NORTH CANTON, Ohio,
July 30, 2015 /PRNewswire/ -- The
Timken Company (NYSE: TKR; www.timken.com), a global leader in
bearings, today reported sales of $728
million for the second quarter of 2015, down 8 percent from
a year ago. Excluding currency impact of 5 percent, sales were
down approximately 3 percent, primarily due to market-related
declines in Mobile Industries that were partially offset by organic
growth in Process Industries.
Net income from continuing operations was $36.7 million or $0.43 per diluted share for the quarter, versus
$56.5 million or $0.61 per diluted share a year ago.
Adjusted net income from continuing operations (reference Table)
was $49.1 million or
$0.57 per diluted share. This
compares with $59.4 million or
$0.65 per diluted share for the same
period in 2014. The change in adjusted net income reflects the
impact of negative currency and unfavorable volume. This was
partially offset by lower material and logistics costs; reduced
selling, general and administrative (SG&A) expenses; and a more
favorable tax rate. Earnings per share benefited from the company's
share buyback program, with 2 million shares repurchased in
the second quarter.
Free cash flow (net cash from operations minus capital
expenditures) for the quarter was $64.7 million, or 132 percent of adjusted
net income. The strong performance was driven in part by lower
working capital.
"The quarter came in near our expectations with demand up
slightly compared with the first quarter," Timken President and CEO
Richard G. Kyle reported. "Given the volume levels and
the impact of currency, we managed costs and cash flow well in the
quarter and continued to return capital to shareholders by raising
our quarterly dividend and executing our share buyback plan.
"During the quarter, demand remained weak in many of our
markets. As a result, we are reducing our outlook for the balance
of the year, now expecting our top line to be slightly off from the
first half," Kyle said. "We are working to accelerate the impact of
our cost-reduction initiatives, and expect to generate second-half
earnings comparable to the first half. We're committed to drive
shareholder value and remain focused on executing our strategy and
growing our business."
|
Adjusted Net
Income and Diluted Earnings Per Share (EPS) from Continuing
Operations
|
|
2015 –
2Q
|
|
2014 –
2Q
|
|
($ in
Mils.)
|
EPS
|
|
($ in
Mils.)
|
EPS
|
|
Net Income from
Continuing Operations
|
$ 36.7
|
$0.43
|
|
$ 56.5
|
$ 0.61
|
|
Adjustments:
|
|
|
|
|
|
|
Pension settlement
charges
|
$ 4.4
|
$0.05
|
|
$ --
|
$ --
|
|
Impairment and
restructuring charges
|
1.7
|
0.02
|
|
6.2
|
0.07
|
|
Provision (Benefit)
for income taxes
|
6.3
|
0.07
|
|
(3.3)
|
(0.03)
|
|
Total
adjustments
|
12.4
|
0.14
|
|
2.9
|
0.04
|
|
Net Income, after
adjustments
|
$ 49.1
|
$ 0.57
|
|
$ 59.4
|
$ 0.65
|
In the quarter, the company:
- Launched the Timken® UC-series ball bearing housed
unit product line, an extension of the company's housed unit
bearing portfolio;
- Started shipping products to support new business platforms in
Mobile Industries;
- Increased the company's quarterly dividend 4 percent to
$0.26 per share;
- Returned $102.5 million in
capital to shareholders through the repurchase of 2 million shares
and payment of dividends in the quarter; and
- Entered into a new five-year $500
million senior credit facility.
Second-Quarter Segment Results
Mobile Industries reported second-quarter sales of
$388.6 million, down approximately
13 percent from the same period a year ago, with about
5 percent attributable to currency. The remainder was largely
due to declines in aerospace, agriculture and automotive, partially
offset by continued growth in the rail sector.
Earnings before interest and taxes (EBIT) for the second quarter
were $36 million or 9.3 percent of sales, compared with
prior-year EBIT of $42.3 million or
9.5 percent of sales. Adjusted EBIT was $37
million or 9.5 percent of sales, compared with
$46.7 million or
10.4 percent of sales in the second quarter last year. The
decline in earnings was driven by lower volume and currency,
partially offset by lower manufacturing, material and logistics
costs, and SG&A expenses.
Process Industries sales of $339.4
million for the second quarter were down 1 percent from
the prior year. Excluding currency impact of about 5 percent, sales
were up almost 4 percent, driven by organic growth in the wind
energy and military marine sectors, higher industrial services
revenue and the benefit of acquisitions. This growth was partially
offset by lower industrial distribution demand driven by weakness
in metals, mining, and oil and gas.
EBIT for the quarter was $56.7 million or 16.7 percent of sales,
compared with prior-year EBIT of $64.8 million or 18.9 percent of sales.
Adjusted EBIT was $57.5 million
or 16.9 percent of sales, compared with $66.6 million or 19.5 percent of sales
in the second quarter last year. The decrease in earnings was
driven by unfavorable mix, manufacturing utilization and currency,
which more than offset the benefit of higher sales volume and lower
logistics costs.
2015 Outlook
For 2015, the company expects year-over-year revenue to be down
approximately 7 to 8 percent, which includes 5 percent from
currency declines. The segment outlook for full-year 2015 has also
been adjusted with:
- Mobile Industries' sales expected to be down 8 to 9 percent.
Without the impact of currency, sales are expected to be down 3 to
4 percent reflecting lower shipments in aerospace and agriculture,
partially offset by organic growth in rail.
- Process Industries' sales expected to be down 6 to 7 percent.
Excluding currency, sales are expected to be down 1 to 2 percent,
as growth in wind energy and military marine, and the benefit of
acquisitions are more than offset by weaker demand in industrial
aftermarket and heavy industries.
Timken expects 2015 earnings per diluted share to range from
$0.30 to $0.40, which includes
$1.80 of non-cash pension settlement
charges and $0.20 per share of
impairment and other restructuring charges, partially offset by
$0.20 of income associated with
discrete tax accrual adjustments.
Excluding these items, the company expects 2015 adjusted
earnings per diluted share to range from $2.10 to $2.20.
Conference Call Information
Timken will host a
conference call today at 11:00 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, July 30,
2015
|
|
11:00 a.m. Eastern
Time
|
|
Live Dial-In:
800-289-0498 or 913-312-0839
|
|
(Call in 10 minutes
prior to be included.)
|
|
Conference ID: Timken
Earnings Call
|
|
Live
Webcast: www.timken.com/investors
|
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through August 13, 2015:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
2686912
|
About The Timken Company
The Timken Company
(NYSE: TKR; www.timken.com) engineers, manufactures and markets
bearings, transmissions, gearboxes, chain and related products, and
offers a spectrum of powertrain rebuild and repair services. The
leading authority on tapered roller bearings, Timken today applies
its deep knowledge of metallurgy, tribology and mechanical power
transmission across a variety of bearings and related systems to
improve reliability and efficiency of machinery and equipment all
around the world. The company's growing product and services
portfolio features many strong industrial brands including Timken®,
Fafnir®, Philadelphia Gear®, Drives® and Interlube™. Known for its
quality products and collaborative technical sales model, Timken
posted $3.1 billion in sales in 2014.
With 14,000 employees operating from 28 countries, Timken makes the
world more productive and keeps industry in motion.
Certain statements in this release (including statements
regarding the company's forecasts, estimates and expectations) that
are not historical in nature are "forward-looking" statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. In particular, the statements related to expectations
regarding the company's future financial performance, including
information under the heading "Outlook," are forward-looking. The
company cautions that actual results may differ materially from
those projected or implied in forward-looking statements due to a
variety of important factors, including: the finalization of the
company's financial statements for the second quarter of 2015; the
company's ability to respond to the changes in its end markets that
could affect demand for the company's products; unanticipated
changes in business relationships with customers or their purchases
from the company; changes in the financial health of the company's
customers, which may have an impact on the company's revenues,
earnings and impairment charges; fluctuations in raw material and
energy costs; the impact of the company's last-in, first-out
accounting; weakness in global or regional economic conditions and
financial markets; fluctuations in currency valuations;
changes in the expected costs associated with product warranty
claims; the ability to achieve satisfactory operating results in
the integration of acquired companies; the impact on operations of
general economic conditions; fluctuations in customer demand; the
impact on the company's pension obligations due to changes in
interest rates, investment performance and other tactics designed
to reduce risk; and the company's ability to complete and achieve
the benefits of announced plans, programs, initiatives, 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, 2014, 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 Contact:
Gloria Irwin
|
Investor
Contact: Shelly Chadwick
|
|
Communications
Manager
|
Vice President –
Treasury & Investor Relations
|
|
Telephone: (234)
262-3514
|
Telephone: (234)
262-3223
|
|
mediarelations@timken.com
|
shelly.chadwick@timken.com
|
|
The Timken
Company
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
(Dollars in millions,
except per share data)
|
2015
|
2014
|
|
2015
|
2014
|
|
Net sales
|
$
728.0
|
$
789.2
|
|
$
1,450.5
|
$ 1,526.0
|
|
Cost of products
sold
|
522.9
|
555.6
|
|
1,042.9
|
1,074.3
|
|
Gross
Profit
|
205.1
|
233.6
|
|
407.6
|
451.7
|
|
Selling, general
& administrative expenses (SG&A)
|
126.1
|
136.8
|
|
254.6
|
278.6
|
|
Impairment and
restructuring charges
|
1.4
|
5.4
|
|
7.6
|
8.6
|
|
Pension settlement
charges
|
4.4
|
-
|
|
219.6
|
0.7
|
|
Operating Income
(Loss)
|
73.2
|
91.4
|
|
(74.2)
|
163.8
|
|
Other income
(expense), net
|
1.1
|
(1.5)
|
|
(0.3)
|
18.9
|
|
Earnings (Loss)
Before Interest and Taxes (EBIT) (1)
|
74.3
|
89.9
|
|
(74.5)
|
182.7
|
|
Interest expense,
net
|
(7.7)
|
(4.7)
|
|
(15.0)
|
(9.2)
|
|
Income (Loss) From
Continuing Operations Before Income Taxes
|
66.6
|
85.2
|
|
(89.5)
|
173.5
|
|
Provision for income
taxes
|
28.9
|
27.6
|
|
7.6
|
55.6
|
|
Income (Loss) From
Continuing Operations
|
37.7
|
57.6
|
|
(97.1)
|
117.9
|
|
Income from
Discontinued Operations, net of income
taxes(2)
|
-
|
6.2
|
|
-
|
29.7
|
|
Net Income
(Loss)
|
37.7
|
63.8
|
|
(97.1)
|
147.6
|
|
Less: Net Income
Attributable to Noncontrolling Interest
|
1.0
|
1.1
|
|
1.4
|
1.4
|
|
Net Income (Loss)
Attributable to The Timken Company
|
$
36.7
|
$
62.7
|
|
$
(98.5)
|
$ 146.2
|
|
|
|
|
|
|
|
Net Income (Loss)
per Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
|
|
|
|
Basic Earnings
(Loss) per share - Continuing Operations
|
$
0.43
|
$
0.62
|
|
$
(1.14)
|
$
1.27
|
|
Basic Earnings per
share - Discontinued Operations
|
-
|
0.07
|
|
-
|
0.33
|
|
Basic Earnings
(Loss) per share
|
$
0.43
|
$
0.69
|
|
$
(1.14)
|
$
1.60
|
|
|
|
|
|
|
|
Diluted Earnings
(Loss) per share - Continuing Operations
|
$
0.43
|
$
0.61
|
|
$
(1.14)
|
$
1.26
|
|
Diluted Earnings
per share - Discontinued Operations
|
-
|
0.07
|
|
-
|
0.32
|
|
Diluted Earnings
(Loss) per share
|
$
0.43
|
$
0.68
|
|
$
(1.14)
|
$
1.58
|
|
|
|
|
|
|
|
Average Shares
Outstanding
|
85,326,526
|
90,859,587
|
|
86,514,517
|
91,558,614
|
|
Average Shares
Outstanding - assuming dilution
|
86,156,775
|
91,726,593
|
|
86,514,517
|
92,395,891
|
|
|
|
|
|
|
|
(1) EBIT
is defined as operating income plus other income (expense).
EBIT is an important financial measure used in the management of
the business, including decisions concerning the allocation of
resources and assessment of performance. Management believes
that reporting EBIT is useful to investors as this measure is
representative of the Company's performance.
|
|
(2)
Discontinued Operations related to the spinoff of the steel
business on June 30, 2014 and includes both operating results and
separation costs.
|
|
BUSINESS
SEGMENTS
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
June 30,
|
Six Months
Ended
June 30,
|
|
(Dollars in
millions)
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
|
Net sales to external
customers
|
$
388.6
|
$
447.2
|
$
781.6
|
$
868.9
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
36.0
|
$
42.3
|
$
71.4
|
$
106.6
|
|
EBIT Margin
(1)
|
9.3 %
|
9.5 %
|
9.1 %
|
12.3 %
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
Net sales to external
customers
|
$
339.4
|
$
342.0
|
$
668.9
|
$
657.1
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
56.7
|
$
64.8
|
$
101.9
|
$
113.0
|
|
EBIT Margin
(1)
|
16.7 %
|
18.9 %
|
15.2 %
|
17.2 %
|
|
|
|
|
|
|
Unallocated corporate
expense
|
$
(14.0)
|
$
(17.2)
|
$
(28.2)
|
$
(36.9)
|
|
Unallocated pension
settlement charges (2)
|
$
(4.4)
|
$
—
|
$
(219.6)
|
$
—
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
Net sales to external
customers
|
$
728.0
|
$
789.2
|
$
1,450.5
|
$
1,526.0
|
|
Earnings (Loss)
before interest and taxes (EBIT)
(1)
|
$
74.3
|
$
89.9
|
$
(74.5)
|
$
182.7
|
|
EBIT Margin
(1)
|
10.2 %
|
11.4 %
|
(5.1)%
|
12.0 %
|
|
|
|
|
|
|
(1) EBIT
is defined as operating income plus other income (expense).
EBIT Margin is EBIT as a percentage of net sales. EBIT and
EBIT Margin are important financial measures used in the management
of the business, including decisions concerning the allocation of
resources and assessment of performance. Management believes
that reporting EBIT and EBIT Margin is useful to investors as these
measures are representative of the Company's
performance.
|
|
|
|
|
(2)
Unallocated pension settlement charges primarily related to the
purchase of a group annuity contract from Prudential Insurance
Company of America (Prudential) on January 23, 2015, that requires
Prudential to pay and administer future pension benefits for
approximately 5,000 U.S. Timken retirees, as well as lump sum
distributions to new retirees during the first six months of
2015.
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
(Dollars in
millions)
|
(Unaudited)
June 30,
2015
|
December 31,
2014
|
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
236.8
|
$
278.8
|
|
Restricted
cash
|
19.1
|
15.3
|
|
Accounts
receivable
|
487.5
|
475.7
|
|
Inventories,
net
|
574.2
|
585.5
|
|
Other current
assets
|
118.4
|
126.6
|
|
Total Current
Assets
|
1,436.0
|
1,481.9
|
|
Property, Plant and
Equipment, net
|
759.1
|
780.5
|
|
Goodwill
|
257.7
|
259.5
|
|
Non-current pension
assets
|
112.2
|
176.2
|
|
Other
assets
|
322.6
|
303.3
|
|
Total
Assets
|
$
2,887.6
|
$
3,001.4
|
|
|
|
|
LIABILITIES
|
|
|
|
Accounts
payable
|
$
170.1
|
$
143.9
|
|
Short-term debt,
including current portion of long-term debt
|
82.2
|
8.0
|
|
Income
taxes
|
91.4
|
80.2
|
|
Accrued
expenses
|
250.3
|
301.7
|
|
Total Current
Liabilities
|
594.0
|
533.8
|
|
|
|
|
Long-term
debt
|
555.6
|
522.1
|
|
Accrued pension
cost
|
157.6
|
165.9
|
|
Accrued
postretirement benefits cost
|
133.7
|
141.8
|
|
Other non-current
liabilities
|
75.6
|
48.7
|
|
Total
Liabilities
|
1,516.5
|
1,412.3
|
|
|
|
|
EQUITY
|
|
|
|
The Timken Company
shareholders' equity
|
1,353.7
|
1,576.2
|
|
Noncontrolling
Interest
|
17.4
|
12.9
|
|
Total
Equity
|
1,371.1
|
1,589.1
|
|
Total Liabilities and
Equity
|
$
2,887.6
|
$
3,001.4
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
(Dollars in
millions)
|
2015
|
2014
|
2015
|
2014
|
|
Cash Provided
(Used)
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
Net income (loss)
attributable to The Timken Company
|
$
36.7
|
$
62.7
|
$
(98.5)
|
$ 146.2
|
|
Net income from
discontinued operations
|
-
|
(6.2)
|
-
|
(29.7)
|
|
Net income
attributable to noncontrolling interest
|
1.0
|
1.1
|
1.4
|
1.4
|
|
Adjustments to
reconcile net income (loss) to net cash provided (used) by
operating activities:
|
|
|
|
|
|
Depreciation and
amortization
|
32.1
|
34.2
|
65.6
|
69.3
|
|
Impairment
charges
|
0.6
|
0.8
|
3.3
|
0.8
|
|
Loss (gain) on sale of
assets
|
1.4
|
0.8
|
1.7
|
(22.2)
|
|
Pension and other
postretirement expense
|
12.9
|
5.4
|
238.0
|
14.9
|
|
Pension and other
postretirement benefit contributions and
payments
|
(10.0)
|
(23.4)
|
(16.9)
|
(41.0)
|
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
6.9
|
(15.5)
|
(22.7)
|
(39.3)
|
|
Inventories
|
10.0
|
(19.9)
|
(2.8)
|
(39.8)
|
|
Accounts payable
|
1.0
|
18.8
|
28.9
|
36.9
|
|
Accrued expenses
|
8.8
|
55.5
|
(54.7)
|
3.5
|
|
Income taxes
|
(14.8)
|
(47.3)
|
(44.5)
|
(36.2)
|
|
Other, net
|
1.9
|
16.8
|
6.7
|
17.7
|
|
Net Cash Provided by
Operating Activities - Continuing Operations
|
$
88.5
|
$
83.8
|
$
105.5
|
$
82.5
|
|
Net Cash (Used)
Provided by Operating Activities - Discontinued
Operations
|
-
|
(7.9)
|
-
|
33.6
|
|
Net Cash Provided by
Operating Activities
|
$
88.5
|
$
75.9
|
$
105.5
|
$ 116.1
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
Capital
expenditures
|
$
(23.8)
|
$
(29.4)
|
$
(43.5)
|
$ (48.5)
|
|
Acquisitions
|
—
|
(12.0)
|
—
|
(12.0)
|
|
Other
|
4.5
|
9.0
|
10.2
|
17.8
|
|
Net Cash Used by
Investing Activities - Continuing Operations
|
$
(19.3)
|
$
(32.4)
|
$
(33.3)
|
$ (42.7)
|
|
Net Cash Used by
Investing Activities - Discontinued Operations
|
-
|
(42.3)
|
-
|
(77.0)
|
|
Net Cash Used by
Investing Activities
|
$
(19.3)
|
$
(74.7)
|
$
(33.3)
|
$ (119.7)
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
Cash dividends paid to
shareholders
|
$
(22.1)
|
$
(22.6)
|
$
(44.0)
|
$ (45.7)
|
|
Purchase of treasury
shares
|
(80.4)
|
(33.6)
|
(177.2)
|
(151.3)
|
|
Net proceeds from credit
facilities
|
114.1
|
41.3
|
110.5
|
45.4
|
|
Net payments from long-term
debt
|
—
|
—
|
(1.1)
|
(0.2)
|
|
Distribution of
TimkenSteel
|
—
|
(43.5)
|
—
|
(43.5)
|
|
Other
|
0.9
|
2.7
|
3.5
|
8.7
|
|
Net Cash Provided
(Used) by Financing Activities - Continuing Operations
|
$
12.5
|
$
(55.7)
|
$
(108.3)
|
$ (186.6)
|
|
Net Cash Provided by
Financing Activities - Discontinued Operations
|
-
|
100.0
|
-
|
100.0
|
|
Net Cash Provided
(Used) by Financing Activities
|
$
12.5
|
$
44.3
|
$
(108.3)
|
$ (86.6)
|
|
Effect of exchange
rate changes on cash
|
0.7
|
1.0
|
(5.9)
|
0.4
|
|
Increase (Decrease)
In Cash and Cash Equivalents
|
$
82.4
|
$
46.5
|
$
(42.0)
|
$ (89.8)
|
|
Cash and cash
equivalents at beginning of period
|
154.4
|
248.3
|
278.8
|
384.6
|
|
Cash and Cash
Equivalents at End of Period
|
$
236.8
|
$
294.8
|
$
236.8
|
$ 294.8
|
|
Reconciliations of
Adjusted Net Income from Continuing Operations to GAAP Income
(Loss) from Continuing Operations and Adjusted Earnings Per Share
to GAAP Earnings (Loss) Per Share:
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
These reconciliations
are provided as additional relevant information about the Company's
performance. Management believes that adjusted net income
from continuing operations and diluted earnings (loss) per share,
adjusted to remove: (a) pension settlement charges; (b) impairment
and restructuring charges; (c) gain on sale of real estate in
Brazil; and (d) provision (benefit) for income taxes are
representative of the Company's performance and therefore useful to
investors.
|
|
|
Three Months
Ended
|
Six Months
Ended
|
|
(Dollars in
millions, except share data)
|
June
30,
|
June
30,
|
|
2015
|
EPS
|
2014
|
EPS
|
2015
|
EPS
|
2014
|
EPS
|
|
Income (Loss) from
Continuing Operations
|
$
37.7
|
|
$
57.6
|
|
$
(97.1)
|
|
$ 117.9
|
|
|
Less: Net Income
Attributable to Noncontrolling Interest
|
1.0
|
|
1.1
|
|
1.4
|
|
1.4
|
|
|
Net Income (Loss) from
Continuing Operations attributable to The Timken Company
|
$
36.7
|
$
0.43
|
$
56.5
|
$
0.61
|
$
(98.5)
|
$ (1.14)
|
$ 116.5
|
$ 1.26
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Pension
settlement charges (1)
|
$
4.4
|
$
0.05
|
$
-
|
$
-
|
$
219.6
|
$ 2.52
|
$
0.7
|
$ 0.01
|
|
Impairment and
restructuring charges (2)
|
1.7
|
0.02
|
6.2
|
0.07
|
8.3
|
0.10
|
10.5
|
0.11
|
|
Gain on sale
of real estate in Brazil (3)
|
-
|
-
|
-
|
-
|
-
|
-
|
(22.6)
|
(0.24)
|
|
Provision
(benefit) for income taxes (4)
|
6.3
|
0.07
|
(3.3)
|
(0.03)
|
(36.0)
|
(0.41)
|
0.7
|
0.01
|
|
Total Adjustments:
|
12.4
|
0.14
|
2.9
|
0.04
|
191.9
|
2.21
|
(10.7)
|
(0.11)
|
|
Adjusted Net Income
from Continuing Operations
|
$
49.1
|
$
0.57
|
$
59.4
|
$
0.65
|
$
93.4
|
$ 1.07
|
$ 105.8
|
$ 1.15
|
|
|
|
|
|
|
|
|
|
|
(1)
Pension settlement charges primarily related to the purchase of a
group annuity contract from Prudential on January 23, 2015, that
requires Prudential to pay and administer future pension benefits
for approximately 5,000 U.S. Timken retirees, as well as lump sum
distributions to new retirees during the first six months of
2015.
|
|
|
|
|
|
|
|
|
|
|
(2)
Impairment and restructuring charges, including rationalization
costs recorded in cost of products sold, related to plant closures,
the rationalization of certain plants and severance related to cost
reduction initiatives.
|
|
|
|
|
|
|
|
|
|
|
(3)
Gain on the sale of real estate related to the sale of the former
manufacturing facility in Sao Paulo, Brazil.
|
|
|
|
|
|
|
|
|
|
|
(4)
Provision (benefit) for income taxes includes the tax impact on
pre-tax special items, the impact of discrete tax items recorded
during the respective periods, as well as adjustments to reflect
the use of one overall effective tax rate on adjusted pre-tax
income in interim periods.
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
EBIT to GAAP Net Income (Loss), and EBIT Margin, After Adjustments,
to Net Income (Loss) as a Percentage of Sales and EBIT, After
Adjustments, to Net Income (Loss):
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
The following
reconciliation is provided as additional relevant information about
the Company's performance. Management believes consolidated
earnings (loss) before interest and taxes (EBIT) is representative
of the Company's performance and that it is appropriate to compare
GAAP net income (loss) to consolidated EBIT. Management also
believes that EBIT and EBIT margin, after adjustments, are
representative of the Company's core operations and therefore
useful to investors.
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Six Months
Ended
|
|
(Dollars in
millions, except share data)
|
June
30,
|
June
30,
|
|
2015
|
Percentage
to
Net Sales
|
2014
|
Percentage
to
Net Sales
|
2015
|
Percentage
to
Net Sales
|
2014
|
Percentage
to
Net Sales
|
|
Net Income
(Loss)
|
$
37.7
|
5.2 %
|
$
63.8
|
8.1 %
|
$
(97.1)
|
(6.7)%
|
$
147.6
|
9.7 %
|
|
|
|
|
|
|
|
|
|
|
Income From
Discontinued Operations, net of income taxes
|
—
|
—%
|
(6.2)
|
(0.8)%
|
—
|
—%
|
(29.7)
|
(1.9)%
|
|
Provision for income
taxes
|
28.9
|
4.0 %
|
27.6
|
3.5 %
|
7.6
|
0.5 %
|
55.6
|
3.7 %
|
|
Interest
expense
|
8.4
|
1.2 %
|
5.8
|
0.7 %
|
16.4
|
1.1 %
|
11.3
|
0.7 %
|
|
Interest
income
|
(0.7)
|
(0.1)%
|
(1.1)
|
(0.1)%
|
(1.4)
|
(0.1)%
|
(2.1)
|
(0.1)%
|
|
Consolidated earnings
(loss) before interest and taxes (EBIT)
|
$
74.3
|
10.2 %
|
$
89.9
|
11.4 %
|
$
(74.5)
|
(5.1)%
|
$
182.7
|
12.1 %
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Pension
settlement charges (1)
|
$
4.4
|
0.6 %
|
$
-
|
—%
|
$
219.6
|
15.1 %
|
$
0.7
|
0.1 %
|
|
Impairment and
restructuring charges (2)
|
1.7
|
0.2 %
|
6.2
|
0.8 %
|
8.3
|
0.6 %
|
10.5
|
0.6 %
|
|
Gain on sale
of real estate in Brazil (3)
|
—
|
—%
|
—
|
—%
|
—
|
—%
|
(22.6)
|
(1.5)%
|
|
Total Adjustments
|
6.1
|
0.8 %
|
6.2
|
0.8 %
|
227.9
|
15.7 %
|
(11.4)
|
(0.8)%
|
|
Consolidated earnings
before interest and taxes (EBIT), after adjustments
|
$
80.4
|
11.0 %
|
$
96.1
|
12.2 %
|
$
153.4
|
10.6 %
|
$
171.3
|
11.3 %
|
|
|
|
|
|
|
|
|
|
|
(1)
Pension settlement charges primarily related to the purchase of a
group annuity contract from Prudential on January 23, 2015, that
requires Prudential to pay and administer future pension benefits
for approximately 5,000 U.S. Timken retirees, as well as lump sum
distributions to new retirees during the first six months of
2015.
|
|
|
|
|
|
|
|
|
|
|
(2)
Impairment and restructuring charges, including rationalization
costs recorded in cost of products sold, related to plant closures,
the rationalization of certain plants, and severance related to
cost reduction initiatives.
|
|
|
|
|
|
|
|
|
|
|
(3)
Gain on the sale of real estate related to the sale of the former
manufacturing facility in Sao Paulo, Brazil.
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
segment EBIT Margin, After Adjustments, to segment EBIT as a
Percentage of Sales and segment EBIT, After Adjustments, to segment
EBIT:
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
The following
reconciliation is provided as additional relevant information about
the Company's Mobile Industries and Process Industries segment
performance. Management believes that segment EBIT and EBIT
margin, after adjustments, are representative of the segment's core
operations and therefore useful to
investors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Three
Months
Ended
June 30,
2015
|
Percentage
to Net
Sales
|
Three
Months
Ended
June 30,
2014
|
Percentage
to Net
Sales
|
Six
Months
Ended
June 30,
2015
|
Percentage
to Net
Sales
|
Six
Months
Ended
June 30,
2014
|
Percentage
to Net
Sales
|
|
Earnings before
interest and taxes (EBIT)
|
$
36.0
|
9.3%
|
$
42.3
|
9.5%
|
$
71.4
|
9.1%
|
$
106.6
|
12.3%
|
|
|
|
|
|
|
|
|
|
|
Pension settlement
charges (1)
|
-
|
—%
|
-
|
—%
|
-
|
—%
|
0.7
|
0.1 %
|
|
Impairment and
restructuring charges(2)
|
1.0
|
0.3 %
|
4.4
|
1.0 %
|
2.0
|
0.3 %
|
7.3
|
0.8 %
|
|
Gain on sale of real
estate in Brazil(3)
|
-
|
—%
|
-
|
—%
|
-
|
—%
|
(22.6)
|
(2.6)%
|
|
Earnings before
interest and taxes (EBIT), after adjustments
|
$
37.0
|
9.5%
|
$
46.7
|
10.4%
|
$
73.4
|
9.4%
|
$
92.0
|
10.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Process
Industries
|
|
(Dollars in
millions)
|
Three
Months
Ended
June 30,
2015
|
Percentage
to Net
Sales
|
Three
Months
Ended
June 30,
2014
|
Percentage
to Net
Sales
|
Six
Months
Ended
June 30,
2015
|
Percentage
to Net
Sales
|
Six
Months
Ended
June 30,
2014
|
Percentage
to Net
Sales
|
|
Earnings before
interest and taxes (EBIT)
|
$
56.7
|
16.7%
|
$
64.8
|
18.9%
|
$
101.9
|
15.2%
|
$
113.0
|
17.2%
|
|
|
|
|
|
|
|
|
|
|
Impairment and
restructuring charges(2)
|
0.8
|
0.2 %
|
1.8
|
0.5 %
|
6.4
|
1.0%
|
2.9
|
0.4 %
|
|
Earnings before
interest and taxes (EBIT), after adjustments
|
$
57.5
|
16.9%
|
$
66.6
|
19.5%
|
$
108.3
|
16.2%
|
$
115.9
|
17.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Pension settlement charges related to the settlement of certain
pension obligations in Canada.
|
|
|
|
|
|
|
|
|
|
|
(2)
Impairment and restructuring charges, including rationalization
costs recorded in cost of products sold, related to plant closures,
the rationalization of certain plants, and severance related to
cost reduction initiatives.
|
|
|
|
|
|
|
|
|
|
|
(3)
Gain on the sale of real estate related to the sale of the former
manufacturing facility in Sao Paulo, Brazil.
|
|
Reconciliation of
Total Debt to Net Debt and the Ratio of Net Debt to
Capital:
|
|
(Unaudited)
|
|
|
|
|
|
This reconciliation
is provided as additional relevant information about the Company's
financial position. Capital, used for the ratio of total debt
to capital, is defined as total debt plus total shareholders'
equity. Capital, used for the ratio of net debt to capital,
is defined as total debt less cash, cash equivalents and restricted
cash plus total shareholders' equity. Management believes Net
Debt is an important measure of the Company's financial position,
due to the amount of cash and cash
equivalents.
|
|
|
(Dollars in
millions)
|
|
|
|
|
|
June 30,
2015
|
December 31,
2014
|
|
Short-term debt,
including current portion of long-term debt
|
|
|
$
82.2
|
$
8.0
|
|
Long-term
debt
|
|
|
555.6
|
522.1
|
|
Total Debt
|
|
|
$
637.8
|
$
530.1
|
|
Less: Cash, cash
equivalents and restricted cash
|
|
|
(255.9)
|
(294.1)
|
|
Net Debt
|
|
|
$
381.9
|
$
236.0
|
|
|
|
|
|
|
Total
equity
|
|
|
$
1,371.1
|
$
1,589.1
|
|
|
|
|
|
|
Ratio of Total Debt
to Capital
|
|
|
31.7 %
|
25.0 %
|
|
Ratio of Net Debt to
Capital
|
|
|
21.8 %
|
12.9 %
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Free Cash Flow to GAAP Net Cash Provided by Operating
Activities:
|
|
(Unaudited)
|
|
|
|
|
|
Management believes
that free cash flow 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
|
Six Months
Ended
|
|
June
30,
|
June
30,
|
|
2015
|
2014
|
2015
|
2014
|
|
Net cash provided by
operating activities from continuing operations
|
$
88.5
|
$
83.8
|
$
105.5
|
$
82.5
|
|
Less: capital
expenditures
|
(23.8)
|
(29.4)
|
(43.5)
|
(48.5)
|
|
Free cash flow
|
$
64.7
|
$
54.4
|
$
62.0
|
$
34.0
|
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SOURCE The Timken Company