NORTH CANTON, Ohio,
Oct. 27, 2016 /PRNewswire/
-- The Timken Company (NYSE: TKR; www.timken.com), a
global leader in bearings and mechanical power transmission
products, today reported third-quarter 2016 sales
of $657 million, down approximately 7 percent from the
same period a year ago. Excluding unfavorable currency of 1
percent, sales were down 6 percent due to weakness across most
end markets, partially offset by the net benefit of acquisitions
and divestitures.
In the third quarter, Timken posted net income
of $20.6 million or $0.26 per diluted share,
versus net income of $63.4 million or $0.75 per
diluted share for the same period a year ago. The year-over-year
decrease in net income was driven by a large tax benefit in the
year-ago period, lower volume, unfavorable price/mix and higher
pension settlement and restructuring charges, partially offset by
lower material, manufacturing and SG&A costs.
Net income in both quarters included expense attributable to
pension settlements, impairment and restructuring, and other items.
In addition, the prior period included a large tax benefit.
Excluding these items, adjusted net income
was $38.9 million or $0.49 per diluted share.
This compares with adjusted net income of $46.7 million
or $0.55 per diluted share for the same period in 2015
(reference table below).
Reconciliations to
Net Income & Earnings Per Share
|
2016 –
3Q
|
2015 –
3Q
|
|
($M)
|
EPS
|
($M)
|
EPS
|
Net Income
Attributable to The Timken Company
|
$
20.6
|
$ 0.26
|
$ 63.4
|
$ 0.75
|
Adjustments*:
|
|
|
|
|
Pension settlement
charges
|
$
10.3
|
|
$
3.6
|
|
Impairment and
restructuring charges
|
7.3
|
|
4.8
|
|
Acquisition related
charges
|
2.5
|
|
1.9
|
|
CDSOA
expense
|
0.2
|
|
---
|
|
Loss on dissolution
of a subsidiary
|
0.9
|
|
---
|
|
Benefit for income
taxes
|
(2.9)
|
|
(27.0)
|
|
Total
adjustments
|
18.3
|
0.23
|
(16.7)
|
(0.20)
|
Adjusted Net
Income/Adjusted EPS
|
$
38.9
|
$ 0.49
|
$ 46.7
|
$ 0.55
|
|
|
|
|
|
*Adjustments are
pre-tax, with net tax (benefit) provision listed
separately.
|
"We performed well again this quarter, demonstrating our ability
to navigate a challenging market environment," said
Richard G. Kyle, Timken president and chief executive
officer. "While most industrial sectors remain weak, our earnings
are on track for the year and we continue to focus on organic
outgrowth initiatives, operational excellence and deploying capital
to create shareholder value."
During the quarter, the company:
- Completed the acquisition of Lovejoy, Inc., a manufacturer of
premium industrial couplings and universal joints, further
expanding its mechanical power transmission portfolio;
- Continued to reduce operating costs, including the announcement
of plans to close its Pulaski,
Tenn., bearing plant and cease manufacturing operations in
South Africa; and
- Returned $35 million in capital
to shareholders in the third quarter through the repurchase of
480,000 shares and the payment of its 377th consecutive
quarterly dividend.
Third-Quarter Segment Results
Mobile Industries reported third-quarter sales
of $353 million, 11 percent lower than the same
period a year ago. Excluding unfavorable currency of 1 percent,
sales were down 10 percent, as the net benefit of
acquisitions were more than offset by declines across most end
markets.
Earnings before interest and taxes (EBIT) in the quarter
were $24.1 million or 6.8 percent of sales,
compared with EBIT of $43.0 million
or 10.8 percent of sales for the same period a year ago.
The decrease in EBIT reflects lower volume, unfavorable price/mix
and higher impairment and restructuring charges, partially offset
by favorable material and manufacturing costs and lower SG&A
expenses.
Excluding impairment and restructuring and other items, adjusted
EBIT in the quarter was $30.6 million
or 8.7 percent of sales, compared
with $46.1 million or 11.6 percent of sales in
the third quarter last year.
Process Industries sales of $304 million for
the third quarter declined 2 percent from the same period a
year ago. Excluding unfavorable currency of 1 percent, sales
were down 1 percent, driven by weaker demand in heavy industries,
industrial services and wind energy, partially offset by higher
military marine revenue and the benefit of acquisitions.
EBIT for the quarter was $40.7 million
or 13.4 percent of sales, compared with EBIT
of $43.1 million or 13.9 percent of sales for
the same period a year ago. The decrease in EBIT was driven by the
impact of lower volume, unfavorable price/mix and charges related
to the Lovejoy acquisition, partially offset by favorable material
costs and lower SG&A expenses.
Excluding acquisition-related charges and other items, adjusted
EBIT in the quarter was $44.2 million or 14.5 percent of
sales, compared with $45.4 million or 14.7 percent of
sales in the third quarter last year.
2016 Outlook
The company expects 2016 revenue to be down approximately 7 to 8
percent in total versus 2015, including an estimated unfavorable
currency impact of 1.5 percent.
Within its segments, the company estimates full-year 2016:
- Mobile Industries' sales to be down approximately 8 percent,
including an unfavorable currency impact of 1.5 percent. The
remaining decline reflects lower demand in rail, off-highway,
aerospace and heavy truck, partially offset by growth in automotive
and the net benefit of acquisitions.
- Process Industries' sales to be down approximately 7 percent,
including an unfavorable currency impact of 1.5 percent. The
remaining decline reflects lower demand in heavy industries and the
industrial aftermarket, partially offset by the benefit of
acquisitions.
Timken anticipates 2016 earnings per diluted share to range
from $1.77 to $1.83 for the full year on a GAAP
basis. The company expects 2016 adjusted earnings per diluted share
to range from $1.92 to $1.98.
Conference Call Information
Timken will host a conference call today at 11 a.m. Eastern
Time to review its financial results. Presentation materials will
be available online in advance of the call for interested investors
and securities analysts.
Conference
Call:
|
Thursday, October 27,
2016
|
|
11 a.m. Eastern
Time
|
|
Live Dial-In:
877-545-1403 or 719-325-4826
|
|
(Call in 10 minutes
prior to be included.)
|
|
Conference ID:
Timken's 3Q Earnings Call
|
|
Live
Webcast: http://investors.timken.com
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through November 10, 2016:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
1719432
|
About The Timken Company
The Timken Company (NYSE: TKR; www.timken.com) engineers,
manufactures and markets bearings, gear drives, belts, chain,
couplings, 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®,
Lovejoy® and Interlube™. 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 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 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 third
quarter of 2016; 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
changes to the company's accounting methods; 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; and retention of U.S. Continued Dumping
and Subsidy Offset Act distributions. 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, 2015,
quarterly reports on Form 10-Q and current reports on Form 8-K.
Except as required by the federal securities laws, the company
undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.
Media Relations:
234.262.3514
mediarelations@timken.com
Investor Relations:
Jason
Hershiser
234.262.7101
jason.hershiser@timken.com
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Timken
Company
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
(Dollars in millions,
except per share data)
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2016
|
2015
|
|
2016
|
2015
|
Net sales
|
$
|
657.4
|
|
$
|
707.4
|
|
|
$
|
2,015.0
|
|
$
|
2,157.9
|
|
Cost of products
sold
|
489.9
|
|
512.0
|
|
|
1,484.3
|
|
1,554.9
|
|
Gross
Profit
|
167.5
|
|
195.4
|
|
|
530.7
|
|
603.0
|
|
Selling, general
& administrative expenses (SG&A)
|
109.5
|
|
120.7
|
|
|
338.0
|
|
375.3
|
|
Impairment and
restructuring charges
|
5.3
|
|
4.4
|
|
|
18.7
|
|
12.0
|
|
Pension settlement
charges
|
10.3
|
|
3.6
|
|
|
11.9
|
|
223.2
|
|
Loss on
divestitures
|
—
|
|
—
|
|
|
—
|
|
0.3
|
|
Operating Income
(Loss)
|
42.4
|
|
66.7
|
|
|
162.1
|
|
(7.8)
|
|
Continued Dumping and
Subsidy Offset Act income (expense), net(1)
|
(0.2)
|
|
—
|
|
|
53.6
|
|
—
|
|
Other (expense),
net
|
(0.1)
|
|
(0.8)
|
|
|
(1.8)
|
|
(0.8)
|
|
Earnings (Loss)
Before Interest and Taxes
(EBIT)(2)
|
42.1
|
|
65.9
|
|
|
213.9
|
|
(8.6)
|
|
Interest expense,
net
|
(7.6)
|
|
(8.0)
|
|
|
(24.0)
|
|
(23.0)
|
|
Income (Loss)
Before Income Taxes
|
34.5
|
|
57.9
|
|
|
189.9
|
|
(31.6)
|
|
Provision (benefit)
for income taxes
|
13.5
|
|
(6.6)
|
|
|
61.1
|
|
1.0
|
|
Net Income
(Loss)
|
21.0
|
|
64.5
|
|
|
128.8
|
|
(32.6)
|
|
Less: Net income
attributable to non-controlling interest
|
0.4
|
|
1.1
|
|
|
0.3
|
|
2.5
|
|
Net Income (Loss)
Attributable to The Timken Company
|
$
|
20.6
|
|
$
|
63.4
|
|
|
$
|
128.5
|
|
$
|
(35.1)
|
|
|
|
|
|
|
|
Net Income (Loss)
per Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
|
|
|
Basic Earnings (Loss) per
share
|
$
|
0.26
|
|
$
|
0.76
|
|
|
$
|
1.63
|
|
$
|
(0.41)
|
|
|
|
|
|
|
|
Diluted Earnings (Loss)
per share
|
$
|
0.26
|
|
$
|
0.75
|
|
|
$
|
1.62
|
|
$
|
(0.41)
|
|
|
|
|
|
|
|
Average Shares
Outstanding
|
77,935,783
|
|
83,671,931
|
|
|
78,808,179
|
|
85,578,800
|
|
Average Shares
Outstanding - assuming dilution
|
78,617,476
|
|
84,145,751
|
|
|
79,471,756
|
|
85,578,800
|
|
|
|
|
|
|
|
(1) U.S.
Continued Dumping and Subsidy Offset Act (CDSOA) income (expense),
net, represents the amount of funds awarded to the Company from
monies collected by U.S. Customs and Border Protection (U.S.
Customs) on entries of merchandise subject to anti-dumping orders
that entered the U.S. prior to October 1, 2007.
|
|
|
|
|
|
|
(2) EBIT is a non-GAAP measure
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 core operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BUSINESS
SEGMENTS
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(Dollars in
millions)
|
2016
|
2015
|
|
2016
|
2015
|
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
|
Net sales
|
$
|
353.1
|
|
$
|
396.4
|
|
|
$
|
1,104.1
|
|
$
|
1,178.0
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
24.1
|
|
$
|
43.0
|
|
|
$
|
89.6
|
|
$
|
114.4
|
|
EBIT Margin
(1)
|
6.8
|
%
|
10.8
|
%
|
|
8.1
|
%
|
9.7
|
%
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
Net sales
|
$
|
304.3
|
|
$
|
311.0
|
|
|
$
|
910.9
|
|
$
|
979.9
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
40.7
|
|
$
|
43.1
|
|
|
$
|
120.0
|
|
$
|
145.0
|
|
EBIT Margin
(1)
|
13.4
|
%
|
13.9
|
%
|
|
13.2
|
%
|
14.8
|
%
|
|
|
|
|
|
|
Unallocated corporate
expense
|
$
|
(12.2)
|
|
$
|
(16.6)
|
|
|
$
|
(37.4)
|
|
$
|
(44.8)
|
|
Unallocated pension
settlement charges (2)
|
(10.3)
|
|
(3.6)
|
|
|
(11.9)
|
|
(223.2)
|
|
CDSOA income
(expense), net(3)
|
(0.2)
|
|
—
|
|
|
53.6
|
|
—
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
Net sales
|
$
|
657.4
|
|
$
|
707.4
|
|
|
$
|
2,015.0
|
|
$
|
2,157.9
|
|
Earnings (loss)
before interest and taxes (EBIT) (1)
|
$
|
42.1
|
|
$
|
65.9
|
|
|
$
|
213.9
|
|
$
|
(8.6)
|
|
EBIT Margin
(1)
|
6.4
|
%
|
9.3
|
%
|
|
10.6
|
%
|
(0.4)%
|
|
|
|
|
|
|
|
(1) EBIT
is a non-GAAP measure defined as operating income plus other income
(expense). EBIT Margin is a non-GAAP measure defined as 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 core operations of the
segments and Company, respectively.
|
|
|
|
|
|
|
(2) Unallocated pension settlement
charges in 2016 primarily related to the purchase of a group
annuity contract from The Canada Life Assurance Company (Canada
Life) to pay and administer future pension benefits for 135
Canadian retirees, as well as lump-sum distributions to deferred
vested participants. Unallocated pension settlement charges in 2015
primarily related to the purchase of a group annuity contract from
Prudential Insurance Company of America (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.
|
|
|
|
|
|
|
(3) CDSOA
income (expense), net, represents the amount of funds awarded to
the Company from monies collected by U.S. Customs on entries of
merchandise subject to anti-dumping orders that entered the U.S.
prior to October 1, 2007.
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
(Dollars in
millions)
|
(Unaudited)
September 30,
2016
|
|
December 31,
2015
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
129.0
|
|
|
$
|
129.6
|
|
Restricted
cash
|
2.7
|
|
|
0.2
|
|
Accounts
receivable
|
452.8
|
|
|
454.6
|
|
Inventories,
net
|
575.9
|
|
|
543.2
|
|
Other current
assets
|
66.4
|
|
|
78.8
|
|
Total Current
Assets
|
1,226.8
|
|
|
1,206.4
|
|
Property, plant and
equipment, net
|
796.6
|
|
|
777.8
|
|
Goodwill and other
intangible assets
|
633.5
|
|
|
598.6
|
|
Non-current pension
assets
|
84.5
|
|
|
86.3
|
|
Other
assets
|
77.8
|
|
|
115.0
|
|
Total
Assets
|
$
|
2,819.2
|
|
|
$
|
2,784.1
|
|
|
|
|
|
LIABILITIES
|
|
|
|
Accounts
payable
|
$
|
184.5
|
|
|
$
|
159.7
|
|
Short-term debt,
including current portion of long-term debt
|
22.5
|
|
|
77.1
|
|
Income
taxes
|
12.1
|
|
|
13.1
|
|
Accrued
expenses
|
231.4
|
|
|
255.4
|
|
Total Current
Liabilities
|
450.5
|
|
|
505.3
|
|
|
|
|
|
Long-term
debt
|
641.4
|
|
|
579.4
|
|
Accrued pension
cost
|
148.1
|
|
|
146.9
|
|
Accrued
postretirement benefits cost
|
130.7
|
|
|
136.1
|
|
Other non-current
liabilities
|
82.3
|
|
|
71.8
|
|
Total
Liabilities
|
1,453.0
|
|
|
1,439.5
|
|
|
|
|
|
EQUITY
|
|
|
|
The Timken Company
shareholders' equity
|
1,339.5
|
|
|
1,324.5
|
|
Noncontrolling
Interest
|
26.7
|
|
|
20.1
|
|
Total
Equity
|
1,366.2
|
|
|
1,344.6
|
|
Total Liabilities and
Equity
|
$
|
2,819.2
|
|
|
$
|
2,784.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
(Dollars in
millions)
|
2016
|
2015
|
2016
|
2015
|
Cash Provided
(Used)
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net income (loss)
attributable to The Timken Company
|
$
|
20.6
|
|
$
|
63.4
|
|
$
|
128.5
|
|
$
|
(35.1)
|
|
Net (loss) income
attributable to noncontrolling interest
|
0.4
|
|
1.1
|
|
0.3
|
|
2.5
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation
and amortization
|
33.3
|
|
32.2
|
|
98.3
|
|
97.8
|
|
Impairment
charges
|
1.2
|
|
—
|
|
3.8
|
|
3.3
|
|
CDSOA
receivable
|
6.2
|
|
—
|
|
—
|
|
—
|
|
Pension and
other postretirement expense
|
19.5
|
|
13.5
|
|
38.4
|
|
251.5
|
|
Pension and
other postretirement benefit contributions
and payments
|
(8.0)
|
|
(6.6)
|
|
(22.3)
|
|
(23.5)
|
|
Changes in
operating assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
7.5
|
|
20.8
|
|
12.2
|
|
(1.9)
|
|
Inventories
|
(5.4)
|
|
9.9
|
|
(13.6)
|
|
7.1
|
|
Accounts
payable
|
2.5
|
|
(1.9)
|
|
15.0
|
|
27.0
|
|
Accrued
expenses
|
(8.7)
|
|
(0.6)
|
|
(19.1)
|
|
(57.6)
|
|
Income
taxes
|
(3.4)
|
|
(13.1)
|
|
22.8
|
|
(57.6)
|
|
Other, net
|
8.8
|
|
22.1
|
|
12.8
|
|
32.8
|
|
Net Cash Provided by
Operating Activities
|
$
|
74.5
|
|
$
|
140.8
|
|
$
|
277.1
|
|
$
|
246.3
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Capital
expenditures
|
$
|
(34.0)
|
|
$
|
(21.6)
|
|
$
|
(84.4)
|
|
$
|
(65.1)
|
|
Acquisitions
|
(62.1)
|
|
(213.6)
|
|
(62.8)
|
|
(213.6)
|
|
Other
|
3.8
|
|
(0.3)
|
|
3.9
|
|
9.9
|
|
Net Cash Used in
Investing Activities
|
$
|
(92.3)
|
|
$
|
(235.5)
|
|
$
|
(143.3)
|
|
$
|
(268.8)
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Cash dividends paid
to shareholders
|
$
|
(20.3)
|
|
$
|
(21.7)
|
|
$
|
(61.4)
|
|
$
|
(65.7)
|
|
Purchase of treasury
shares
|
(15.1)
|
|
(50.7)
|
|
(83.3)
|
|
(227.9)
|
|
Net proceeds from
credit facilities
|
43.4
|
|
86.6
|
|
19.0
|
|
197.1
|
|
Net payments from
long-term debt
|
(15.1)
|
|
—
|
|
(15.1)
|
|
(1.1)
|
|
Other
|
(2.5)
|
|
3.9
|
|
2.7
|
|
7.4
|
|
Net Cash (Used in)
Provided by Financing Activities
|
$
|
(9.6)
|
|
$
|
18.1
|
|
$
|
(138.1)
|
|
$
|
(90.2)
|
|
Effect of exchange
rate changes on cash
|
0.4
|
|
(5.2)
|
|
3.7
|
|
(11.1)
|
|
Decrease in Cash and
Cash Equivalents
|
$
|
(27.0)
|
|
$
|
(81.8)
|
|
$
|
(0.6)
|
|
$
|
(123.8)
|
|
Cash and cash
equivalents at Beginning of Period
|
156.0
|
|
236.8
|
|
129.6
|
|
278.8
|
|
Cash and Cash
Equivalents at End of Period
|
$
|
129.0
|
|
$
|
155.0
|
|
$
|
129.0
|
|
$
|
155.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliations of
Adjusted Net Income to GAAP Income (Loss) and Adjusted Diluted
Earnings Per Share to GAAP Earnings (Loss) Per
Share:
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following
reconciliation is provided as additional relevant information about
the Company's performance deemed useful to investors.
Management believes that non-GAAP measures of adjusted net income
and adjusted diluted earnings per share are important financial
measures used in the management of the business, including
decisions concerning the allocation of resources and assessment of
performance. Management believes that reporting adjusted net income
and adjusted diluted earnings per share is useful to investors as
these measures are representative of the Company's core
operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions, except share data)
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
|
2016
|
|
EPS
|
2015
|
|
EPS
|
|
2016
|
|
EPS
|
2015
|
|
EPS
|
Income (Loss) from
The Timken Company
|
|
$
|
21.0
|
|
|
|
$
|
64.5
|
|
|
|
|
$
|
128.8
|
|
|
|
$
|
(32.6)
|
|
|
|
Less: Net (loss) income
attributable to noncontrolling interest
|
|
0.4
|
|
|
|
1.1
|
|
|
|
|
0.3
|
|
|
|
2.5
|
|
|
|
Net Income (Loss)
Attributable to The Timken Company
|
|
$
|
20.6
|
|
|
$
|
0.26
|
|
$
|
63.4
|
|
|
$
|
0.75
|
|
|
$
|
128.5
|
|
|
$
|
1.62
|
|
$
|
(35.1)
|
|
|
$
|
(0.41)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
settlement charges(2)
|
|
$
|
10.3
|
|
|
|
$
|
3.6
|
|
|
|
|
$
|
11.9
|
|
|
|
$
|
223.2
|
|
|
|
Impairment and restructuring
charges(3)
|
|
7.3
|
|
|
|
4.8
|
|
|
|
|
21.4
|
|
|
|
12.8
|
|
|
|
Acquisition related charges
(4)
|
|
2.5
|
|
|
|
1.9
|
|
|
|
|
3.3
|
|
|
|
1.9
|
|
|
|
CDSOA
(income) expense, net(5)
|
|
0.2
|
|
|
|
—
|
|
|
|
|
(53.6)
|
|
|
|
—
|
|
|
|
(Gain)
loss on dissolution/divestment of subsidiary
|
|
0.9
|
|
|
|
—
|
|
|
|
|
(0.5)
|
|
|
|
0.3
|
|
|
|
(Provision) benefit for income
taxes(6)
|
|
(2.9)
|
|
|
|
(27.0)
|
|
|
|
|
8.5
|
|
|
|
(63.0)
|
|
|
|
Total
Adjustments:
|
|
18.3
|
|
|
0.23
|
|
(16.7)
|
|
|
(0.20)
|
|
|
(9.0)
|
|
|
(0.12)
|
|
175.2
|
|
|
2.03
|
|
Adjusted Net Income
from The Timken Company
|
|
$
|
38.9
|
|
|
$
|
0.49
|
|
$
|
46.7
|
|
|
$
|
0.55
|
|
|
$
|
119.5
|
|
|
$
|
1.50
|
|
$
|
140.1
|
|
|
$
|
1.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Adjustments are pre-tax, with net
tax provision (benefit) listed separately.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Pension settlement charges in
2016 primarily related to the purchase of a group annuity contract
from Canada Life to pay and administer future pension benefits for
135 Canadian retirees, as well as lump-sum distributions to
deferred vested participants. Pension settlement charges in 2015
primarily related to the purchase of a group annuity contract from
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
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. The Company re-assesses its operating
footprint and makes adjustments as needed that result in
restructuring charges. However, management believes these
actions are not representative of the Company's core
operations. Therefore, management believes that reporting
adjusted net income and adjusted diluted earnings per share that
exclude these charges is useful to investors as those measures are
representative of the Company's core operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)
Acquisition related charges in 2016 related to the acquisition of
Lovejoy, Inc. ("Lovejoy"), including one-time transaction costs.
Acquisition related charges in 2015 related to the acquisition of
Carlstar Belts LLC ("Timken Belts").
|
|
(5) CDSOA
(income) expense, net, represents the amount of funds awarded to
the Company from monies collected by U.S. Customs on entries of
merchandise subject to anti-dumping orders that entered the U.S.
prior to October 1, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6)
(Benefit) provision for income taxes includes the net tax impact on
pre-tax adjustments, 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 deemed useful to investors.
Management believes consolidated earnings (loss) before
interest and taxes (EBIT) is a non-GAAP measure that is useful to
investors as it is representative of the Company's performance and
that it is appropriate to compare GAAP net income (loss) to
consolidated EBIT. Management also believes that non-GAAP measures
of adjusted EBIT and adjusted EBIT margin are useful to investors
as they are representative of the Company's core operations and are
used in the management of the business, including decisions
concerning the allocation of resources and assessment of
performance.
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions, except share data)
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2016
|
Percentage to
Net Sales
|
2015
|
Percentage
to
Net Sales
|
|
2016
|
Percentage to
Net Sales
|
2015
|
Percentage to
Net Sales
|
Net Income
(Loss)
|
$
|
21.0
|
|
3.2
|
%
|
$
|
64.5
|
|
9.1
|
%
|
|
$
|
128.8
|
|
6.4
|
%
|
$
|
(32.6)
|
|
(1.5)%
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit)
for income taxes
|
13.5
|
|
2.1
|
%
|
(6.6)
|
|
(0.9)%
|
|
|
61.1
|
|
3.0
|
%
|
1.0
|
|
—
|
%
|
Interest
expense
|
8.0
|
|
1.2
|
%
|
8.6
|
|
1.2
|
%
|
|
25.1
|
|
1.2
|
%
|
25.0
|
|
1.2
|
%
|
Interest
income
|
(0.4)
|
|
—
|
%
|
(0.6)
|
|
(0.1)%
|
|
|
(1.1)
|
|
(0.1)%
|
|
(2.0)
|
|
(0.1)%
|
|
Consolidated
EBIT
|
$
|
42.1
|
|
6.4
|
%
|
$
|
65.9
|
|
9.3
|
%
|
|
$
|
213.9
|
|
10.6
|
%
|
$
|
(8.6)
|
|
(0.4)%
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Pension
settlement charges (1)
|
$
|
10.3
|
|
1.6
|
%
|
$
|
3.6
|
|
0.5
|
%
|
|
$
|
11.9
|
|
0.6
|
%
|
$
|
223.2
|
|
10.3
|
%
|
Impairment and restructuring
charges(2)
|
7.3
|
|
1.1
|
%
|
4.8
|
|
0.7
|
%
|
|
21.4
|
|
1.1
|
%
|
12.8
|
|
0.6
|
%
|
CDSOA
(income) expense, net(3)
|
0.2
|
|
—
|
%
|
—
|
|
—
|
%
|
|
(53.6)
|
|
(2.7)%
|
|
—
|
|
—
|
%
|
Acquisition related
charges(4)
|
2.5
|
|
0.4
|
%
|
1.9
|
|
0.3
|
%
|
|
3.3
|
|
0.2
|
%
|
1.9
|
|
0.1
|
%
|
(Gain)
loss on dissolution/divestment of subsidiary
|
0.9
|
|
0.1
|
%
|
—
|
|
—
|
%
|
|
(0.5)
|
|
—
|
%
|
0.3
|
|
—
|
%
|
Total
Adjustments
|
21.2
|
|
3.2
|
%
|
10.3
|
|
1.5
|
%
|
|
(17.5)
|
|
(0.8)%
|
|
238.2
|
|
11.0
|
%
|
Adjusted
EBIT
|
$
|
63.3
|
|
9.6
|
%
|
$
|
76.2
|
|
10.8
|
%
|
|
$
|
196.4
|
|
9.7
|
%
|
$
|
229.6
|
|
10.6
|
%
|
|
|
|
|
|
|
|
|
|
|
(1) Pension settlement charges in
2016 primarily related to the purchase of a group annuity contract
from Canada Life to pay and administer future pension benefits for
135 Canadian retirees, as well as lump-sum distributions to
deferred vested participants. Pension settlement charges in 2015
primarily related to the purchase of a group annuity contract from
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.
|
|
|
|
|
|
|
|
|
|
|
(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. The Company re-assesses its operating
footprint and makes adjustments as needed that result in
restructuring charges. However, management believes that
these actions are not representative of the Company's core
operations. Therefore, management believes that reporting
adjusted EBIT and adjusted EBIT margin that exclude these charges
is useful to investors as those measures are representative of the
Company's core operations.
|
|
|
|
|
|
|
|
|
|
|
(3) CDSOA
(income) expense, net, represents the amount of funds awarded to
the Company from monies collected by U.S. Customs on entries of
merchandise subject to anti-dumping orders that entered the U.S.
prior to October 1, 2007.
|
|
|
|
|
|
|
|
|
|
|
(4)
Acquisition related charges in 2016 related to the acquisition of
Lovejoy, including one-time transaction costs. Acquisition related
charges in 2015 related to the acquisition of Timken
Belts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 deemed useful to investors. Management believes that
non-GAAP measures of adjusted EBIT and adjusted EBIT margin for the
segments are useful to investors as they are representative of each
segment's core operations and are used in the management of the
business, including decisions concerning the allocation of
resources and assessment of performance.
|
|
|
|
|
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Three
Months
Ended
September
30,
2016
|
Percentage
to Net
Sales
|
Three
Months
Ended
September
30, 2015
|
Percentage
to Net
Sales
|
|
Nine Months
Ended
September
30,
2016
|
Percentage
to Net
Sales
|
Nine Months
Ended
September
30, 2015
|
Percentage
to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
|
24.1
|
|
6.8
|
%
|
$
|
43.0
|
|
10.8
|
%
|
|
$
|
89.6
|
|
8.1
|
%
|
$
|
114.4
|
|
9.7
|
%
|
|
|
|
|
|
|
|
|
|
|
Impairment and
restructuring charges (1)
|
6.5
|
|
1.9
|
%
|
2.4
|
|
0.6
|
%
|
|
15.9
|
|
1.4
|
%
|
4.4
|
|
0.4
|
%
|
Gain on
dissolution/divestment of subsidiary
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
(1.4)
|
|
(0.2)%
|
|
—
|
|
—
|
%
|
Acquisition related
charges (2)
|
—
|
|
—
|
%
|
0.7
|
|
0.2
|
%
|
|
—
|
|
—
|
%
|
0.7
|
|
0.1
|
%
|
Adjusted
EBIT
|
$
|
30.6
|
|
8.7
|
%
|
$
|
46.1
|
|
11.6
|
%
|
|
$
|
104.1
|
|
9.3
|
%
|
$
|
119.5
|
|
10.2
|
%
|
|
|
|
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Three
Months
Ended
September
30,
2016
|
Percentage
to Net
Sales
|
Three
Months
Ended
September
30, 2015
|
Percentage
to Net
Sales
|
|
Nine Months
Ended
September
30,
2016
|
Percentage
to Net
Sales
|
Nine Months
Ended
September
30, 2015
|
Percentage
to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
|
40.7
|
|
13.4
|
%
|
$
|
43.1
|
|
13.9
|
%
|
|
$
|
120.0
|
|
13.2
|
%
|
$
|
145.0
|
|
14.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Impairment and
restructuring charges(1)
|
0.9
|
|
0.3
|
%
|
1.8
|
|
0.6
|
%
|
|
5.5
|
|
0.6
|
%
|
7.9
|
|
0.8
|
%
|
Loss on
dissolution/divestment of subsidiary
|
0.9
|
|
0.3
|
%
|
—
|
|
—
|
%
|
|
0.9
|
|
0.1
|
%
|
0.3
|
|
—
|
%
|
Acquisition related
charges (2)
|
1.7
|
|
0.5
|
%
|
0.5
|
|
0.2
|
%
|
|
1.7
|
|
0.2
|
%
|
0.5
|
|
0.1
|
%
|
Adjusted
EBIT
|
$
|
44.2
|
|
14.5
|
%
|
$
|
45.4
|
|
14.7
|
%
|
|
$
|
128.1
|
|
14.1
|
%
|
$
|
153.7
|
|
15.7
|
%
|
|
|
|
|
|
|
|
|
|
|
(1) 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.
The Company re-assesses its operating footprint and makes
adjustments as needed that result in restructuring charges.
However, those efforts are not representative of the Company's core
operations. Therefore, management believes that reporting
adjusted EBIT and adjusted EBIT margin that exclude these charges
is useful to investors as those measures are representative of the
Company's core operations.
|
|
|
|
|
|
|
|
|
|
|
(2) Acquisition related charges in
2016 related to the acquisition of Lovejoy, including one-time
transaction costs. Acquisition related charges in 2015 related to
the acquisition of Timken Belts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 deemed useful to investors. Capital, used for
the ratio of total debt to capital, is a non-GAAP measure defined
as total debt plus total shareholders' equity. Capital, used for
the ratio of net debt to capital, is a non-GAAP measure 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 on hand.
|
|
|
|
|
(Dollars in
millions)
|
|
|
|
|
|
|
September 30,
2016
|
December 31,
2015
|
Short-term debt,
including current portion of long-term debt
|
|
|
$
|
22.5
|
|
$
|
77.1
|
|
Long-term
debt
|
|
|
641.4
|
|
579.4
|
|
Total
Debt
|
|
|
$
|
663.9
|
|
$
|
656.5
|
|
Less: Cash, cash
equivalents and restricted cash
|
|
|
(131.7)
|
|
(129.8)
|
|
Net Debt
|
|
|
$
|
532.2
|
|
$
|
526.7
|
|
|
|
|
|
|
Total
equity
|
|
|
$
|
1,366.2
|
|
$
|
1,344.6
|
|
|
|
|
|
|
Ratio of Total Debt
to Capital
|
|
|
32.7
|
%
|
32.8
|
%
|
Ratio of Net Debt to
Capital
|
|
|
28.0
|
%
|
28.1
|
%
|
|
|
|
|
|
Reconciliation of
Free Cash Flow to GAAP Net Cash Provided by Operating
Activities:
|
(Unaudited)
|
|
|
|
|
Management believes
that free cash flow is a non-GAAP measure that is useful to
investors because it is a meaningful indicator of cash generated
from operating activities available for the execution of its
business strategy.
|
|
|
|
|
(Dollars in
millions)
|
|
|
|
|
Three Months
Ended
September 30,
|
Nine Months
Ended
September 30,
|
|
2016
|
2015
|
2016
|
2015
|
Net cash provided by
operating activities
|
$
|
74.5
|
|
$
|
140.8
|
|
$
|
277.1
|
|
$
|
246.3
|
|
Less: capital
expenditures
|
(34.0)
|
|
(21.6)
|
|
(84.4)
|
|
(65.1)
|
|
Free cash
flow
|
$
|
40.5
|
|
$
|
119.2
|
|
$
|
192.7
|
|
$
|
181.2
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted Earnings per Share to GAAP Earnings per Share for Full
Year 2016 Outlook:
|
(Unaudited)
|
The following
reconciliation is provided as additional relevant information about
the Company's outlook deemed useful to investors. Forecasted
full year adjusted diluted earnings per share is an important
financial measure that management believes is useful to investors
as it is representative of the Company's expectation for the
performance of its core business operations.
|
|
|
|
|
|
Low End
Earnings
Per Share
|
|
High End
Earnings
Per Share
|
Forecasted full year
GAAP diluted earnings per share
|
$
|
1.77
|
|
|
$
|
1.83
|
|
|
|
|
|
Forecasted
Adjustments: (1)
|
|
|
|
CDSOA
income, net (2)
|
(0.67)
|
|
|
(0.67)
|
|
Pension
settlement charges (3)
|
0.36
|
|
|
0.36
|
|
Impairment and restructuring charges
(4)
|
0.41
|
|
|
0.41
|
|
Acquisition related charges
|
0.05
|
|
|
0.05
|
|
Other,
net
|
(0.01)
|
|
|
(0.01)
|
|
Provision
for income taxes
|
0.01
|
|
|
0.01
|
|
Total
Adjustments:
|
$
|
0.15
|
|
|
$
|
0.15
|
|
Forecasted full year
adjusted diluted earnings per share
|
$
|
1.92
|
|
|
$
|
1.98
|
|
|
|
|
|
(1) Forecasted adjustments are
pre-tax, with net tax provision listed separately.
|
|
|
|
|
(2) CDSOA
income, net, represents the amount of funds awarded to the Company
from monies collected by U.S. Customs on entries of merchandise
subject to anti-dumping orders that entered the U.S. prior to
October 1, 2007.
|
|
|
|
|
(3) Pension settlement charges
primarily relate to anticipated lump-sum settlement
activity.
|
|
|
|
|
(4) Impairment and restructuring
charges relate to severance and other cost reduction
initiatives.
|
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SOURCE The Timken Company