NORTH CANTON, Ohio,
Feb. 3, 2016 /PRNewswire/ -- The
Timken Company (NYSE: TKR; www.timken.com), a global leader in
bearings, today reported sales of $714.4 million for the fourth quarter of 2015,
approximately 6 percent lower than the same period a year ago.
Excluding the impact of currency, sales were down just under 2
percent, primarily due to market-related declines in Process
Industries, which were partially offset by sales from the recently
acquired Carlisle belts product
line.
In the fourth quarter, Timken posted a net loss from continuing
operations of $35.7 million or
$0.44 per basic share, versus net
income of $41.2 million or
$0.46 per diluted share a year
ago. The loss included certain unusual items including non-cash
pension settlement charges of $242 million (pre-tax), offset
partially by a divestiture gain and the reversal of certain tax
reserves (reference Table I).
Excluding unusual items, adjusted net income from continuing
operations was $49.0 million or
$0.59 per diluted share. This
compares with $57.9 million or
$0.65 per diluted share for the same
period in 2014. The year-over-year change in adjusted net income
reflects lower volume and unfavorable currency, partially offset by
the impact of favorable material and operating costs and lower
SG&A expenses. Earnings per share also benefited from the
company's share buyback program, with 2.7 million shares
repurchased in the fourth quarter.
Free cash flow (net cash from operations minus capital
expenditures) for the quarter was $88 million, compared with
$69 million in the prior-year period. The strong performance
was driven primarily by lower working capital.
"Given the soft industrial environment globally, we were pleased
with our fourth quarter results," said Richard G. Kyle, Timken
president and chief executive officer. "Demand declined slightly
less than anticipated and our cost-reduction initiatives continued
to gain momentum, resulting in a solid finish to a challenging
year.
"In 2015, we gained share in sectors like automotive, wind and
rail, maintained double-digit operating margins, generated strong
cash flow, acquired the Carlisle
belts product line and made structural improvements to our
cost-competitiveness and operating margins," said Kyle. "We also
continued to return capital to shareholders by increasing our
dividend and buying back nearly 10 percent of our outstanding
shares."
Kyle concluded, "We enter 2016 with a lower backlog and a
significant degree of market uncertainty. As such, we are planning
for 2016 revenue to be lower than 2015, reflecting softer end-user
demand across most of the industrial landscape and a continued
strong U.S. dollar. Our strategic priorities remain the same:
We will continue to focus on outgrowing our end markets through our
DeltaX initiative, driving operational excellence with an emphasis
on cost reductions and cash generation, as well as effective
capital deployment to increase shareholder value."
Table I: Adjusted
Net Income & Earnings Per Share (EPS) from Continuing
Operations
|
|
2015 –
4Q
|
2015 – Full
Year
|
|
($M)
|
EPS
|
($M)
|
EPS
|
Net (Loss) Income
Attributable to
The Timken
Company
|
$ (35.7)
|
$ (0.44)
|
$ (70.8)
|
$ (0.84)
|
Adjustments:
|
|
|
|
|
Pension settlement
charges
|
$ 241.8
|
$ 2.92
|
$ 465.0
|
$ 5.45
|
Impairment and
restructuring charges
|
3.1
|
0.04
|
15.9
|
0.19
|
Gain on
divestitures
|
(29.0)
|
(0.35)
|
(28.7)
|
(0.33)
|
Acquisition-related
charges
|
3.8
|
0.05
|
5.7
|
0.07
|
Fixed asset
write-off
|
9.7
|
0.12
|
9.7
|
0.11
|
Tax benefit from
above adjustments (net)
|
(109.6)
|
(1.32)
|
(173.1)
|
(2.03)
|
Other income tax
adjustments
|
(35.1)
|
(0.43)
|
(34.6)
|
(0.41)
|
Total
adjustments
|
84.7
|
1.03
|
259.9
|
3.05
|
Net Income, after
adjustments
|
$ 49.0
|
$ 0.59
|
$ 189.1
|
$ 2.21
|
2015 Full-Year Results
For 2015, sales were $2.9 billion,
7 percent lower than 2014. Excluding the impact of currency, sales
declined almost 2 percent, primarily driven by weaker end‑market
demand across both Mobile and Process Industries, offset partially
by the benefit of acquisitions. Net loss from continuing operations
was $70.8 million or $0.84 per basic share for the year, versus net
income of $146.8 million or
$1.61 per diluted share a year
ago.
Adjusted net income was $189.1 million or $2.21 per diluted share. This compares with
$232.9 million or $2.55 per diluted share in 2014. The decline in
earnings reflects negative currency, volume and net price/mix and
higher interest expense, partially offset by favorable material and
operating costs, lower SG&A expenses and a lower tax rate.
Earnings per share also benefited from the company's share buyback
program, with 8.6 million shares repurchased in 2015.
Among recent developments, the company:
- Broke ground on a new tapered roller bearing manufacturing
facility in Ploiesti, Romania. The
company expects to begin production in 2017;
- Returned $103.1 million in
capital to shareholders in the fourth quarter, through the
repurchase of 2.7 million shares and payment of dividends,
bringing total capital returned to shareholders to nearly
$400 million for the year;
- Received board authorization to repurchase up to 5 million
shares in 2016;
- Entered into a group annuity contract to transfer approximately
$475 million of retiree pension obligations to Prudential
Insurance Company of America. Coupled with a similar transaction in
the first quarter, the total liability transferred was over
$1 billion in 2015, funded entirely with plan assets; and
- Completed its global rollout of the Timken® 6000
series metric deep groove ball bearings and introduced a new line
of Drives® Leaf Chain, both as part of its DeltaX growth
initiative.
Fourth-Quarter Segment Results
Mobile Industries reported fourth-quarter sales of
$380.3 million, approximately
2 percent lower than the same period a year ago. Excluding the
impact of currency, sales increased over 2 percent driven by the
net benefit of acquisitions. Organically, revenue was roughly flat,
with automotive growth partially offset by lower off-highway and
rail demand.
Earnings before interest and taxes (EBIT) for the fourth quarter
were $58.9 million or
15.5 percent of sales, compared with EBIT of $22.4 million or 5.8 percent of sales for
the same period a year ago. Adjusted EBIT was $36.2 million or 9.5 percent of sales,
compared with $28.6 million or
7.3 percent of sales in the fourth quarter last year. The
increase in year-over-year adjusted EBIT was driven by the impact
of favorable material and operating costs and lower SG&A
expenses, partially offset by the impact of lower production
volume.
Process Industries sales of $334.1
million for the fourth quarter declined approximately
10 percent from the same period a year ago. Excluding the
impact of currency, sales were down about 6 percent, driven by
weaker demand in the industrial aftermarket and heavy industries,
partially offset by growth in wind energy and military marine, and
the benefit of acquisitions.
EBIT for the quarter was $45.2 million or 13.5 percent of sales,
compared with EBIT of $79.7 million or 21.4 percent of sales for
the same period a year ago. Adjusted EBIT was $55.7 million or 16.7 percent of sales,
compared with $79.4 million or
21.3 percent of sales in the fourth quarter last year. The
decrease in year-over-year adjusted EBIT was driven by the impact
of lower volume and currency, partially offset by favorable
material costs, lower SG&A expenses and the benefit of
acquisitions.
2016 Outlook
The company is planning for 2016 revenue to be down
approximately 4 to 5 percent versus 2015, including
2 percent from currency declines.
Within its segments, the company estimates full-year 2016:
- Mobile Industries' sales to be down approximately 5 percent.
Excluding the impact of currency, sales are expected to be down
around 3 percent, reflecting lower demand in rail, off-highway and
aerospace, offset partially by growth in automotive and the net
benefit of acquisitions.
- Process Industries' sales to be down approximately 4 percent.
Excluding the impact of currency, sales are expected to be down
around 2 percent, driven by declines across the industrial
aftermarket and heavy industries, offset partially by the benefit
of acquisitions.
Timken anticipates 2016 earnings per diluted share to range from
$1.35 to $1.45 for the full year on a
GAAP basis. Excluding unusual items, the company expects 2016
adjusted earnings per diluted share to be $1.90 to $2.00. Earnings per share estimates
reflect the benefit of share repurchases completed by the end of
2015 and currency rates as of Dec. 31,
2015.
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, February
3, 2016
|
|
9:00 a.m. Eastern
Time
|
|
Live Dial-In:
888-240-1251 or 913-981-5544
|
|
(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 February 17, 2016:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
8118267
|
About The Timken Company
The Timken Company (NYSE: TKR; www.timken.com) engineers,
manufactures and markets bearings, transmissions, gearboxes, belts,
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
InterlubeTM. Known for its quality products and
collaborative technical sales model, Timken posted $2.9 billion in sales in 2015. With more
than 14,000 employees operating from 29 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 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
"Outlook," are forward-looking.
The company cautions that actual results may differ
materially from those projected or implied in forward-looking
statements due to a variety of important factors, including: the
finalization of the company's financial statements for the fourth
quarter and full-year of 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 capital 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; the
company's ability to complete and achieve the benefits of announced
plans, programs, initiatives, and capital investments; the
company's ability to avoid any indemnification liabilities under
certain agreements it entered into with TimkenSteel Corporation in
connection with the spinoff and the ability of TimkenSteel
Corporation to satisfy any indemnification liabilities it entered
into in connection with the spinoff; and the taxable nature of the
spinoff. 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 – Media
Relations
|
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
December 31,
|
|
Twelve Months
Ended
December 31,
|
(Dollars in millions,
except per share data)
|
2015
|
2014
|
|
2015
|
2014
|
Net sales
|
$
714.4
|
$
762.2
|
|
$
2,872.3
|
$ 3,076.2
|
Cost of products
sold
|
523.5
|
541.4
|
|
2,078.4
|
2,178.2
|
Gross
Profit
|
190.9
|
220.8
|
|
793.9
|
898.0
|
Selling, general
& administrative expenses (SG&A)
|
119.0
|
131.7
|
|
494.3
|
542.5
|
Impairment and
restructuring charges
|
2.7
|
5.4
|
|
14.7
|
113.4
|
Pension settlement
charges
|
241.8
|
33.0
|
|
465.0
|
33.7
|
Gain on
divestitures
|
(29.0)
|
-
|
|
(28.7)
|
-
|
Operating (Loss)
Income
|
(143.6)
|
50.7
|
|
(151.4)
|
208.4
|
Other (expense)
income, net
|
(6.7)
|
(0.8)
|
|
(7.5)
|
19.9
|
(Loss) Earnings
Before Interest and Taxes (EBIT) (1)
|
(150.3)
|
49.9
|
|
(158.9)
|
228.3
|
Interest expense,
net
|
(7.7)
|
(7.0)
|
|
(30.7)
|
(24.3)
|
(Loss) Income From
Continuing Operations Before Income Taxes
|
(158.0)
|
42.9
|
|
(189.6)
|
204.0
|
(Benefit) provision
for income taxes
|
(122.6)
|
1.3
|
|
(121.6)
|
54.7
|
(Loss) Income From
Continuing Operations
|
(35.4)
|
41.6
|
|
(68.0)
|
149.3
|
Income from
discontinued operations, net of income
taxes(2)
|
-
|
5.3
|
|
-
|
24.0
|
Net (Loss)
Income
|
(35.4)
|
46.9
|
|
(68.0)
|
173.3
|
Less: Net Income
Attributable to Noncontrolling Interest
|
0.3
|
0.4
|
|
2.8
|
2.5
|
Net (Loss) Income
Attributable to The Timken Company
|
$
(35.7)
|
$
46.5
|
|
$
(70.8)
|
$ 170.8
|
|
|
|
|
|
|
Net (Loss) Income
per Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
|
|
|
Basic (Loss)
Earnings per share - Continuing Operations
|
$
(0.44)
|
$
0.46
|
|
$
(0.84)
|
$
1.62
|
Basic Earnings per
share - Discontinued Operations
|
-
|
0.06
|
|
-
|
0.27
|
Basic (Loss)
Earnings per share
|
$
(0.44)
|
$
0.52
|
|
$
(0.84)
|
$
1.89
|
|
|
|
|
|
|
Diluted (Loss)
Earnings per share - Continuing Operations
|
$
(0.44)
|
$
0.46
|
|
$
(0.84)
|
$
1.61
|
Diluted Earnings
per share - Discontinued Operations
|
-
|
0.06
|
|
-
|
0.26
|
Diluted (Loss)
Earnings per share
|
$
(0.44)
|
$
0.52
|
|
$
(0.84)
|
$
1.87
|
|
|
|
|
|
|
Average Shares
Outstanding
|
81,845,054
|
88,633,323
|
|
84,631,778
|
90,367,345
|
Average Shares
Outstanding - assuming dilution
|
81,845,054
|
89,600,784
|
|
84,631,778
|
91,224,328
|
|
|
|
|
|
|
(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
December 31,
|
Twelve Months
Ended
December 31,
|
(Dollars in
millions)
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
Net sales to external
customers
|
$
380.3
|
$
389.5
|
$
1,558.3
|
$
1,685.4
|
Earnings before
interest and taxes (EBIT) (1)
|
$
58.9
|
$
22.4
|
$
173.3
|
$
65.6
|
EBIT Margin
(1)
|
15.5 %
|
5.8 %
|
11.1 %
|
3.9 %
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
Net sales to external
customers
|
$
334.1
|
$
372.7
|
$
1,314.0
|
$
1,390.8
|
Earnings before
interest and taxes (EBIT) (1)
|
$
45.2
|
$
79.7
|
$
190.2
|
$
267.1
|
EBIT Margin
(1)
|
13.5 %
|
21.4 %
|
14.5 %
|
19.2 %
|
|
|
|
|
|
Unallocated corporate
expense
|
$
(12.6)
|
$
(19.2)
|
$
(57.4)
|
$
(71.4)
|
Unallocated pension
settlement charges (2)
|
(241.8)
|
(33.0)
|
(465.0)
|
(33.0)
|
|
|
|
|
|
Consolidated
|
|
|
|
|
Net sales to external
customers
|
$
714.4
|
$
762.2
|
$
2,872.3
|
$
3,076.2
|
(Loss) earnings
before interest and taxes (EBIT)
(1)
|
$
(150.3)
|
$
49.9
|
$
(158.9)
|
$
228.3
|
EBIT Margin
(1)
|
(21.0)%
|
6.5 %
|
(5.5)%
|
7.4 %
|
|
|
|
|
|
(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 two agreements
pursuant to which two of the Company's U.S. defined benefit pension
plans purchased group annuity contracts from Prudential Insurance
Company of America (Prudential), which require Prudential to pay
and administer future benefits for a total of approximately 8,400
U.S. Timken retirees, as well as lump sum distributions to new
retirees during 2015.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
(Dollars in
millions)
|
(Unaudited)
December 31,
2015
|
December 31,
2014
|
ASSETS
|
|
|
Cash and cash
equivalents
|
$
129.6
|
$
278.8
|
Restricted
cash
|
0.2
|
15.3
|
Accounts
receivable
|
447.0
|
475.7
|
Inventories,
net
|
543.2
|
585.5
|
Other current
assets
|
78.8
|
126.6
|
Total Current
Assets
|
1,198.8
|
1,481.9
|
Property, Plant and
Equipment, net
|
777.8
|
780.5
|
Goodwill and other
intangible assets
|
598.6
|
499.3
|
Non-current pension
assets
|
86.3
|
176.2
|
Other
assets
|
128.9
|
63.5
|
Total
Assets
|
$
2,790.4
|
$
3,001.4
|
|
|
|
LIABILITIES
|
|
|
Accounts
payable
|
$
159.7
|
$
143.9
|
Short-term debt,
including current portion of long-term debt
|
77.1
|
8.0
|
Income
taxes
|
13.1
|
80.2
|
Accrued
expenses
|
247.8
|
301.7
|
Total Current
Liabilities
|
497.7
|
533.8
|
|
|
|
Long-term
debt
|
580.6
|
522.1
|
Accrued pension
cost
|
146.9
|
165.9
|
Accrued
postretirement benefits cost
|
136.1
|
141.8
|
Other non-current
liabilities
|
71.8
|
48.7
|
Total
Liabilities
|
1,433.1
|
1,412.3
|
|
|
|
EQUITY
|
|
|
The Timken Company
shareholders' equity
|
1,337.2
|
1,576.2
|
Noncontrolling
Interest
|
20.1
|
12.9
|
Total
Equity
|
1,357.3
|
1,589.1
|
Total Liabilities and
Equity
|
$
2,790.4
|
$
3,001.4
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
December 31,
|
Twelve Months
Ended
December 31,
|
(Dollars in
millions)
|
2015
|
2014
|
2015
|
2014
|
Cash Provided
(Used)
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net (loss) income
attributable to The Timken Company
|
$
(35.7)
|
$
46.5
|
$
(70.8)
|
$ 170.8
|
Net income from
discontinued operations
|
-
|
(5.3)
|
-
|
(24.0)
|
Net income
attributable to noncontrolling interest
|
0.3
|
0.4
|
2.8
|
2.5
|
Adjustments to
reconcile net (loss) income to net cash provided (used) by
operating activities:
|
|
|
|
|
Depreciation and
amortization
|
33.0
|
33.6
|
130.8
|
137.0
|
Impairment
charges
|
—
|
0.1
|
3.3
|
98.9
|
Loss (gain) on sale of
assets
|
10.0
|
0.7
|
11.8
|
(20.2)
|
Gain on
divestitures
|
(29.0)
|
—
|
(28.7)
|
—
|
Pension and other
postretirement expense
|
251.4
|
39.5
|
502.9
|
62.0
|
Pension and other
postretirement benefit contributions and
payments
|
(6.3)
|
(2.3)
|
(29.8)
|
(49.9)
|
Changes in operating assets
and liabilities:
|
|
|
|
|
Accounts
receivable
|
18.0
|
4.3
|
16.1
|
(48.3)
|
Inventories
|
45.8
|
25.3
|
52.9
|
(26.8)
|
Accounts payable
|
(15.4)
|
(39.3)
|
11.6
|
8.0
|
Accrued expenses
|
0.2
|
9.6
|
(55.8)
|
2.2
|
Income taxes
|
(152.9)
|
(21.0)
|
(210.5)
|
(68.6)
|
Other, net
|
9.1
|
16.6
|
38.2
|
37.9
|
Net Cash Provided by
Operating Activities - Continuing Operations
|
$
128.5
|
$
108.7
|
$
374.8
|
$ 281.5
|
Net Cash Provided by
Operating Activities - Discontinued Operations
|
-
|
2.9
|
-
|
25.5
|
Net Cash Provided by
Operating Activities
|
$
128.5
|
$
111.6
|
$
374.8
|
$ 307.0
|
INVESTING
ACTIVITIES
|
|
|
|
|
Capital
expenditures
|
$
(40.5)
|
$
(39.7)
|
$
(105.6)
|
$ (126.8)
|
Acquisitions
|
0.3
|
(9.7)
|
(213.3)
|
(21.7)
|
Divestitures
|
43.4
|
7.4
|
46.2
|
7.4
|
Other
|
0.4
|
4.4
|
7.5
|
23.4
|
Net Cash (Used)
Provided by Investing Activities - Continuing Operations
|
$
3.6
|
$
(37.6)
|
$
(265.2)
|
$ (117.7)
|
Net Cash Used by
Investing Activities - Discontinued Operations
|
-
|
-
|
-
|
(77.0)
|
Net Cash (Used)
Provided by Investing Activities
|
$
3.6
|
$
(37.6)
|
$
(265.2)
|
$ (194.7)
|
FINANCING
ACTIVITIES
|
|
|
|
|
Cash dividends paid to
shareholders
|
$
(21.3)
|
$
(22.1)
|
$
(87.0)
|
$ (90.3)
|
Purchase of treasury
shares
|
(81.8)
|
(4.4)
|
(309.7)
|
(270.9)
|
Net proceeds (payments) from
credit facilities
|
(21.4)
|
(0.3)
|
55.0
|
(9.8)
|
Net proceeds (payments) from
long-term debt
|
(44.5)
|
(0.1)
|
75.1
|
95.5
|
Distribution of
TimkenSteel
|
—
|
—
|
—
|
(46.5)
|
Other
|
17.6
|
(0.2)
|
25.0
|
19.8
|
Net Cash Used by
Financing Activities - Continuing Operations
|
$
(151.4)
|
$
(27.1)
|
$
(241.6)
|
$ (302.2)
|
Net Cash Provided by
Financing Activities - Discontinued Operations
|
-
|
-
|
-
|
100.0
|
Net Cash Used by
Financing Activities
|
$
(151.4)
|
$
(27.1)
|
$
(241.6)
|
$ (202.2)
|
Effect of exchange
rate changes on cash
|
(6.1)
|
(6.3)
|
(17.2)
|
(15.9)
|
(Decrease) Increase
In Cash and Cash Equivalents
|
$
(25.4)
|
$
40.6
|
$
(149.2)
|
$ (105.8)
|
Cash and Cash
Equivalents at Beginning of Period
|
155.0
|
238.2
|
278.8
|
384.6
|
Cash and Cash
Equivalents at End of Period
|
$
129.6
|
$
278.8
|
$
129.6
|
$ 278.8
|
Reconciliations of
Adjusted Net Income from Continuing Operations to GAAP (Loss)
Income from Continuing Operations and Adjusted Diluted Earnings Per
Share to GAAP (Loss) Earnings 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 adjusted diluted earnings per share,
adjusted to remove: (a) pension settlement charges; (b) impairment
and restructuring charges; (c) gain on divestitures and the sale of
real estate; (d) acquisition related charges; (e) fixed asset
write-offs; and (f) the benefit from income taxes are
representative of the Company's performance and therefore useful to
investors.
|
|
|
Three Months
Ended
|
Twelve Months
Ended
|
(Dollars in
millions, except share data)
|
December
31,
|
December
31,
|
|
2015
|
EPS
|
2014
|
EPS
|
2015
|
EPS
|
2014
|
EPS
|
(Loss) Income from
Continuing Operations
|
$
(35.4)
|
|
$
41.6
|
|
$
(68.0)
|
|
$ 149.3
|
|
Less:
Net Income Attributable to Noncontrolling Interest
|
0.3
|
|
0.4
|
|
2.8
|
|
2.5
|
|
Net (Loss) Income from
Continuing Operations attributable to The Timken Company
|
$
(35.7)
|
$
(0.44)
|
$
41.2
|
$
0.46
|
$
(70.8)
|
$ (0.84)
|
$ 146.8
|
$ 1.61
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Pension
settlement charges (1)
|
$
241.8
|
$
2.92
|
$
33.0
|
$
0.36
|
$
465.0
|
$ 5.45
|
$
33.7
|
$ 0.37
|
Impairment and
restructuring charges (2)
|
3.1
|
0.04
|
5.9
|
0.07
|
15.9
|
0.19
|
136.2
|
1.49
|
Gain on
divestitures and sale of real estate (3)
|
(29.0)
|
(0.35)
|
-
|
-
|
(28.7)
|
(0.33)
|
(22.6)
|
(0.25)
|
Acquisition
related charges (4)
|
3.8
|
0.05
|
-
|
-
|
5.7
|
0.07
|
-
|
-
|
Fixed asset
write-off (5)
|
9.7
|
0.12
|
-
|
-
|
9.7
|
0.11
|
-
|
-
|
Tax benefit
from above adjustments (net) (6)
|
(109.6)
|
(1.32)
|
(13.7)
|
(0.15)
|
(173.1)
|
(2.03)
|
(52.5)
|
(0.58)
|
Other income
tax adjustments (7)
|
(35.1)
|
(0.43)
|
(8.5)
|
(0.09)
|
(34.6)
|
(0.41)
|
(8.7)
|
(0.09)
|
Total Adjustments:
|
84.7
|
1.03
|
16.7
|
0.19
|
259.9
|
3.05
|
86.1
|
0.94
|
Adjusted Net Income
from Continuing Operations
|
$
49.0
|
$
0.59
|
$
57.9
|
$
0.65
|
$
189.1
|
$ 2.21
|
$ 232.9
|
$ 2.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Pension
settlement charges primarily related to two agreements pursuant to
which two of the Company's U.S. defined benefit pension plans
purchased group annuity contracts from Prudential, which require
Prudential to pay and administer future benefits for a total of
approximately 8,400 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) Gain on
divestitures related to the gain on the sales of Timken Alcor
Aerospace Technologies, Inc. (Alcor) located in Mesa, Arizona, of
$29.0 million in the fourth quarter of 2015. Gain on the sale of
real estate related to the sale of the former manufacturing
facility in Sao Paulo, Brazil of $22.6 million in the first quarter
of 2014.
|
|
|
|
|
|
|
|
|
|
(4) Acquisition
charges related to the acquisition of the Carlisle belts product
line, including an inventory step up and one time transaction
costs.
|
|
|
|
|
|
|
|
|
|
(5) The fixed
asset write-off related to costs that remained in construction in
process (CIP) after the related assets were placed into
service. The majority of these assets were placed into
service between 2008 and 2012. This error was identified
during an examination of aged balances in the CIP account.
Management of the Company concluded that the correction of this
error in the fourth quarter of 2015 and the presence of this error
in prior periods is immaterial to all periods presented.
|
|
|
|
|
|
|
|
|
|
(6) Tax benefit
from above adjustments (net) included the tax impact on pre-tax
special items as well as adjustments to reflect the use of one
overall effective tax rate on adjusted pre-tax income in interim
periods.
|
|
|
|
|
|
|
|
|
|
(7) Other
income tax adjustments included the impact of discrete tax items
recorded during the respective periods, including the reversal of
certain valuation allowances on deferred tax assets and reversals
of uncertain tax positions in the fourth quarter of
2015.
|
Reconciliation of
EBIT to GAAP Net (Loss) Income, and EBIT Margin, After Adjustments,
to Net (Loss) Income as a Percentage of Sales and EBIT, After
Adjustments, to Net (Loss) Income:
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
The following
reconciliation is provided as additional relevant information about
the Company's performance. Management believes consolidated
(loss) earnings before interest and taxes (EBIT) is representative
of the Company's performance and that it is appropriate to compare
GAAP net (loss) income 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
|
Twelve Months
Ended
|
(Dollars in
millions, except share data)
|
December
31,
|
December
31,
|
|
2015
|
Percentage to
Net Sales
|
2014
|
Percentage to
Net Sales
|
2015
|
Percentage to
Net Sales
|
2014
|
Percentage to
Net Sales
|
Net (Loss)
Income
|
$
(35.4)
|
(5.0)%
|
$
46.9
|
6.2 %
|
$
(68.0)
|
(2.4)%
|
$
173.3
|
5.6 %
|
|
|
|
|
|
|
|
|
|
Income from
discontinued operations, net of income taxes
|
—
|
—%
|
(5.3)
|
(0.7)%
|
—
|
—%
|
(24.0)
|
(0.8)%
|
(Benefit) provision
for income taxes
|
(122.6)
|
(17.1)%
|
1.3
|
0.2 %
|
(121.6)
|
(4.2)%
|
54.7
|
1.8 %
|
Interest
expense
|
8.4
|
1.2 %
|
8.3
|
1.1 %
|
33.4
|
1.2 %
|
28.7
|
0.9 %
|
Interest
income
|
(0.7)
|
(0.1)%
|
(1.3)
|
(0.2)%
|
(2.7)
|
(0.1)%
|
(4.4)
|
(0.1)%
|
Consolidated (loss)
earnings before interest and taxes (EBIT)
|
$
(150.3)
|
(21.0)%
|
$
49.9
|
6.5 %
|
$
(158.9)
|
(5.5)%
|
$
228.3
|
7.4 %
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Pension
settlement charges (1)
|
$
241.8
|
33.9 %
|
$
33.0
|
4.4 %
|
$
465.0
|
16.2 %
|
$
33.7
|
1.1 %
|
Impairment and
restructuring charges (2)
|
3.1
|
0.4 %
|
5.9
|
0.8 %
|
15.9
|
0.5 %
|
136.2
|
4.4 %
|
Gain on
divestitures and sale of real estate (3)
|
(29.0)
|
(4.1)%
|
—
|
—%
|
(28.7)
|
(1.0)%
|
(22.6)
|
(0.7)%
|
Acquisition
related charges (4)
|
3.8
|
0.5 %
|
—
|
—%
|
5.7
|
0.2 %
|
—
|
—%
|
Fixed asset
write-off (5)
|
9.7
|
1.4 %
|
—
|
—%
|
9.7
|
0.3 %
|
—
|
—%
|
Total Adjustments
|
229.4
|
32.1 %
|
38.9
|
5.2 %
|
467.6
|
16.2 %
|
147.3
|
4.8 %
|
Consolidated earnings
before interest and taxes (EBIT), after adjustments
|
$
79.1
|
11.1 %
|
$
88.8
|
11.7 %
|
$
308.7
|
10.7 %
|
$
375.6
|
12.2 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Pension
settlement charges primarily related to two agreements pursuant to
which two of the Company's U.S. defined pension plans purchased
group annuity contracts from Prudential, which require Prudential
to pay and administer future benefits for a total of approximately
8,400 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) Gain on
divestitures related to the gain on the sale of Alcor located in
Mesa, Arizona, of $29.0 million in the fourth quarter of 2015. Gain
on the sale of real estate related to the sale of the former
manufacturing facility in Sao Paulo, Brazil of $22.6 million in the
first quarter of 2014.
|
|
|
|
|
|
|
|
|
|
(4) Acquisition
charges related to the acquisition of the Carlisle belts product
line, including an inventory step up and one time transaction
costs.
|
|
|
|
|
|
|
|
|
|
(5) The fixed
asset write-off related to costs that remained in CIP after the
related assets were placed into service. The majority of
these assets were placed into service between 2008 and 2012.
This error was identified during an examination of aged balances in
the CIP account. Management of the Company concluded that the
correction of this error in the fourth quarter of 2015 and the
presence of this error in prior periods is immaterial to all
periods presented.
|
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
December 31,
2015
|
Percentage to Net
Sales
|
Three Months
Ended
December 31,
2014
|
Percentage to Net
Sales
|
Twelve Months
Ended
December 31,
2015
|
Percentage to Net
Sales
|
Twelve Months
Ended
December 31,
2014
|
Percentage to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
58.9
|
15.5%
|
$
22.4
|
5.8 %
|
$
173.3
|
11.1%
|
$
65.6
|
3.9%
|
|
|
|
|
|
|
|
|
|
Pension settlement
charges (1)
|
-
|
—%
|
-
|
—%
|
-
|
—%
|
0.7
|
—%
|
Impairment and
restructuring charges(2)
|
2.5
|
0.6 %
|
6.2
|
1.5 %
|
6.9
|
0.4 %
|
133.4
|
7.9 %
|
Gain on divestitures
and sale of real estate (3)
|
(29.0)
|
(7.6)%
|
-
|
—%
|
(29.0)
|
(1.8)%
|
(22.6)
|
(1.3)%
|
Acquisition related
charges(4)
|
2.3
|
0.6 %
|
-
|
—%
|
3.0
|
0.2 %
|
-
|
—%
|
Fixed asset write-off
(5)
|
1.5
|
0.4 %
|
-
|
—%
|
1.5
|
0.1 %
|
-
|
—%
|
Earnings before
interest and taxes (EBIT), after adjustments
|
$
36.2
|
9.5%
|
$
28.6
|
7.3%
|
$
155.7
|
10.0%
|
$
177.1
|
10.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Process
Industries
|
(Dollars in
millions)
|
Three Months
Ended
December 31,
2015
|
Percentage to Net
Sales
|
Three Months
Ended
December 31,
2014
|
Percentage to Net
Sales
|
Twelve Months
Ended
December 31,
2015
|
Percentage to Net
Sales
|
Twelve Months
Ended
December 31,
2014
|
Percentage to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
45.2
|
13.5%
|
$
79.7
|
21.4%
|
$
190.2
|
14.5%
|
$
267.1
|
19.2%
|
|
|
|
|
|
|
|
|
|
Impairment and
restructuring charges(2)
|
1.0
|
0.3 %
|
(0.3)
|
(0.1)%
|
8.9
|
0.7%
|
2.2
|
0.2 %
|
Loss on divestitures
(3)
|
-
|
—%
|
-
|
—%
|
0.3
|
—%
|
-
|
—%
|
Acquisition related
charges(4)
|
1.3
|
0.4 %
|
-
|
—%
|
1.8
|
0.1%
|
-
|
—%
|
Fixed asset write-off
(5)
|
8.2
|
2.5 %
|
-
|
—%
|
8.2
|
0.6%
|
-
|
—%
|
Earnings before
interest and taxes (EBIT), after adjustments
|
$
55.7
|
16.7%
|
$
79.4
|
21.3%
|
$
209.4
|
15.9%
|
$
269.3
|
19.4%
|
|
|
|
|
|
|
|
|
|
(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) loss
on divestitures related to the gain on the sale of Alcor located in
Mesa, Arizona, of $29.0 million in the fourth quarter of 2015, and
the loss on the sale of the Company's repair business in Niles,
Ohio, of $0.3 million in the second quarter of 2015. Gain on
the sale of real estate related to the sale of the former
manufacturing facility in Sao Paulo, Brazil of $22.6 million in the
first quarter of 2014.
|
|
|
|
|
|
|
|
|
|
(4) Acquisition
charges related to the acquisition of the Carlisle belts product
line, including an inventory step up and one time transaction
costs.
|
|
|
|
|
|
|
|
|
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(5) The fixed
asset write-off related to costs that remained in CIP after the
related assets were placed into service. The majority of
these assets were placed into service between 2008 and 2012.
This error was identified during an examination of aged balances in
the CIP account. Management of the Company concluded that the
correction of this error in the fourth quarter of 2015 and the
presence of this error in prior periods is immaterial to all
periods presented.
|
Reconciliation of
Total Debt to Net Debt and the Ratio of Net Debt to Capital to the
Ratio of Total Debt to Capital:
|
(Unaudited)
|
|
|
|
|
These reconciliations
are 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 and the Ratio of Net Debt to Capital are important measures of
the Company's financial position, due to the amount of cash and
cash equivalents.
|
(Dollars in
millions)
|
|
|
|
|
|
December 31,
2015
|
December 31,
2014
|
Short-term debt,
including current portion of long-term debt
|
|
|
$
77.1
|
$
8.0
|
Long-term
debt
|
|
|
580.6
|
522.1
|
Total Debt
|
|
|
$
657.7
|
$
530.1
|
Less: Cash, cash
equivalents and restricted cash
|
|
|
(129.8)
|
(294.1)
|
Net Debt
|
|
|
$
527.9
|
$
236.0
|
|
|
|
|
|
Total
equity
|
|
|
$
1,357.3
|
$
1,589.1
|
|
|
|
|
|
Ratio of Total Debt
to Capital
|
|
|
32.6 %
|
25.0 %
|
Ratio of Net Debt to
Capital
|
|
|
28.0 %
|
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
|
Twelve Months
Ended
|
|
December
31,
|
December
31,
|
|
2015
|
2014
|
2015
|
2014
|
Net cash provided by
operating activities from continuing operations
|
$
128.5
|
$
108.7
|
$
374.8
|
$
281.5
|
Less: capital
expenditures
|
(40.5)
|
(39.7)
|
(105.6)
|
(126.8)
|
Free cash flow
|
$
88.0
|
$
69.0
|
$
269.2
|
$
154.7
|
Reconciliation of
Adjusted Earnings per Share to GAAP Earnings per Share for Full
Year 2016 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; and (b) restructuring charges 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
|
$
1.35
|
$
1.45
|
|
|
|
Adjustments:
|
|
|
Pension
settlement charges (1)
|
0.25
|
0.25
|
Restructuring
charges (2)
|
0.30
|
0.30
|
Total Adjustments:
|
$
0.55
|
$
0.55
|
Forecasted full year
adjusted diluted earnings per share
|
$
1.90
|
$
2.00
|
|
|
|
|
|
|
|
|
|
(1) Pension
settlement charges primarily relate to anticipated lump sum
settlement activity.
|
|
|
|
(2)
Restructuring charges relate to severance and other cost reduction
initiatives.
|
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SOURCE The Timken Company