NORTH CANTON, Ohio,
Oct. 28, 2015 /PRNewswire/
-- The Timken Company (NYSE: TKR; www.timken.com), a global
leader in bearings, today reported sales of $707.4 million for the third quarter of 2015,
down 10 percent from a year ago. Currency accounted for half of the
decrease. The remaining decline was primarily due to continued
softening across industrial end markets, partially offset by the
benefit of acquisitions.
Net income from continuing operations was $63.4 million or $0.75 per diluted share for the quarter, versus a
loss of $10.9 million or $0.12 per share a year ago. The third quarter of
2014 included a $118 million pre-tax
charge related to the restructuring of the company's aerospace
business.
Adjusted net income from continuing operations (see table) was
$46.7 million or $0.55 per diluted share. This compares with
$70.0 million or $0.77 per diluted share for the same period in
2014. The year-over-year change in adjusted net income reflects the
impact of negative currency, lower volume and unfavorable
price/mix, partially offset by favorable material, operating and
SG&A costs, and a lower tax rate. Earnings per share benefited
from the company's share buyback program, with 1.55 million
shares repurchased in the third quarter, bringing the year-to-date
total to 5.9 million shares. Free cash flow (net cash from
operations minus capital expenditures) for the quarter was
$119 million.
"Given the market environment, we performed well in the quarter.
We generated strong cash flow, closed on an acquisition, purchased
over 1.5 million shares and made progress on both our outgrowth and
cost-reduction initiatives," Timken President and CEO
Richard G. Kyle reported. "We continue to experience
downward pressure in several of our end markets, including
agriculture, metals, mining, oil and gas, and broadly across the
industrial distribution channel.
"End markets have declined more than expected and the timing of
a recovery remains uncertain," Kyle added. "As a result, we are
accelerating our cost-reduction actions to return operating margins
to our targeted ranges. Although many of our end markets are in
cyclical downturns, the diversity of our markets serves us well and
we expect them to continue to present attractive long-term
profitable growth opportunities for Timken."
Adjusted Net
Income and Diluted Earnings Per Share (EPS) from Continuing
Operations
|
|
2015 –
3Q
|
|
2014 –
3Q
|
|
($ in
Mils.)
|
EPS
|
|
($ in
Mils.)
|
EPS
|
Net Income (Loss)
from Continuing Operations
|
$ 63.4
|
$0.75
|
|
$(10.9)
|
$(0.12)
|
Adjustments:
|
|
|
|
|
|
Pension settlement
charges
|
$ 3.6
|
$0.04
|
|
$ --
|
$ --
|
Impairment and
restructuring charges
|
4.8
|
0.06
|
|
119.5
|
1.33
|
Acquisition-related
one-time charges
|
1.9
|
0.02
|
|
--
|
--
|
Benefit from income
taxes
|
(27.0)
|
(0.32)
|
|
(38.6)
|
(0.44)
|
Total
adjustments
|
(16.7)
|
(0.20)
|
|
80.9
|
0.89
|
Net Income, after
adjustments
|
$ 46.7
|
$ 0.55
|
|
$ 70.0
|
$ 0.77
|
Among recent developments, the company:
- Completed an acquisition to expand its portfolio of power
transmission products, adding belts used in industrial, commercial
and consumer applications and sold under well-recognized brands
that include Carlisle, Ultimax and
Panther;
- Sold Timken Alcor Aerospace Technologies, Inc., located in
Mesa, Ariz., for approximately
$45 million;
- Broke ground on a $20 million
expansion of the company's Jamshedpur bearing manufacturing
facility in India to serve the
demands of local and international Mobile Industries markets;
- Opened a motor and gearbox repair facility in Pasco, Wash., adding new capabilities to
repair large electric motors, wind turbine generators and
industrial gearboxes;
- Received a $46 million multi-year
contract from the U.S. Defense Department for the overhaul of
Apache helicopter transmissions; and
- Repurchased 1.55 million shares in the third quarter for an
aggregate of $50.7 million.
Third-Quarter Segment Results
Mobile Industries reported third-quarter sales of
$396.4 million, down approximately
7 percent from the same period a year ago. Excluding negative
currency of 6 percent, sales were down 1 percent, driven largely by
lower off-highway and aerospace demand, partially offset by growth
in automotive and rail and the benefit of acquisitions.
Earnings before interest and taxes (EBIT) for the third quarter
were $43 million or 10.8 percent of sales, compared with
a prior-year loss of $63.4 million or
14.8 percent of sales. The third quarter of 2014 included a
$118 million charge related to the
restructuring of our aerospace business. Adjusted EBIT was
$46.1 million or 11.6 percent of
sales, compared with $56.5 million or 13.2 percent of sales
in the third quarter last year. The difference in year-over-year
earnings was driven by the impact of lower volume, unfavorable
price/mix and currency, partially offset by favorable material and
operating costs and lower SG&A expenses.
Process Industries sales of $311.0
million for the third quarter were down 14 percent from
the prior year. Excluding currency of 5 percent, sales were down
9 percent, driven by weaker demand in heavy industries and the
industrial aftermarket, partially offset by the benefit of
acquisitions.
EBIT for the quarter was $43.1 million or 13.9 percent of sales,
compared with prior-year EBIT of $74.4 million or 20.6 percent of sales.
Adjusted EBIT was $45.4 million
or 14.6 percent of sales, compared with $74.0 million or 20.5 percent of sales
in the third quarter last year. The decrease in earnings was driven
by the impact of lower volume, unfavorable price/mix and currency,
partially offset by favorable material and operating costs and
lower SG&A expenses.
2015 Outlook
The company revised its full-year outlook to reflect
year-to-date results and expected continued softening in many of
its industrial end markets. The company now expects year-over-year
revenue to be down approximately 8 percent, which includes
5 percent from currency. The segment outlook for full-year
2015 is now as follows:
- Mobile Industries' sales expected to be down approximately 8
percent. Without the impact of currency, sales are expected to be
down approximately 3 percent reflecting lower shipments in
off-highway and aerospace, partially offset by organic growth in
automotive and rail, and the benefit of acquisitions.
- Process Industries' sales expected to be down approximately 8
percent. Excluding currency, sales are expected to be down
approximately 3 percent, as growth in wind energy and military
marine and the benefit of acquisitions are more than offset by
weaker demand in heavy industries and the industrial
aftermarket.
Timken now expects 2015 earnings per diluted share to range from
$0.65 to $0.70 on a GAAP basis.
Excluding unusual items, adjusted earnings per diluted share are
expected to range from $2.05 to
$2.10.
Conference Call Information
Timken will host a conference call today at 9:00 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:
|
Wednesday, October
28, 2015
|
|
9:00 a.m. Eastern
Time
|
|
Live Dial-In:
888-740-6143 or 913-312-1448
|
|
(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 November 11, 2015:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
9912233
|
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®, Carlisle®, 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 third 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:
Clark
Harvey
|
Investor
Contact: Shelly Chadwick
|
Manager -
Communications
|
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
September 30,
|
|
Nine Months
Ended
September 30,
|
(Dollars in millions,
except per share data)
|
2015
|
2014
|
|
2015
|
2014
|
Net sales
|
$
707.4
|
$
788.0
|
|
$
2,157.9
|
$ 2,314.0
|
Cost of products
sold
|
512.0
|
562.5
|
|
1,554.9
|
1,636.8
|
Gross
Profit
|
195.4
|
225.5
|
|
603.0
|
677.2
|
Selling, general
& administrative expenses (SG&A)
|
120.7
|
132.2
|
|
375.3
|
410.8
|
Impairment and
restructuring charges
|
4.4
|
99.4
|
|
12.0
|
108.0
|
Pension settlement
charges
|
3.6
|
—
|
|
223.2
|
0.7
|
Operating Income
(Loss)
|
66.7
|
(6.1)
|
|
(7.5)
|
157.7
|
Other (expense)
income, net
|
(0.8)
|
1.8
|
|
(1.1)
|
20.7
|
Earnings (Loss)
Before Interest and Taxes (EBIT) (1)
|
65.9
|
(4.3)
|
|
(8.6)
|
178.4
|
Interest expense,
net
|
(8.0)
|
(8.1)
|
|
(23.0)
|
(17.3)
|
Income (Loss) From
Continuing Operations Before Income Taxes
|
57.9
|
(12.4)
|
|
(31.6)
|
161.1
|
Provision (benefit)
for income taxes
|
(6.6)
|
(2.2)
|
|
1.0
|
53.4
|
Income (Loss) From
Continuing Operations
|
64.5
|
(10.2)
|
|
(32.6)
|
107.7
|
Income (loss) from
discontinued operations, net of income
taxes(2)
|
—
|
(11.0)
|
|
—
|
18.7
|
Net Income
(Loss)
|
64.5
|
(21.2)
|
|
(32.6)
|
126.4
|
Less: Net Income
Attributable to Noncontrolling Interest
|
1.1
|
0.7
|
|
2.5
|
2.1
|
Net Income (Loss)
Attributable to The Timken Company
|
$
63.4
|
$
(21.9)
|
|
$
(35.1)
|
$ 124.3
|
|
|
|
|
|
|
Net Income (Loss)
per Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
|
|
|
Basic Earnings
(Loss) per share - Continuing Operations
|
$
0.76
|
$
(0.12)
|
|
$
(0.41)
|
$
1.16
|
Basic Earnings
(Loss) per share - Discontinued Operations
|
—
|
(0.12)
|
|
—
|
0.21
|
Basic Earnings
(Loss) per share
|
$
0.76
|
$
(0.24)
|
|
$
(0.41)
|
$
1.37
|
|
|
|
|
|
|
Diluted Earnings
(Loss) per share - Continuing Operations
|
$
0.75
|
$
(0.12)
|
|
$
(0.41)
|
$
1.15
|
Diluted Earnings
(Loss) per share - Discontinued Operations
|
—
|
(0.12)
|
|
—
|
0.20
|
Diluted Earnings
(Loss) per share
|
$
0.75
|
$
(0.24)
|
|
$
(0.41)
|
$
1.35
|
|
|
|
|
|
|
Average Shares
Outstanding
|
83,671,931
|
89,683,436
|
|
85,578,800
|
90,889,871
|
Average Shares
Outstanding - assuming dilution
|
84,145,751
|
89,683,436
|
|
85,578,800
|
91,710,028
|
|
|
|
|
|
|
(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
September 30,
|
Nine Months
Ended
September 30,
|
(Dollars in
millions)
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
Net sales to external
customers
|
$ 396.4
|
$ 427.0
|
$ 1,178.0
|
$ 1,295.9
|
Earnings (loss)
before interest and taxes (EBIT)
(1)
|
$ 43.0
|
$ (63.4)
|
$ 114.4
|
$ 43.2
|
EBIT Margin
(1)
|
10.8 %
|
(14.8)%
|
9.7 %
|
3.3 %
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
Net sales to external
customers
|
$ 311.0
|
$ 361.0
|
$ 979.9
|
$ 1,018.1
|
Earnings before
interest and taxes (EBIT) (1)
|
$ 43.1
|
$ 74.4
|
$ 145.0
|
$ 187.4
|
EBIT Margin
(1)
|
13.9 %
|
20.6 %
|
14.8 %
|
18.4 %
|
|
|
|
|
|
Unallocated corporate
expense
|
$ (16.6)
|
$ (15.3)
|
$
(44.8)
|
$ (52.2)
|
Unallocated pension
settlement charges (2)
|
$ (3.6)
|
$
—
|
$ (223.2)
|
$
—
|
|
|
|
|
|
Consolidated
|
|
|
|
|
Net sales to external
customers
|
$ 707.4
|
$ 788.0
|
$ 2,157.9
|
$ 2,314.0
|
Earnings (loss)
before interest and taxes (EBIT)
(1)
|
$ 65.9
|
$ (4.3)
|
$
(8.6)
|
$ 178.4
|
EBIT Margin
(1)
|
9.3 %
|
(0.5)%
|
(0.4)%
|
7.7 %
|
|
|
|
|
|
(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 nine months of 2015.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
(Dollars in
millions)
|
(Unaudited)
September 30,
2015
|
December 31,
2014
|
ASSETS
|
|
|
Cash and cash
equivalents
|
$
155.0
|
$
278.8
|
Restricted
cash
|
14.8
|
15.3
|
Accounts
receivable
|
469.8
|
475.7
|
Inventories,
net
|
595.4
|
585.5
|
Other current
assets
|
143.9
|
126.6
|
Total Current
Assets
|
1,378.9
|
1,481.9
|
Property, Plant and
Equipment, net
|
783.1
|
780.5
|
Goodwill
|
327.1
|
259.5
|
Non-current pension
assets
|
114.1
|
176.2
|
Other
assets
|
343.4
|
303.3
|
Total
Assets
|
$
2,946.6
|
$
3,001.4
|
|
|
|
LIABILITIES
|
|
|
Accounts
payable
|
$
176.0
|
$
143.9
|
Short-term debt,
including current portion of long-term debt
|
98.7
|
8.0
|
Income
taxes
|
75.0
|
80.2
|
Accrued
expenses
|
255.9
|
301.7
|
Total Current
Liabilities
|
605.6
|
533.8
|
|
|
|
Long-term
debt
|
625.9
|
522.1
|
Accrued pension
cost
|
158.8
|
165.9
|
Accrued
postretirement benefits cost
|
130.1
|
141.8
|
Other non-current
liabilities
|
74.6
|
48.7
|
Total
Liabilities
|
1,595.0
|
1,412.3
|
|
|
|
EQUITY
|
|
|
The Timken Company
shareholders' equity
|
1,334.3
|
1,576.2
|
Noncontrolling
Interest
|
17.3
|
12.9
|
Total
Equity
|
1,351.6
|
1,589.1
|
Total Liabilities and
Equity
|
$
2,946.6
|
$
3,001.4
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
(Dollars in
millions)
|
2015
|
2014
|
2015
|
2014
|
Cash Provided
(Used)
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net income (loss)
attributable to The Timken Company
|
$
63.4
|
$
(21.9)
|
$
(35.1)
|
$ 124.3
|
Net income from
discontinued operations
|
—
|
11.0
|
—
|
(18.7)
|
Net income
attributable to noncontrolling interest
|
1.1
|
0.7
|
2.5
|
2.1
|
Adjustments to
reconcile net income (loss) to net cash provided (used) by
operating activities:
|
|
|
|
|
Depreciation and
amortization
|
32.2
|
34.1
|
97.8
|
103.4
|
Impairment
charges
|
—
|
98.0
|
3.3
|
98.8
|
Loss (gain) on sale of
assets
|
0.4
|
1.3
|
2.1
|
(20.9)
|
Pension and other
postretirement expense
|
13.5
|
7.6
|
251.5
|
22.5
|
Pension and other
postretirement benefit
contributions and
payments
|
(6.6)
|
(6.6)
|
(23.5)
|
(47.6)
|
Changes in operating assets
and liabilities:
|
|
|
|
|
Accounts
receivable
|
20.8
|
(13.3)
|
(1.9)
|
(52.6)
|
Inventories
|
9.9
|
(12.3)
|
7.1
|
(52.1)
|
Accounts payable
|
(1.9)
|
10.4
|
27.0
|
47.3
|
Accrued expenses
|
(1.3)
|
(10.9)
|
(56.0)
|
(7.4)
|
Income taxes
|
(13.1)
|
(11.4)
|
(57.6)
|
(47.6)
|
Other, net
|
22.4
|
3.6
|
29.1
|
21.3
|
Net Cash Provided by
Operating Activities - Continuing Operations
|
$
140.8
|
$
90.3
|
$
246.3
|
$ 172.8
|
Net Cash (Used)
Provided by Operating Activities - Discontinued
Operations
|
—
|
(11.0)
|
—
|
22.6
|
Net Cash Provided by
Operating Activities
|
$
140.8
|
$
79.3
|
$
246.3
|
$ 195.4
|
INVESTING
ACTIVITIES
|
|
|
|
|
Capital
expenditures
|
$
(21.6)
|
$
(38.6)
|
$
(65.1)
|
$ (87.1)
|
Acquisitions
|
(213.6)
|
—
|
(213.6)
|
(12.0)
|
Other
|
(0.3)
|
1.2
|
9.9
|
19.0
|
Net Cash Used by
Investing Activities - Continuing Operations
|
$
(235.5)
|
$
(37.4)
|
$
(268.8)
|
$ (80.1)
|
Net Cash Used by
Investing Activities - Discontinued Operations
|
—
|
—
|
—
|
(77.0)
|
Net Cash Used by
Investing Activities
|
$
(235.5)
|
$
(37.4)
|
$
(268.8)
|
$ (157.1)
|
FINANCING
ACTIVITIES
|
|
|
|
|
Cash dividends paid to
shareholders
|
$
(21.7)
|
$
(22.5)
|
$
(65.7)
|
$ (68.2)
|
Purchase of treasury
shares
|
(50.7)
|
(115.2)
|
(227.9)
|
(266.5)
|
Net proceeds (payments) from
credit facilities
|
1.6
|
(54.9)
|
76.4
|
(9.5)
|
Net proceeds from long-term
debt
|
85.0
|
95.8
|
119.6
|
95.6
|
Distribution of
TimkenSteel
|
—
|
(3.0)
|
—
|
(46.5)
|
Other
|
3.9
|
11.3
|
7.4
|
20.0
|
Net Cash Provided
(Used) by Financing Activities - Continuing Operations
|
$
18.1
|
$
(88.5)
|
$
(90.2)
|
$ (275.1)
|
Net Cash Provided by
Financing Activities - Discontinued Operations
|
—
|
—
|
—
|
100.0
|
Net Cash Provided
(Used) by Financing Activities
|
$
18.1
|
$
(88.5)
|
$
(90.2)
|
$ (175.1)
|
Effect of exchange
rate changes on cash
|
(5.2)
|
(10.0)
|
(11.1)
|
(9.6)
|
Decrease In Cash and
Cash Equivalents
|
$
(81.8)
|
$
(56.6)
|
$
(123.8)
|
$ (146.4)
|
Cash and Cash
Equivalents at Beginning of Period
|
236.8
|
294.8
|
278.8
|
384.6
|
Cash and Cash
Equivalents at End of Period
|
$
155.0
|
$
238.2
|
$
155.0
|
$ 238.2
|
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; (d) acquisition related charges; and (e) benefit from
income taxes are representative of the Company's performance and
therefore useful to investors.
|
|
Three Months
Ended
|
Nine Months
Ended
|
(Dollars in
millions, except share data)
|
September
30,
|
September
30,
|
|
2015
|
EPS
|
2014
|
EPS
|
2015
|
EPS
|
2014
|
EPS
|
Income (Loss) from
Continuing Operations
|
$
64.5
|
|
$
(10.2)
|
|
$
(32.6)
|
|
$ 107.7
|
|
Less:
Net Income Attributable to Noncontrolling Interest
|
1.1
|
|
0.7
|
|
2.5
|
|
2.1
|
|
Net Income (Loss) from
Continuing Operations attributable to The Timken Company
|
$
63.4
|
$
0.75
|
$
(10.9)
|
$
(0.12)
|
$
(35.1)
|
$ (0.41)
|
$ 105.6
|
$ 1.15
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Pension
settlement charges(1)
|
$
3.6
|
$
0.04
|
$
—
|
$
—
|
$
223.2
|
$ 2.59
|
$
0.7
|
$ 0.01
|
Impairment and
restructuring charges(2)
|
4.8
|
0.06
|
119.5
|
1.33
|
13.1
|
0.15
|
129.9
|
1.42
|
Gain on sale
of real estate in Brazil(3)
|
—
|
—
|
—
|
—
|
—
|
—
|
(22.6)
|
(0.25)
|
Acquisition
related charges(4)
|
1.9
|
0.02
|
—
|
—
|
1.9
|
0.02
|
—
|
—
|
Benefit from
income taxes(5)
|
(27.0)
|
(0.32)
|
(38.6)
|
(0.44)
|
(63.0)
|
(0.73)
|
(38.1)
|
(0.42)
|
Total Adjustments:
|
(16.7)
|
(0.20)
|
80.9
|
0.89
|
175.2
|
2.03
|
69.9
|
0.76
|
Adjusted Net Income
from Continuing Operations
|
$
46.7
|
$
0.55
|
$
70.0
|
$
0.77
|
$
140.1
|
$ 1.62
|
$ 175.5
|
$ 1.91
|
|
|
|
|
|
|
|
|
|
(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 nine 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)
Acquisition related charges related to the acquisition of the
Carlstar Belts Business.
|
|
|
|
|
|
|
|
|
|
(5)
Benefit from 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
|
Nine Months
Ended
|
(Dollars in
millions, except share data)
|
September
30,
|
September
30,
|
|
2015
|
Percentage
to
Net Sales
|
2014
|
Percentage
to
Net Sales
|
2015
|
Percentage
to
Net Sales
|
2014
|
Percentage
to
Net Sales
|
Net Income
(Loss)
|
$
64.5
|
9.1 %
|
$
(21.2)
|
(2.7)%
|
$
(32.6)
|
(1.5)%
|
$
126.4
|
5.5 %
|
|
|
|
|
|
|
|
|
|
Income From
Discontinued Operations, net of income taxes
|
—
|
—%
|
11.0
|
1.4 %
|
—
|
—%
|
(18.7)
|
(0.8)%
|
Provision
(benefit) for income taxes
|
(6.6)
|
(0.9)%
|
(2.2)
|
(0.3)%
|
1.0
|
—%
|
53.4
|
2.3 %
|
Interest
expense
|
8.6
|
1.2 %
|
9.1
|
1.2 %
|
25.0
|
1.2 %
|
20.4
|
0.9 %
|
Interest
income
|
(0.6)
|
(0.1)%
|
(1.0)
|
(0.1)%
|
(2.0)
|
(0.1)%
|
(3.1)
|
(0.2)%
|
Consolidated earnings
(loss) before interest and taxes (EBIT)
|
$
65.9
|
9.3 %
|
$
(4.3)
|
(0.5)%
|
$
(8.6)
|
(0.4)%
|
$
178.4
|
7.7 %
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Pension
settlement charges(1)
|
$
3.6
|
0.5 %
|
$
—
|
—%
|
$
223.2
|
10.3 %
|
$
0.7
|
—%
|
Impairment and
restructuring charges(2)
|
4.8
|
0.7 %
|
119.5
|
15.1 %
|
13.1
|
0.6 %
|
129.9
|
5.6 %
|
Gain on sale
of real estate in Brazil(3)
|
—
|
—%
|
—
|
—%
|
—
|
—%
|
(22.6)
|
(0.9)%
|
Acquisition
related charges(4)
|
1.9
|
0.3 %
|
—
|
—%
|
1.9
|
0.1 %
|
—
|
—%
|
Total Adjustments
|
10.3
|
1.5 %
|
119.5
|
15.1 %
|
238.2
|
11.0 %
|
108.0
|
4.7 %
|
Consolidated earnings
before interest and taxes (EBIT), after adjustments
|
$
76.2
|
10.8 %
|
$
115.2
|
14.6 %
|
$
229.6
|
10.6 %
|
$
286.4
|
12.4 %
|
|
|
|
|
|
|
|
|
|
(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 nine 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)
Acquisition related charges related to the acquisition of the
Carlstar Belts Business.
|
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
September 30,
2015
|
Percentage
to Net
Sales
|
Three Months
Ended
September 30,
2014
|
Percentage
to Net
Sales
|
Nine Months
Ended
September 30,
2015
|
Percentage
to Net
Sales
|
Nine Months
Ended
September 30,
2014
|
Percentage
to Net
Sales
|
Earnings (loss)
before interest and taxes (EBIT)
|
$
43.0
|
10.8%
|
$
(63.4)
|
(14.8)%
|
$
114.4
|
9.7%
|
$
43.2
|
3.3%
|
|
|
|
|
|
|
|
|
|
Pension settlement
charges(1)
|
—
|
—%
|
—
|
—%
|
—
|
—%
|
0.7
|
0.1 %
|
Impairment and
restructuring charges(2)
|
2.4
|
0.6 %
|
119.9
|
28.0 %
|
4.4
|
0.4 %
|
127.2
|
9.8 %
|
Gain on sale of real
estate in Brazil(3)
|
—
|
—%
|
—
|
—%
|
—
|
—%
|
(22.6)
|
(1.7)%
|
Acquisition related
charges(4)
|
0.7
|
0.2 %
|
—
|
—%
|
0.7
|
—%
|
—
|
—%
|
Earnings before
interest and taxes (EBIT), after adjustments
|
$
46.1
|
11.6%
|
$
56.5
|
13.2%
|
$
119.5
|
10.1%
|
$
148.5
|
11.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Process
Industries
|
(Dollars in
millions)
|
Three Months
Ended
September 30,
2015
|
Percentage
to Net
Sales
|
Three Months
Ended
September 30, 2014
|
Percentage
to Net
Sales
|
Nine Months
Ended
September 30,
2015
|
Percentage
to Net
Sales
|
Nine Months
Ended
September 30,
2014
|
Percentage
to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
43.1
|
13.9%
|
$
74.4
|
20.6%
|
$
145.0
|
14.8%
|
$
187.4
|
18.4%
|
|
|
|
|
|
|
|
|
|
Impairment and
restructuring charges(2)
|
1.8
|
0.6 %
|
(0.4)
|
(0.1)%
|
8.2
|
0.8%
|
2.5
|
0.2 %
|
Acquisition related
charges(4)
|
0.5
|
0.1 %
|
—
|
—%
|
0.5
|
0.1%
|
—
|
—%
|
Earnings before
interest and taxes (EBIT), after adjustments
|
$
45.4
|
14.6%
|
$
74.0
|
20.5%
|
$
153.7
|
15.7%
|
$
189.9
|
18.6%
|
|
|
|
|
|
|
|
|
|
(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.
|
|
|
|
|
|
|
|
|
|
(4)
Acquisition related charges related to the acquisition of the
Carlstar Belts Business.
|
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)
|
|
|
|
|
|
September 30,
2015
|
December 31,
2014
|
Short-term debt,
including current portion of long-term debt
|
|
|
$
98.7
|
$
8.0
|
Long-term
debt
|
|
|
625.9
|
522.1
|
Total Debt
|
|
|
$
724.6
|
$
530.1
|
Less: Cash, cash
equivalents and restricted cash
|
|
|
(169.8)
|
(294.1)
|
Net Debt
|
|
|
$
554.8
|
$
236.0
|
|
|
|
|
|
Total
equity
|
|
|
$
1,351.6
|
$
1,589.1
|
|
|
|
|
|
Ratio of Total Debt
to Capital
|
|
|
34.9 %
|
25.0 %
|
Ratio of Net Debt to
Capital
|
|
|
29.1 %
|
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.
|
|
|
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
September
30,
|
September
30,
|
(Dollars in
millions)
|
2015
|
2014
|
2015
|
2014
|
Net cash provided by
operating activities from continuing operations
|
$ 140.8
|
$ 90.3
|
$
246.3
|
$
172.8
|
Less: capital
expenditures
|
(21.6)
|
(38.6)
|
(65.1)
|
(87.1)
|
Free cash flow
|
$ 119.2
|
$ 51.7
|
$
181.2
|
$
85.7
|
Reconciliation of
Adjusted Earnings per Share to GAAP Earnings per Share for Full
Year 2015 Outlook:
|
(Unaudited)
|
|
|
This reconciliation
is provided as additional relevant information about the Company's
performance. Management believes that adjusted diluted
earnings per share, adjusted to remove: (a) pension settlement
charges; (b) impairment and restructuring charges; (c) acquisition
related charges; (d) gain on sale of Alcor; and (e) discrete tax
accrual adjustments are representative of the Company's performance
and therefore useful to investors.
|
|
|
Low End
Earnings
Per Share
|
High End
Earnings
Per Share
|
Forecasted full year
GAAP diluted earnings per share
|
$
0.65
|
$
0.70
|
|
|
|
Adjustments:
|
|
|
Pension
settlement charges (1)
|
1.65
|
1.65
|
Impairment and
restructuring charges (2)
|
0.20
|
0.20
|
Acquisition
related charges (3)
|
0.05
|
0.05
|
Gain on sale
of Alcor (4)
|
(0.25)
|
(0.25)
|
Discrete tax
accrual adjustments
|
(0.25)
|
(0.25)
|
Total Adjustments:
|
$
1.40
|
$
1.40
|
Forecasted full year
adjusted diluted earnings per share
|
$
2.05
|
$
2.10
|
|
|
|
(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 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)
Acquisition related charges related to the acquisition of the
Carlstar Belts Business.
|
|
|
|
(4)
Gain on sale of Alcor related to the sale of former subsidiary,
Timken Alcor Aerospace Technologies, Inc (Alcor).
|
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SOURCE The Timken Company