
(9.8)
|
|
(18.9)
|
|
Net Cash Provided by
Operating Activities
|
$
|
145.2
|
|
$
|
105.8
|
|
|
$
|
222.3
|
|
$
|
284.6
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
Capital
expenditures
|
$
|
(47.3)
|
|
$
|
(43.1)
|
|
|
$
|
(122.5)
|
|
$
|
(103.6)
|
|
Acquisitions, net of
cash received
|
(0.1)
|
|
(7.3)
|
|
|
(152.4)
|
|
|
(7.2)
|
|
Proceeds from
divestitures, net of cash divested
|
1.0
|
|
—
|
|
|
1.0
|
|
|
—
|
|
Investments in
short-term marketable securities, net
|
4.4
|
|
8.4
|
|
|
27.8
|
|
(5.4)
|
|
Other, net
|
(1.3)
|
|
—
|
|
|
4.1
|
|
0.3
|
|
Net Cash Used in
Investing Activities
|
$
|
(43.3)
|
|
$
|
(42.0)
|
|
|
$
|
(242.0)
|
|
$
|
(115.9)
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
Cash dividends paid to
shareholders
|
$
|
(22.8)
|
|
$
|
(22.8)
|
|
|
$
|
(69.2)
|
|
$
|
(69.5)
|
|
Purchase of treasury
shares
|
(49.0)
|
|
(30.3)
|
|
|
(193.3)
|
|
(56.6)
|
|
Proceeds from exercise
of stock options
|
2.6
|
|
—
|
|
|
4.2
|
|
25.4
|
|
Payments related to tax
withholding for stock-based compensation
|
(1.4)
|
|
—
|
|
|
(9.5)
|
|
(23.5)
|
|
Net proceeds (payments)
from credit facilities
|
(12.1)
|
|
(46.9)
|
|
|
18.4
|
|
(88.3)
|
|
Net proceeds (payments)
on long-term debt
|
(5.7)
|
|
(3.0)
|
|
|
335.4
|
|
(9.4)
|
|
Other, net
|
(0.5)
|
|
(0.5)
|
|
|
2.5
|
|
(0.5)
|
|
Net Cash Provided by
(Used in) Financing Activities
|
$
|
(88.9)
|
|
$
|
(103.5)
|
|
|
$
|
88.5
|
|
$
|
(222.4)
|
|
Effect of exchange rate
changes on cash
|
(17.4)
|
|
(4.0)
|
|
|
(25.1)
|
|
(4.8)
|
|
Increase (Decrease) in
Cash, Cash Equivalents and Restricted Cash
|
$
|
(4.4)
|
|
$
|
(43.7)
|
|
|
$
|
43.7
|
|
$
|
(58.5)
|
|
Cash, Cash Equivalents
and Restricted Cash at Beginning of Period
|
306.0
|
|
306.3
|
|
|
257.9
|
|
321.1
|
|
Cash, Cash Equivalents
and Restricted Cash at End of Period
|
$
|
301.6
|
|
$
|
262.6
|
|
|
$
|
301.6
|
|
$
|
262.6
|
|
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
September 30,
|
|
Nine Months Ended
September 30,
|
|
2022
|
|
EPS
|
2021
|
|
EPS
|
|
2022
|
|
EPS
|
2021
|
|
EPS
|
Net Income Attributable
to The Timken Company
|
$
|
87.0
|
|
|
$
|
1.18
|
|
$
|
88.1
|
|
|
$
|
1.14
|
|
|
$
|
310.2
|
|
|
$
|
4.16
|
|
$
|
306.2
|
|
|
$
|
3.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and reorganization charges
(2)
|
$
|
32.1
|
|
|
|
$
|
5.9
|
|
|
|
|
$
|
35.7
|
|
|
|
$
|
13.3
|
|
|
|
Corporate
pension and other postretirement benefit related expense
(3)
|
1.0
|
|
|
|
3.9
|
|
|
|
|
15.2
|
|
|
|
8.3
|
|
|
|
Russia-related charges (4)
|
2.3
|
|
|
|
—
|
|
|
|
|
15.3
|
|
|
|
—
|
|
|
|
Acquisition-related charges (5)
|
3.0
|
|
|
|
1.5
|
|
|
|
|
5.7
|
|
|
|
2.1
|
|
|
|
Noncontrolling
interest of above adjustments
|
0.1
|
|
|
|
—
|
|
|
|
|
(5.7)
|
|
|
|
0.2
|
|
|
|
Provision
for income taxes (6)
|
(12.9)
|
|
|
|
(8.4)
|
|
|
|
|
(18.2)
|
|
|
|
(26.3)
|
|
|
|
Total
Adjustments:
|
25.6
|
|
|
0.34
|
|
2.9
|
|
|
0.04
|
|
|
48.0
|
|
|
0.64
|
|
(2.4)
|
|
|
(0.03)
|
|
Adjusted Net Income
Attributable to The Timken Company
|
$
|
112.6
|
|
|
$
|
1.52
|
|
$
|
91.0
|
|
|
$
|
1.18
|
|
|
$
|
358.2
|
|
|
$
|
4.80
|
|
$
|
303.8
|
|
|
$
|
3.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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; (iv) impairment of
assets held for sale; and (v) related depreciation and
amortization. Impairment, restructuring and reorganization charges
for the third quarter of 2022 included $29.3 million related to
Timken Aerospace Drive Systems ("ADS"). 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) Corporate pension and other postretirement benefit
related expense represents actuarial losses and (gains) that
resulted from the remeasurement of plan assets and obligations as a
result of changes in assumptions or experience. 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4) Russia-related charges include
impairments or allowances recorded against certain property, plant
and equipment, inventory and trade receivables to reflect the
current impact of Russia's invasion of Ukraine (and associated
sanctions) on the Company's operations. In addition to impairments
and allowances recorded, the Company recorded a loss on the
divestiture of its Timken-Rus Service Company ooo ("Timken Russia")
business during the third quarter of 2022. Refer to Russia
Operations in Management Discussion and Analysis within the
Company's quarterly report on Form 10-Q for additional
information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5) Acquisition-related charges represent the contingent
consideration related to the acquisition of Intelligent Machine
Solutions ("iMS") that closed on August 20, 2021, and deal-related
expenses associated with completed transactions and certain
unsuccessful transactions, as well as any resulting inventory
step-up impact. In addition, the 2021 acquisition-related charges
includes an acquisition-related gain due to measurement period
adjustments to the bargain purchase gain on the acquisition of the
assets of Aurora that closed on November 30, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) 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 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
September 30,
|
|
Nine Months Ended
September 30,
|
|
2022
|
Percentage to
Net Sales
|
2021
|
Percentage to
Net Sales
|
|
2022
|
Percentage to
Net Sales
|
2021
|
Percentage to
Net Sales
|
Net Income
|
$
|
90.4
|
|
8.0
|
%
|
$
|
91.6
|
|
8.8
|
%
|
|
$
|
317.9
|
|
9.3
|
%
|
$
|
314.8
|
|
10.1
|
%
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
26.7
|
|
|
20.4
|
|
|
|
108.9
|
|
|
75.1
|
|
|
Interest
expense
|
19.3
|
|
|
14.8
|
|
|
|
51.9
|
|
|
45.0
|
|
|
Interest
income
|
(1.1)
|
|
|
(0.5)
|
|
|
|
(2.7)
|
|
|
(1.7)
|
|
|
Depreciation and
amortization
|
39.9
|
|
|
41.3
|
|
|
|
122.0
|
|
|
126.5
|
|
|
Consolidated
EBITDA
|
$
|
175.2
|
|
15.4
|
%
|
$
|
167.6
|
|
16.2
|
%
|
|
$
|
598.0
|
|
17.5
|
%
|
$
|
559.7
|
|
17.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and reorganization charges
(1)
|
$
|
32.1
|
|
|
$
|
5.6
|
|
|
|
$
|
35.7
|
|
|
$
|
12.5
|
|
|
Corporate
pension and other postretirement benefit related
expense (2)
|
1.0
|
|
|
3.9
|
|
|
|
15.2
|
|
|
8.3
|
|
|
Russia-related charges (3)
|
2.3
|
|
|
—
|
|
|
|
15.3
|
|
|
—
|
|
|
Acquisition-related charges (4)
|
3.0
|
|
|
1.5
|
|
|
|
5.7
|
|
|
2.1
|
|
|
Total Adjustments
|
38.4
|
|
3.4
|
%
|
11.0
|
|
1.0
|
%
|
|
71.9
|
|
2.1
|
%
|
22.9
|
|
0.7
|
%
|
Adjusted
EBITDA
|
$
|
213.6
|
|
18.8
|
%
|
$
|
178.6
|
|
17.2
|
%
|
|
$
|
669.9
|
|
19.6
|
%
|
$
|
582.6
|
|
18.6
|
%
|
|
|
|
|
|
|
|
|
|
|
(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; (iii)
severance related to cost reduction initiatives; and (iv)
impairment of assets held for sale. Impairment, restructuring and
reorganization charges for the third quarter of 2022 included $29.3
million related to ADS. 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) Corporate pension and other
postretirement benefit related expense represents actuarial losses
and (gains) that resulted from the remeasurement of plan assets and
obligations as a result of changes in assumptions or experience.
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) Russia-related charges include
impairments or allowances recorded against certain property, plant
and equipment, inventory and trade receivables to reflect the
current impact of Russia's invasion of Ukraine (and associated
sanctions) on the Company's operations. In addition to impairments
and allowances recorded, the Company recorded a loss on the
divestiture of its Timken Russia business during the third quarter
of 2022. Refer to Russia Operations in Management Discussion and
Analysis within the Company's quarterly report on Form 10-Q for
additional information.
|
|
|
|
|
|
|
|
|
|
|
(4) Acquisition-related charges represent the contingent
consideration related to the acquisition of iMS that closed on
August 20, 2021, and deal-related expenses associated with
completed transactions and certain unsuccessful transactions, as
well as any resulting inventory step-up impact. In addition, the
2021 acquisition-related charges includes an acquisition-related
gain due to measurement period adjustments to the bargain purchase
gain on the acquisition of the assets of Aurora that closed on
November 30, 2020.
|
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
September 30,
|
|
Nine Months Ended
September 30,
|
(Dollars in millions)
|
2022
|
Percentage
to Net Sales
|
|
2021
|
Percentage
to Net Sales
|
|
2022
|
Percentage
to Net Sales
|
2021
|
Percentage
to Net Sales
|
Earnings before
interest, taxes, depreciation
and amortization (EBITDA)
|
$
|
20.0
|
|
3.8
|
%
|
|
$
|
53.2
|
|
10.9
|
%
|
|
$
|
164.2
|
|
10.2
|
%
|
$
|
200.1
|
|
13.5
|
%
|
Impairment, restructuring and
reorganization charges (1)
|
31.0
|
|
|
|
4.8
|
|
|
|
33.0
|
|
|
6.3
|
|
|
Russia-related charges (2)
|
4.1
|
|
|
|
—
|
|
|
|
16.6
|
|
|
—
|
|
|
Acquisition-related charges (3)
|
—
|
|
|
|
0.2
|
|
|
|
—
|
|
|
0.6
|
|
|
Adjusted
EBITDA
|
$
|
55.1
|
|
10.5
|
%
|
|
$
|
58.2
|
|
11.9
|
%
|
|
$
|
213.8
|
|
13.3
|
%
|
$
|
207.0
|
|
13.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Process Industries
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
(Dollars in millions)
|
2022
|
Percentage
to Net Sales
|
|
2021
|
Percentage
to Net Sales
|
|
2022
|
Percentage
to Net Sales
|
2021
|
Percentage
to Net Sales
|
Earnings before
interest, taxes, depreciation
and amortization (EBITDA)
|
$
|
165.3
|
|
27.1
|
%
|
|
$
|
129.7
|
|
23.6
|
%
|
|
$
|
484.4
|
|
26.9
|
%
|
$
|
401.9
|
|
24.5
|
%
|
Impairment, restructuring and
reorganization charges (1)
|
1.1
|
|
|
|
0.8
|
|
|
|
2.7
|
|
|
6.2
|
|
|
Russia-related charges (2)
|
(1.8)
|
|
|
|
—
|
|
|
|
(1.3)
|
|
|
—
|
|
|
Acquisition-related charges (3)
|
2.1
|
|
|
|
0.2
|
|
|
|
3.5
|
|
|
0.5
|
|
|
Adjusted
EBITDA
|
$
|
166.7
|
|
27.4
|
%
|
|
$
|
130.7
|
|
23.8
|
%
|
|
$
|
489.3
|
|
27.1
|
%
|
$
|
408.6
|
|
24.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
(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; (iii)
severance related to cost reduction initiatives; and (iv)
impairment of assets held for sale. Impairment, restructuring and
reorganization charges for the third quarter of 2022 included $29.3
million related to ADS. 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) Russia-related charges include
impairments or allowances recorded against certain property, plant
and equipment, inventory and trade receivables to reflect the
current impact of Russia's invasion of Ukraine (and associated
sanctions) on the Company's operations. In addition to impairments
and allowances recorded, the Company recorded a loss on the
divestiture of its Timken Russia business during the third quarter
of 2022. Refer to Russia Operations in Management Discussion and
Analysis within the Company's quarterly report on Form 10-Q for
additional information.
|
|
|
|
|
|
|
|
|
|
|
|
(3) The acquisition-related charges represent contingent
consideration related to the acquisition of iMS that closed on
August 20, 2021 and the inventory step-up impact of the
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 the subsequent page), 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. The Company presents net debt to adjusted
EBITDA because it believes it is more representative of the
Company's financial position as it is reflective of the ability to
cover its net debt obligations with results from its core
operations.
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
|
|
September 30,
2022
|
December 31,
2021
|
Short-term debt,
including current portion of long-term debt
|
|
|
$
|
371.8
|
|
$
|
53.8
|
|
Long-term
debt
|
|
|
1,411.3
|
|
1,411.1
|
|
Total
Debt
|
|
|
$
|
1,783.1
|
|
$
|
1,464.9
|
|
Less: Cash and cash
equivalents
|
|
|
(300.9)
|
|
(257.1)
|
|
Net Debt
|
|
|
$
|
1,482.2
|
|
$
|
1,207.8
|
|
|
|
|
|
|
Total Equity
|
|
|
$
|
2,178.8
|
|
$
|
2,377.7
|
|
|
|
|
|
|
Ratio of Net Debt to
Capital
|
|
|
40.5
|
%
|
33.7
|
%
|
|
|
|
|
|
Adjusted EBITDA for the
Twelve Months Ended
|
|
|
$
|
805.3
|
|
$
|
718.0
|
|
|
|
|
|
|
Ratio of Net Debt to
Adjusted EBITDA
|
|
|
1.8
|
|
1.7
|
|
|
|
|
|
|
Reconciliation of Free Cash Flow to GAAP Net Cash
Provided by Operating Activities:
|
(Unaudited)
|
|
|
|
|
Management believes
that free cash flow is a non-GAAP measure that is useful to
investors because it is a meaningful indicator of cash generated
from operating activities available for the execution of its
business strategy.
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
2022
|
2021
|
2022
|
2021
|
Net cash provided by
operating activities
|
$
|
145.2
|
|
$
|
105.8
|
|
$
|
222.3
|
|
$
|
284.6
|
|
Less: capital
expenditures
|
(47.3)
|
|
(43.1)
|
|
(122.5)
|
|
(103.6)
|
|
Free cash
flow
|
$
|
97.9
|
|
$
|
62.7
|
|
$
|
99.8
|
|
$
|
181.0
|
|
Reconciliation of 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, 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 the non-GAAP measure of
adjusted EBITDA is useful to investors as it is representative of
the Company's core operations and is used in the management of the
business, including decisions concerning the allocation of
resources and assessment of performance.
|
|
|
|
(Dollars in millions)
|
Twelve Months Ended
September 30, 2022
|
Twelve Months Ended
December 31, 2021
|
Net Income
|
$
|
384.6
|
|
$
|
381.5
|
|
Provision for income
taxes
|
128.9
|
|
95.1
|
|
Interest
expense
|
65.7
|
|
58.8
|
|
Interest
income
|
(3.3)
|
|
(2.3)
|
|
Depreciation and
amortization
|
163.3
|
|
167.8
|
|
Consolidated
EBITDA
|
$
|
739.2
|
|
$
|
700.9
|
|
Adjustments:
|
|
|
Impairment,
restructuring and reorganization
charges (1)
|
$
|
37.5
|
|
$
|
14.3
|
|
Corporate
pension and other postretirement benefit related expense
(2)
|
7.2
|
|
0.3
|
|
Acquisition-related
charges (3)
|
5.9
|
|
2.3
|
|
Russia-related
charges (4)
|
15.3
|
|
—
|
|
Tax indemnification and
related items
|
0.2
|
|
0.2
|
|
Total Adjustments
|
66.1
|
|
17.1
|
|
Adjusted
EBITDA
|
$
|
805.3
|
|
$
|
718.0
|
|
|
|
|
(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; (iii)
severance related to cost reduction initiatives; and (iv)
impairment of assets held for sale. Impairment, restructuring and
reorganization charges for the twelve months ended September 30,
2022 included $29.3 million related to ADS. 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) Corporate pension and other
postretirement benefit related expense represents actuarial losses
and (gains) that resulted from the remeasurement of plan assets and
obligations as a result of changes in assumptions or experience.
The Company recognizes actuarial losses and (gains) in connection
with the annual remeasurement in the fourth quarter, or if specific
events trigger a remeasurement.
|
|
|
|
(3) Acquisition-related charges represent contingent
consideration related to the acquisition of iMS that closed on
August 20, 2021, and deal-related expenses associated with
completed transactions and certain unsuccessful transactions, as
well as any resulting inventory step-up impact. Also included is
the acquisition-related gain related to measurement period
adjustments to the bargain purchase gain on the acquisition of the
assets of Aurora that closed on November 30, 2020.
|
|
|
|
(4) Russia-related charges include impairments or
allowances recorded against certain property, plant equipment,
inventory and trade receivables to reflect the current impact of
Russia's invasion of Ukraine (and associated sanctions) on the
Company's operations. In addition to impairments and allowances
recorded, the Company recorded a loss on the divestiture of its
Timken Russia business during the third quarter of 2022. Refer to
Russia Operations in Management Discussion and Analysis within the
Company's quarterly report on Form 10-Q for additional
information.
|
Reconciliation of Net Sales to Organic
Sales
|
(Unaudited)
|
|
|
|
|
|
|
The following
reconciliation is provided as additional relevant information about
the Company's performance deemed useful to investors. Management
believes that net sales, excluding the impact of acquisitions,
divestitures and foreign currency exchange rate changes, allow
investors and the Company to meaningfully evaluate the percentage
change in net sales on a comparable basis from period to
period.
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2022
|
|
Three Months Ended
September 30, 2021
|
|
$ Change
|
% Change
|
Net sales
|
$
|
1,136.4
|
|
|
$
|
1,037.3
|
|
|
$
|
99.1
|
|
9.6
|
%
|
Less: Acquisitions and
divestitures
|
5.2
|
|
|
—
|
|
|
5.2
|
|
NM
|
|
Currency
|
(47.2)
|
|
|
—
|
|
|
(47.2)
|
|
NM
|
|
Net sales, excluding
the impact of acquisitions, divestitures and currency
|
$
|
1,178.4
|
|
|
$
|
1,037.3
|
|
|
$
|
141.1
|
|
13.6
|
%
|
Reconciliation of Adjusted Earnings per Share to GAAP
Earnings per Share for Full Year 2022
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
|
$
|
5.15
|
|
|
$
|
5.30
|
|
|
|
|
|
Forecasted
Adjustments:
|
|
|
|
Restructuring and other special items,
net (1)
|
0.65
|
|
|
0.65
|
|
Total
Adjustments:
|
$
|
0.65
|
|
|
$
|
0.65
|
|
Forecasted full year
adjusted diluted earnings per share
|
$
|
5.80
|
|
|
$
|
5.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Restructuring and other special items, net do
not include the impact of any potential future mark-to-market
pension and other postretirement remeasurement adjustments, because
the amounts will not be known until incurred.
|
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SOURCE The Timken Company