- Record sales of $1.27
billion, up 10 percent from last year
- Second-quarter EPS of $1.73; adjusted EPS of $2.01
- Net income margin of 9.8 percent; adjusted EBITDA margin
of 20.7 percent
- Repurchased 1.3 million shares during the quarter
- Updates 2023 outlook; now expects 2023 EPS of
$5.70-$6.10, with adjusted EPS of $6.90-$7.30
NORTH
CANTON, Ohio, Aug. 3, 2023
/PRNewswire/ -- The Timken Company (NYSE: TKR; www.timken.com), a
global leader in engineered bearings and industrial motion
products, today reported second-quarter 2023 sales
of $1.27 billion, up 10.3 percent from the same period a
year ago. The increase was driven by the benefit of acquisitions
(net of divestitures) and continued organic growth in both segments
led by Industrial Motion, partially offset by unfavorable foreign
currency translation.
Timken posted net income in the second quarter
of $125.2 million or $1.73 per diluted share, a record for the
second quarter. This compares to net income
of $105.0 million or $1.42 per diluted share for the
same period a year ago.
Excluding special items (detailed in the attached tables),
adjusted net income in the second quarter was $146.1 million or $2.01 per diluted share, a record for the second
quarter. This compares to adjusted net income of $131.8 million or $1.78 per diluted share for the same period in
2022. Adjusted EBITDA in the quarter was $263.0 million
or 20.7 percent of sales, compared
with $231.2 million or 20.0 percent of sales in the
second quarter of last year.
Net cash from operations for the quarter was $144.0 million and free cash flow was
$94.4 million. During the quarter,
Timken repurchased approximately 1.3 million shares of company
stock, or nearly 2 percent of outstanding shares, and increased its
quarterly dividend by 6 percent. In total, the company returned
$124.3 million of cash to
shareholders through dividends and share repurchases during the
second quarter. In April, Timken closed on the previously announced
acquisition of Nadella Group, and in June, the company completed
the sale of a portion of its controlling stake in Timken India
Limited.
"Timken delivered strong results in the second quarter,
achieving double-digit sales and earnings growth and year-over-year
margin expansion," said Richard G.
Kyle, Timken president and chief executive officer. "Our
performance reflects improved operational execution across the
enterprise and the continued positive impact of our strategic
growth and capital allocation initiatives."
Second-Quarter 2023 Segment Results
Engineered Bearings sales
of $857.2 million increased 7.4 percent from the same
period a year ago. The increase was driven by the benefit of
acquisitions and modest organic growth, partially offset by
unfavorable foreign currency translation.
EBITDA for the quarter was $185.5
million or 21.6 percent of sales, compared with EBITDA of
$167.5 million or 21.0 percent of
sales for the same period a year ago. The increase in EBITDA was
driven primarily by the impact of favorable price/mix and lower
material & logistics costs, as well as the benefit of
acquisitions and lower Russia-related charges, partially offset by
higher manufacturing costs and the impact of lower
volume.
Excluding special items, adjusted EBITDA in the quarter
was $189.6 million or 22.1 percent of sales,
compared with $176.6 million or 22.1 percent of
sales in the second quarter of last year.
Industrial Motion sales of $415.1 million
increased 16.8 percent compared with the same period a year ago.
The increase was driven by strong organic growth led by the drive
systems and services platforms, as well as the benefit of
acquisitions (net).
EBITDA for the quarter was $80.9 million
or 19.5 percent of sales, compared with EBITDA
of $65.1 million or 18.3 percent of sales for the
same period a year ago. The increase in EBITDA was driven primarily
by the impact of favorable price/mix and higher volume, partially
offset by higher SG&A costs.
Excluding special items, adjusted EBITDA in the quarter
was $85.9 million or 20.7 percent of sales,
compared with $67.4 million or 19.0 percent of sales
in the second quarter of last year.
2023 Outlook
Timken is updating its 2023 outlook, with full-year earnings per
diluted share now forecasted to be in the range of $5.70 to $6.10 and
adjusted earnings per diluted share in the range of $6.90 to $7.30. The
company is now planning for 2023 revenue to be up approximately 8
percent in total at the midpoint from 2022.
"We have updated our outlook to reflect current order trends and
continued near-term economic uncertainty," said Kyle. "Macro
drivers remain constructive across most of the markets we serve,
and Timken is on track to deliver all-time record results in 2023.
Looking ahead, we will continue to focus on advancing our proven
strategy to drive profitable growth and resilient 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:
|
Thursday, August 3,
2023
|
|
11:00 a.m. Eastern
Time
|
|
Live Dial-In:
833-470-1428
|
|
Or
404-975-4839
|
|
Access Code:
023620
|
|
(Call in 10 minutes
prior to be included.)
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through
|
|
August 17,
2023:
|
|
866-813-9403 or
929-458-6194
|
|
Replay Passcode:
189497
|
|
|
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 $4.5
billion in sales in 2022 and employs more than 19,000 people
globally, operating from 46 countries. Timken has been recognized
among America's Most Responsible Companies by Newsweek,
the World's Most Ethical Companies® by
Ethisphere, America's Most Innovative Companies by
Fortune and America's Best Large Employers, Best
Employers for New Graduates and 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
"2023 Outlook," are forward-looking.
The company cautions that actual results may differ
materially from those projected or implied in forward-looking
statements due to a variety of important factors, including: the
finalization of the company's financial statements for the second
quarter of 2023; 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, sanctions and
hostilities; weakness in global or regional general economic
conditions and capital markets (as a result of financial stress
affecting the banking system or otherwise); 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,
commercial requirements, and company goals associated with climate
change and emissions or other waste reduction initiatives;
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 and to attract, retain and develop management and other key
employees; 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,
2022, 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
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
2022
|
|
2023
|
2022
|
Net sales
|
$
|
1,272.3
|
|
$
|
1,153.7
|
|
|
$
|
2,535.1
|
|
$
|
2,278.3
|
|
Cost of products
sold
|
866.9
|
|
801.3
|
|
|
1,712.9
|
|
1,587.6
|
|
Selling, general &
administrative expenses
|
184.9
|
|
155.9
|
|
|
371.7
|
|
310.0
|
|
Amortization of
intangible assets
|
17.3
|
|
10.6
|
|
|
30.8
|
|
21.5
|
|
Impairment and
restructuring charges
|
2.5
|
|
10.0
|
|
|
31.4
|
|
11.0
|
|
Operating Income
|
200.7
|
|
175.9
|
|
|
388.3
|
|
348.2
|
|
Non-service pension and
other postretirement income (expense)
|
0.1
|
|
(7.9)
|
|
|
0.2
|
|
(6.6)
|
|
Other income (expense),
net
|
2.2
|
|
(1.1)
|
|
|
5.3
|
|
(0.9)
|
|
Interest expense,
net
|
(26.4)
|
|
(17.3)
|
|
|
(49.0)
|
|
(31.0)
|
|
Income Before Income Taxes
|
176.6
|
|
149.6
|
|
|
344.8
|
|
309.7
|
|
Provision for income
taxes
|
47.1
|
|
44.0
|
|
|
89.6
|
|
82.2
|
|
Net Income
|
129.5
|
|
105.6
|
|
|
255.2
|
|
227.5
|
|
Less: Net income
attributable to noncontrolling interest
|
4.3
|
|
0.6
|
|
|
7.7
|
|
4.3
|
|
Net Income Attributable to The Timken
Company
|
$
|
125.2
|
|
$
|
105.0
|
|
|
$
|
247.5
|
|
$
|
223.2
|
|
Net Income per Common Share Attributable to The
Timken Company Common Shareholders
|
|
|
|
|
|
Basic Earnings per
share
|
$
|
1.74
|
|
$
|
1.43
|
|
|
$
|
3.43
|
|
$
|
3.01
|
|
Diluted Earnings per
share
|
$
|
1.73
|
|
$
|
1.42
|
|
|
$
|
3.39
|
|
$
|
2.98
|
|
|
|
|
|
|
|
Average Shares Outstanding
|
71,882,843
|
|
73,660,410
|
|
|
72,162,267
|
|
74,234,300
|
|
Average Shares Outstanding - assuming
dilution
|
72,512,991
|
|
74,182,793
|
|
|
72,907,804
|
|
74,877,248
|
|
BUSINESS SEGMENTS
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
(Dollars in
millions)
|
2023
|
2022
|
2023
|
2022
|
Engineered Bearings
|
|
|
|
|
Net sales
|
$
|
857.2
|
|
$
|
798.3
|
|
$
|
1,757.9
|
|
$
|
1,570.7
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
185.5
|
|
$
|
167.5
|
|
$
|
390.5
|
|
$
|
335.8
|
|
EBITDA Margin
(1)
|
21.6
|
%
|
21.0
|
%
|
22.2
|
%
|
21.4
|
%
|
Industrial Motion
|
|
|
|
|
Net sales
|
$
|
415.1
|
|
$
|
355.4
|
|
$
|
777.2
|
|
$
|
707.6
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
80.9
|
|
$
|
65.1
|
|
$
|
129.1
|
|
$
|
127.5
|
|
EBITDA Margin
(1)
|
19.5
|
%
|
18.3
|
%
|
16.6
|
%
|
18.0
|
%
|
Unallocated corporate
expense
|
$
|
(13.2)
|
|
$
|
(13.4)
|
|
$
|
(30.9)
|
|
$
|
(26.3)
|
|
Corporate pension and
other postretirement benefit related income (expense)
(2)
|
1.0
|
|
(11.6)
|
|
1.9
|
|
(14.2)
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
Net sales
|
$
|
1,272.3
|
|
$
|
1,153.7
|
|
$
|
2,535.1
|
|
$
|
2,278.3
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
254.2
|
|
$
|
207.6
|
|
$
|
490.6
|
|
$
|
422.8
|
|
EBITDA
Margin (1)
|
20.0
|
%
|
18.0
|
%
|
19.4
|
%
|
18.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 income
(expense) primarily represents actuarial gains and (losses) that
resulted from the remeasurement of plan assets and obligations
as a result of changes in assumptions or experience. The Company
recognizes actuarial gains and (losses) 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.
|
CONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
|
(Dollars in
millions)
|
(Unaudited)
|
|
|
|
June 30,
2023
|
|
December 31,
2022
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
344.3
|
|
|
$
|
331.6
|
|
Restricted
cash
|
8.0
|
|
|
9.1
|
|
Accounts receivable,
net
|
811.9
|
|
|
699.6
|
|
Unbilled
receivables
|
121.8
|
|
|
103.9
|
|
Inventories,
net
|
1,251.7
|
|
|
1,191.3
|
|
Other current
assets
|
173.1
|
|
|
168.5
|
|
Total Current
Assets
|
2,710.8
|
|
|
2,504.0
|
|
Property, plant and
equipment, net
|
1,255.5
|
|
|
1,207.4
|
|
Operating lease
assets
|
111.9
|
|
|
101.4
|
|
Goodwill and other
intangible assets
|
2,074.5
|
|
|
1,863.6
|
|
Other assets
|
98.6
|
|
|
96.0
|
|
Total Assets
|
$
|
6,251.3
|
|
|
$
|
5,772.4
|
|
LIABILITIES
|
|
|
|
Accounts
payable
|
$
|
392.2
|
|
|
$
|
403.9
|
|
Short-term debt,
including current portion of long-term debt
|
53.2
|
|
|
49.0
|
|
Income taxes
|
77.8
|
|
|
51.3
|
|
Accrued
expenses
|
499.2
|
|
|
508.2
|
|
Total Current
Liabilities
|
1,022.4
|
|
|
1,012.4
|
|
Long-term
debt
|
2,046.5
|
|
|
1,914.2
|
|
Accrued pension
benefits
|
161.3
|
|
|
160.3
|
|
Accrued postretirement
benefits
|
31.5
|
|
|
31.4
|
|
Long-term operating
lease liabilities
|
70.3
|
|
|
65.2
|
|
Other non-current
liabilities
|
269.3
|
|
|
236.0
|
|
Total
Liabilities
|
3,601.3
|
|
|
3,419.5
|
|
EQUITY
|
|
|
|
The Timken Company
shareholders' equity
|
2,531.3
|
|
|
2,268.3
|
|
Noncontrolling
interest
|
118.7
|
|
|
84.6
|
|
Total Equity
|
2,650.0
|
|
|
2,352.9
|
|
Total Liabilities and
Equity
|
$
|
6,251.3
|
|
|
$
|
5,772.4
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(Dollars in
millions)
|
2023
|
2022
|
|
2023
|
2022
|
Cash Provided by (Used
in)
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
Net Income
|
$
|
129.5
|
|
$
|
105.6
|
|
|
$
|
255.2
|
|
$
|
227.5
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
51.2
|
|
40.7
|
|
|
96.8
|
|
82.1
|
|
Impairment
charges
|
—
|
|
8.8
|
|
|
28.3
|
|
8.8
|
|
Loss (gain) on
divestitures
|
0.4
|
|
—
|
|
|
(3.6)
|
|
—
|
|
Stock-based
compensation expense
|
6.1
|
|
8.5
|
|
|
17.1
|
|
15.6
|
|
Pension and other
postretirement expense
|
0.7
|
|
10.2
|
|
|
1.1
|
|
11.2
|
|
Pension and other
postretirement benefit contributions and payments
|
(2.4)
|
|
(2.9)
|
|
|
(7.2)
|
|
(8.1)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
(37.1)
|
|
(31.1)
|
|
|
(87.4)
|
|
(149.3)
|
|
Unbilled
receivables
|
(6.6)
|
|
(19.0)
|
|
|
(17.7)
|
|
(2.9)
|
|
Inventories
|
9.2
|
|
(55.9)
|
|
|
15.3
|
|
(126.1)
|
|
Accounts
payable
|
(5.5)
|
|
(13.8)
|
|
|
(14.9)
|
|
(6.1)
|
|
Accrued
expenses
|
15.7
|
|
36.1
|
|
|
(29.1)
|
|
16.6
|
|
Income
taxes
|
(17.3)
|
|
5.7
|
|
|
(29.5)
|
|
13.8
|
|
Other,
net
|
0.1
|
|
(14.6)
|
|
|
(1.8)
|
|
(6.0)
|
|
Net Cash Provided by
Operating Activities
|
$
|
144.0
|
|
$
|
78.3
|
|
|
$
|
222.6
|
|
$
|
77.1
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
Capital
expenditures
|
$
|
(49.6)
|
|
$
|
(40.9)
|
|
|
$
|
(91.3)
|
|
$
|
(75.2)
|
|
Acquisitions, net of
cash received
|
(295.4)
|
|
(152.3)
|
|
|
(324.6)
|
|
(152.3)
|
|
Investments in
short-term marketable securities, net
|
(1.6)
|
|
24.2
|
|
|
(0.8)
|
|
23.4
|
|
Other, net
|
(0.9)
|
|
5.3
|
|
|
4.7
|
|
5.4
|
|
Net Cash Used in
Investing Activities
|
$
|
(347.5)
|
|
$
|
(163.7)
|
|
|
$
|
(412.0)
|
|
$
|
(198.7)
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
Cash dividends paid to
shareholders
|
$
|
(23.8)
|
|
$
|
(22.9)
|
|
|
$
|
(47.4)
|
|
$
|
(46.4)
|
|
Purchase of treasury
shares
|
(100.5)
|
|
(44.3)
|
|
|
(154.5)
|
|
(144.3)
|
|
Proceeds from exercise
of stock options
|
4.5
|
|
(0.5)
|
|
|
17.2
|
|
1.6
|
|
Payments related to tax
withholding for stock-based compensation
|
(1.3)
|
|
0.2
|
|
|
(15.1)
|
|
(8.1)
|
|
Net proceeds (payments)
from credit facilities
|
64.7
|
|
(0.6)
|
|
|
126.6
|
|
30.5
|
|
Net (payments) proceeds
on long-term debt
|
(1.9)
|
|
41.6
|
|
|
(2.6)
|
|
341.1
|
|
Proceeds on sale of
shares in Timken India Limited
|
284.8
|
|
—
|
|
|
284.8
|
|
—
|
|
Other, net
|
—
|
|
(0.8)
|
|
|
—
|
|
3.0
|
|
Net Cash Provided by
(Used in) Financing Activities
|
$
|
226.5
|
|
$
|
(27.3)
|
|
|
$
|
209.0
|
|
$
|
177.4
|
|
Effect of exchange rate
changes on cash
|
(9.8)
|
|
(6.5)
|
|
|
(8.0)
|
|
(7.7)
|
|
Increase Increase in
Cash, Cash Equivalents and Restricted Cash
|
$
|
13.2
|
|
$
|
(119.2)
|
|
|
$
|
11.6
|
|
$
|
48.1
|
|
Cash, Cash Equivalents
and Restricted Cash at Beginning of Period
|
339.1
|
|
425.2
|
|
|
340.7
|
|
257.9
|
|
Cash, Cash Equivalents
and Restricted Cash at End of Period
|
$
|
352.3
|
|
$
|
306.0
|
|
|
$
|
352.3
|
|
$
|
306.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliations of Adjusted Net Income to GAAP Net
Income and Adjusted Earnings Per Share to GAAP Earnings Per
Share:
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following
reconciliation is provided as additional relevant information about
the Company's performance deemed useful to investors. Management
believes that the non-GAAP measures of
adjusted net income and adjusted diluted earnings per share are
important financial measures used in the management of the
business, including decisions concerning the allocation of
resources
and assessment of performance. Management believes that reporting
adjusted net income and adjusted diluted earnings per share is
useful to investors as these measures are representative of
the Company's core operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, except share
data)
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
EPS
|
2022
|
|
EPS
|
|
2023
|
|
EPS
|
|
2022
|
|
EPS
|
Net Income Attributable
to The Timken Company
|
$
|
125.2
|
|
|
$
|
1.73
|
|
$
|
105.0
|
|
|
$
|
1.42
|
|
|
$
|
247.5
|
|
|
$
|
3.39
|
|
|
$
|
223.2
|
|
|
$
|
2.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition intangible
amortization
|
$
|
17.3
|
|
|
|
$
|
10.6
|
|
|
|
|
$
|
30.8
|
|
|
|
|
$
|
21.5
|
|
|
|
Impairment,
restructuring and reorganization charges (2)
|
6.1
|
|
|
|
2.1
|
|
|
|
|
36.1
|
|
|
|
|
3.7
|
|
|
|
Corporate
pension and other postretirement benefit related (income) expense
(3)
|
(1.0)
|
|
|
|
11.6
|
|
|
|
|
(1.9)
|
|
|
|
|
14.2
|
|
|
|
Russia-related
charges (4)
|
(0.1)
|
|
|
|
8.4
|
|
|
|
|
0.2
|
|
|
|
|
13.0
|
|
|
|
Acquisition-related charges (5)
|
3.8
|
|
|
|
1.6
|
|
|
|
|
8.5
|
|
|
|
|
2.7
|
|
|
|
Loss (gain) on
divestitures and sale of certain assets (6)
|
0.4
|
|
|
|
(0.1)
|
|
|
|
|
(4.4)
|
|
|
|
|
(0.1)
|
|
|
|
Noncontrolling interest
of above adjustments
|
—
|
|
|
|
(4.5)
|
|
|
|
|
(0.2)
|
|
|
|
|
(5.8)
|
|
|
|
Provision for
income taxes (7)
|
(5.6)
|
|
|
|
(2.9)
|
|
|
|
|
(17.0)
|
|
|
|
|
(10.8)
|
|
|
|
Total
Adjustments:
|
20.9
|
|
|
0.28
|
|
26.8
|
|
|
0.36
|
|
|
52.1
|
|
|
0.72
|
|
|
38.4
|
|
|
0.51
|
|
Adjusted Net Income
Attributable to The Timken Company
|
$
|
146.1
|
|
|
$
|
2.01
|
|
$
|
131.8
|
|
|
$
|
1.78
|
|
|
$
|
299.6
|
|
|
$
|
4.11
|
|
|
$
|
261.6
|
|
|
$
|
3.49
|
|
|
(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; and (v) related depreciation and
amortization. Impairment, restructuring and reorganization charges
for 2023 included $28.3 million related to the impairment of
goodwill. 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 (income)
expense represents actuarial (gains) and losses that resulted from
the remeasurement of plan assets and obligations as a result of
changes in
assumptions or experience. The Company recognizes actuarial (gains)
and losses 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 trade receivables, inventory and other assets to
reflect the current impact of Russia's invasion of Ukraine (and
associated sanctions) on
the Company's operations. 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 deal-related expenses
associated with completed transactions and any resulting inventory
step-up impact.
|
(6)
Represents the net loss (gain) resulting from divestitures and the
sale of certain assets.
|
(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 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
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
Percentage to
Net Sales
|
2022
|
Percentage to
Net Sales
|
|
2023
|
Percentage to
Net Sales
|
2022
|
Percentage to
Net Sales
|
Net Income
|
$
|
129.5
|
|
10.2
|
%
|
$
|
105.6
|
|
9.2
|
%
|
|
$
|
255.2
|
|
10.1
|
%
|
$
|
227.5
|
|
10.0
|
%
|
Provision for income
taxes
|
47.1
|
|
|
44.0
|
|
|
|
89.6
|
|
|
82.2
|
|
|
Interest
expense
|
28.3
|
|
|
18.3
|
|
|
|
52.4
|
|
|
32.6
|
|
|
Interest
income
|
(1.9)
|
|
|
(1.0)
|
|
|
|
(3.4)
|
|
|
(1.6)
|
|
|
Depreciation and
amortization
|
51.2
|
|
|
40.7
|
|
|
|
96.8
|
|
|
82.1
|
|
|
Consolidated
EBITDA
|
$
|
254.2
|
|
20.0
|
%
|
$
|
207.6
|
|
18.0
|
%
|
|
$
|
490.6
|
|
19.4
|
%
|
$
|
422.8
|
|
18.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Impairment,
restructuring and reorganization charges (1)
|
$
|
5.7
|
|
|
$
|
2.1
|
|
|
|
$
|
35.5
|
|
|
$
|
3.7
|
|
|
Corporate pension and
other postretirement benefit related
(income) expense
(2)
|
(1.0)
|
|
|
11.6
|
|
|
|
(1.9)
|
|
|
14.2
|
|
|
Russia-related
charges(3)
|
(0.1)
|
|
|
8.4
|
|
|
|
0.2
|
|
|
13.0
|
|
|
Acquisition-related
charges (4)
|
3.8
|
|
|
1.6
|
|
|
|
8.5
|
|
|
2.7
|
|
|
Loss (gain) on
divestitures and sale of certain assets (5)
|
0.4
|
|
|
(0.1)
|
|
|
|
(4.4)
|
|
|
(0.1)
|
|
|
Total
Adjustments
|
8.8
|
|
0.7
|
%
|
23.6
|
|
2.0
|
%
|
|
37.9
|
|
1.4
|
%
|
33.5
|
|
1.4
|
%
|
Adjusted
EBITDA
|
$
|
263.0
|
|
20.7
|
%
|
$
|
231.2
|
|
20.0
|
%
|
|
$
|
528.5
|
|
20.8
|
%
|
$
|
456.3
|
|
20.0
|
%
|
|
(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. Impairment, restructuring and
reorganization charges for 2023 included $28.3 million related to
the impairment of goodwill. 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 (income)
expense represents actuarial (gains) and losses that resulted from
the remeasurement of plan assets and obligations as a result of
changes in
assumptions or experience. The Company recognizes actuarial (gains)
and losses 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 trade receivables, inventory and other assets to
reflect the current impact of Russia's invasion of Ukraine (and
associated sanctions)
on the Company's operations. 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 deal-related expenses
associated with completed transactions and any resulting inventory
step-up impact.
|
(5)
Represents the net loss (gain) resulting from divestitures and the
sale of certain assets.
|
|
Reconciliation of segment EBITDA, after adjustments,
to segment EBITDA, and segment EBITDA, after adjustments, as a
percentage of sales to segment
EBITDA, as a percentage of sales:
(Unaudited)
|
The following
reconciliation is provided as additional relevant information about
the Company's Engineered Bearings and Industrial Motion 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.
|
|
|
Engineered Bearings
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(Dollars in millions)
|
2023
|
Percentage
to Net
Sales
|
|
2022
|
Percentage to Net
Sales
|
|
2023
|
Percentage to Net Sales
|
|
2022
|
Percentage to Net
Sales
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
|
$
|
185.5
|
|
21.6
|
%
|
|
$
|
167.5
|
|
21.0
|
%
|
|
$
|
390.5
|
|
22.2
|
%
|
|
$
|
335.8
|
|
21.4
|
%
|
Impairment,
restructuring and reorganization charges (1)
|
4.1
|
|
|
|
0.6
|
|
|
|
5.2
|
|
|
|
1.6
|
|
|
Russia-related
charges (2)
|
(0.1)
|
|
|
|
8.4
|
|
|
|
0.2
|
|
|
|
13.0
|
|
|
Acquisition-related charges (3)
|
0.1
|
|
|
|
—
|
|
|
|
2.3
|
|
|
|
—
|
|
|
Loss (gain) on
divestitures and sale of certain assets (4)
|
—
|
|
|
|
0.1
|
|
|
|
(4.8)
|
|
|
|
0.1
|
|
|
Adjusted
EBITDA
|
$
|
189.6
|
|
22.1
|
%
|
|
$
|
176.6
|
|
22.1
|
%
|
|
$
|
393.4
|
|
22.4
|
%
|
|
$
|
350.5
|
|
22.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Motion
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(Dollars in millions)
|
2023
|
Percentage
to Net
Sales
|
|
2022
|
Percentage to Net
Sales
|
|
2023
|
Percentage to Net Sales
|
|
2022
|
Percentage to Net
Sales
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
|
$
|
80.9
|
|
19.5
|
%
|
|
$
|
65.1
|
|
18.3
|
%
|
|
$
|
129.1
|
|
16.6
|
%
|
|
$
|
127.5
|
|
18.0
|
%
|
Impairment,
restructuring and reorganization charges (1)
|
1.5
|
|
|
|
1.5
|
|
|
|
30.2
|
|
|
|
2.1
|
|
|
Acquisition-related charges (3)
|
3.1
|
|
|
|
1.0
|
|
|
|
3.1
|
|
|
|
1.4
|
|
|
Loss (gain) on
divestitures and sale of certain assets (4)
|
0.4
|
|
|
|
(0.2)
|
|
|
|
0.4
|
|
|
|
(0.2)
|
|
|
Adjusted
EBITDA
|
$
|
85.9
|
|
20.7
|
%
|
|
$
|
67.4
|
|
19.0
|
%
|
|
$
|
162.8
|
|
20.9
|
%
|
|
$
|
130.8
|
|
18.5
|
%
|
(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; (iii)
severance related to cost reduction initiatives;
and (iv) impairment of assets. Impairment, restructuring and
reorganization charges for 2023 included $28.3 million related to
the impairment of goodwill. 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 trade receivables, inventory and other assets to
reflect the current impact of Russia's invasion of Ukraine (and
associated sanctions) on
the Company's operations. 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 the inventory step-up impact
of the completed acquisitions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)
Represents the net loss (gain) resulting from divestitures and the
sale of certain assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
prior 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)
|
|
|
|
|
|
|
|
June 30,
2023
|
December 31,
2022
|
Short-term debt,
including current portion of long-term debt
|
|
|
$
|
53.2
|
|
$
|
49.0
|
|
Long-term
debt
|
|
|
2,046.5
|
|
1,914.2
|
|
Total
Debt
|
|
|
$
|
2,099.7
|
|
$
|
1,963.2
|
|
Less: Cash and cash
equivalents
|
|
|
(344.3)
|
|
(331.6)
|
|
Net Debt
|
|
|
$
|
1,755.4
|
|
$
|
1,631.6
|
|
|
|
|
|
|
Total Equity
|
|
|
$
|
2,650.0
|
|
$
|
2,352.9
|
|
Ratio of Net Debt to
Capital
|
|
|
39.8
|
%
|
40.9
|
%
|
|
|
|
|
|
Adjusted EBITDA for the
Twelve Months Ended
|
|
|
$
|
928.1
|
|
$
|
855.9
|
|
Ratio of Net Debt to
Adjusted EBITDA
|
|
|
1.9
|
|
1.9
|
|
Reconciliation of Free Cash Flow to GAAP Net Cash
Provided by Operating Activities:
|
(Unaudited)
|
|
|
|
|
Management believes
that free cash flow is a non-GAAP measure that is useful to
investors because it is a meaningful indicator of cash generated
from operating activities available for the
execution of its business strategy.
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
2023
|
2022
|
2023
|
2022
|
Net cash provided by
operating activities
|
$
|
144.0
|
|
$
|
78.3
|
|
$
|
222.6
|
|
$
|
77.1
|
|
Less: capital
expenditures
|
(49.6)
|
|
(40.9)
|
|
(91.3)
|
|
(75.2)
|
|
Free cash
flow
|
$
|
94.4
|
|
$
|
37.4
|
|
$
|
131.3
|
|
$
|
1.9
|
|
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
June 30, 2023
|
Twelve Months Ended
December 31, 2022
|
Net Income
|
$
|
444.7
|
|
$
|
417.0
|
|
Provision for income
taxes
|
141.3
|
|
133.9
|
|
Interest
expense
|
94.4
|
|
74.6
|
|
Interest
income
|
(5.6)
|
|
(3.8)
|
|
Depreciation and
amortization
|
178.7
|
|
164.0
|
|
Consolidated
EBITDA
|
$
|
853.5
|
|
$
|
785.7
|
|
Adjustments:
|
|
|
Impairment, restructuring and reorganization charges
(1)
|
$
|
71.3
|
|
$
|
39.5
|
|
Corporate
pension and other postretirement benefit related (income) expense
(2)
|
(13.2)
|
|
2.9
|
|
Acquisition-related charges (3)
|
20.6
|
|
14.8
|
|
Gain on
divestitures and sale of certain assets (4)
|
(7.2)
|
|
(2.9)
|
|
Russia-related charges (5)
|
2.8
|
|
15.6
|
|
Tax indemnification and
related items
|
0.3
|
|
0.3
|
|
Total
Adjustments
|
74.6
|
|
70.2
|
|
Adjusted
EBITDA
|
$
|
928.1
|
|
$
|
855.9
|
|
|
|
|
|
|
|
|
|
|
(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. Impairment, restructuring and
reorganization charges for the twelve months ended December 31,
2022 and June 30, 2023 included $29.3 million related to the sale
of Timken Aerospace Drives
Systems, LLC ("ADS"). In addition, impairment, restructuring and
reorganization charges for the twelve months ended June 30, 2023
included $28.3 million related to the impairment of goodwill. 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 (income)
expense represents actuarial (gains) and losses that resulted from
the remeasurement of plan assets and obligations as a result of
changes in
assumptions or experience. The Company recognizes actuarial (gains)
and losses in connection with the annual remeasurement in the
fourth quarter, or if specific events trigger a
remeasurement.
|
(3)
Acquisition-related charges represent deal-related expenses
associated with completed transactions and any resulting inventory
step-up impact.
|
(4)
Represents the net gain resulting from divestitures and the sale of
certain assets.
|
(5)
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.
|
Reconciliation of Adjusted Earnings per Share to GAAP
Earnings per Share for Full Year 2023
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
|
$
|
5.70
|
|
|
$
|
6.10
|
|
|
|
|
|
Forecasted
Adjustments:
|
|
|
|
Impairment,
restructuring and other special items, net
(1)
|
0.55
|
|
|
0.55
|
|
Acquisition-related intangible amortization expense, net
|
0.65
|
|
|
0.65
|
|
Forecasted full year
adjusted diluted earnings per share
|
$
|
6.90
|
|
|
$
|
7.30
|
|
|
(1)
Impairment, 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