NORTH CANTON, Ohio,
Oct. 29, 2020 /PRNewswire/
-- The Timken Company (NYSE: TKR; www.timken.com), a
world leader in engineered bearings and power transmission
products, today reported third-quarter 2020 sales
of $894.6 million, down 2.1 percent from the same period
a year ago. The decline from the prior year was driven by lower
demand in most end markets, partially offset by significant growth
in renewable energy and the favorable impact of acquisitions. Third
quarter sales were up 11.3 percent from the second quarter.
In the third quarter, Timken posted net income
of $88.8 million or $1.16 per diluted share,
versus net income of $64.2 million or $0.84 per
diluted share for the same period a year ago. The year-over-year
increase was driven primarily by pension remeasurement income,
lower operating expenses reflecting the impact of cost reduction
initiatives, favorable manufacturing performance and a lower tax
rate, partially offset by the unfavorable impact of lower volume,
price/mix and currency, and higher restructuring charges.
Excluding pension remeasurement, restructuring and other special
items detailed in the attached tables, adjusted net income in the
third quarter was $86.4 million or $1.13 per
diluted share versus adjusted net income of $87.4 million or $1.14 per diluted
share for the same period in 2019.
Net cash from operations for the third quarter was $153.6 million, up from $144.9 million in the same period a year ago.
Free cash flow for the quarter was $124.4
million, which compares to $101.2
million in the year-ago period. For the nine months ended
September 30, 2020, net cash from
operations was $457.2 million and
free cash flow was $371.5 million.
During the third quarter, Timken paid its 393rd consecutive
quarterly dividend.
"We are pleased with our performance in the third quarter," said
Richard G. Kyle, Timken president
and chief executive officer. "Our markets continued to recover from
the April trough, and with our strong execution, revenue exceeded
our expectations and approached last year's level. Additionally,
our strategy to diversify our portfolio and increase our presence
in sectors like renewable energy is contributing to our top-line
performance in 2020. I am proud of how our Timken associates have
shown resilience through the global pandemic. We continue to keep
our operations safe, serve customers, deliver solid financial
results and position the company for long-term success."
Third-Quarter 2020 Segment Results
Process Industries sales of $466.0 million
increased 1.5 percent from the same period a year ago. The
year-over-year increase was driven primarily by strong growth in
renewable energy, positive pricing and the benefit of acquisitions,
partially offset by lower revenue across most other sectors.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) in the quarter were $109.2 million
or 23.4 percent of sales, compared with EBITDA
of $116.5 million or 25.4 percent of sales for
the same period a year ago. The decrease in EBITDA was driven
primarily by the unfavorable impact of price/mix and currency,
along with higher restructuring expenses, partially offset by the
favorable impact of cost reductions and manufacturing
performance.
Excluding special items detailed in the attached tables,
adjusted EBITDA in the quarter was $115.2 million
or 24.7 percent of sales, compared
with $119.2 million or 26.0 percent of sales in the
third quarter last year.
Mobile Industries sales of $428.6 million
decreased 5.8 percent compared with the same period a year ago. The
decline was driven primarily by lower shipments across most
sectors, partially offset by the benefit of acquisitions. Mobile
Industries' third quarter sales were up 25.1 percent from the
second quarter.
EBITDA for the quarter was $64.0 million
or 14.9 percent of sales, compared with EBITDA
of $70.1 million or 15.4 percent of sales for the
same period a year ago. The decrease in EBITDA reflects the impact
of lower volume and higher restructuring expenses, partially offset
by the favorable impact of cost reductions and manufacturing
performance, lower material and logistics costs and the positive
impact of acquisitions.
Excluding special items detailed in the attached tables,
adjusted EBITDA in the quarter was $68.4 million
or 16.0 percent of sales, compared
with $71.9 million or 15.8 percent of sales in the
third quarter last year.
Balance Sheet, Liquidity and Cost Savings
Update
Timken ended the third quarter with a net debt to EBITDA ratio
of 2.0 times. During the third quarter, the company reduced net
debt by over $80 million. Timken has
strong liquidity, with $313 million
of cash on hand and over $600 million
of availability under committed credit facilities as of
September 30, 2020. The company
expects to generate strong cash flow and further reduce net debt in
the fourth quarter.
Timken continues to execute on cost reduction and other
operational excellence initiatives across the enterprise. In total,
cost reduction actions are now expected to generate year-on-year
savings of approximately $55 to
$60 million in the second half of
2020 compared to our previous outlook of $50 to $60
million.
"Timken is demonstrating our ability to perform through
challenging times, as evidenced by our year-to-date results," said
Kyle. "We expect markets to remain relatively stable with normal
seasonality through the end of the year, and we are focused on
finishing 2020 strong. While there remains a fair amount of
uncertainty surrounding the pandemic, we're seeing solid demand
across most of our markets and combined with our strong balance
sheet and cash flow, we are well positioned heading into 2021. We
remain focused on our strategy to deliver long-term profitable
growth and advance Timken as a high-performing global industrial
leader."
The company is not providing full year 2020 sales and earnings
guidance at this time.
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 29,
2020
|
|
11:00 a.m. Eastern
Time
|
|
Live Dial-In:
800-458-4121
|
|
Or +1
323-794-2093
|
|
(Call in 10 minutes
prior to be included.)
|
|
Conference ID:
Timken's 3Q Earnings Call
|
|
Or Click to Join:
https://tmkn.biz/34yogAH
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through
|
|
November 12,
2020:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
8801158
|
|
|
Live
Webcast:
|
http://investors.timken.com
|
About The Timken Company
The Timken Company (NYSE: TKR; www.timken.com) designs
a growing portfolio of engineered bearings and power transmission
products. With more than a century of knowledge and innovation, we
continuously improve the reliability and efficiency of global
machinery and equipment to move the world forward. Timken
posted $3.8 billion in sales in 2019
and employs more than 17,000 people globally, operating from 42
countries.
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 and cost reduction measures, including
information under the heading "Balance Sheet, Liquidity and Cost
Savings Update," 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 2020; the company's ability to respond to the changes in
its end markets that could affect demand for the company's products
or services; unanticipated changes in business relationships with
customers or their purchases from the company; changes in the
financial health of the company's customers, which may have an
impact on the company's revenues, earnings and impairment charges;
fluctuations in material and energy costs; the impact of changes to
the company's accounting methods; political risks associated with
government instability; recent world events that have increased the
risks posed by international trade disputes, tariffs and sanctions;
weakness in global or regional economic conditions and capital
markets; the company's ability to satisfy its obligations under its
debt agreements and renew or refinance borrowings on favorable
terms; fluctuations in currency valuations; changes in the expected
costs associated with product warranty claims; the ability to
achieve satisfactory operating results in the integration of
acquired companies, including realizing any accretion within
expected timeframes or at all; the impact on operations of general
economic conditions; fluctuations in customer demand; the impact on
the company's pension obligations and assets due to changes in
interest rates, investment performance and other tactics designed
to reduce risk; the introduction of new disruptive technologies;
unplanned plant shutdowns; the company's ability to maintain
positive relations with unions and works councils; negative impacts
to the company's business, results of operations, financial
position or liquidity as a result of COVID-19 or other epidemics
and associated governmental measures such as restrictions on travel
and manufacturing operations; and the company's ability to complete
and achieve the benefits of announced plans, programs, initiatives,
acquisitions and capital investments. Additional factors are
discussed in the company's filings with the Securities and Exchange
Commission, including the company's Annual Report on Form 10-K for
the year ended Dec. 31, 2019,
quarterly reports on Form 10-Q and current reports on Form 8-K.
Except as required by the federal securities laws, the company
undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.
Media Relations:
Scott
Schroeder
234.262.6420
scott.schroeder@timken.com
Investor Relations:
Neil
Frohnapple
234.262.2310
neil.frohnapple@timken.com
The Timken
Company
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
(Dollars in
millions, except share data) (Unaudited)
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2020
|
2019
|
|
2020
|
2019
|
Net sales
|
$
|
894.6
|
|
$
|
914.0
|
|
|
$
|
2,621.5
|
|
$
|
2,893.7
|
|
Cost of products
sold
|
630.9
|
|
636.5
|
|
|
1,848.6
|
|
2,007.9
|
|
Gross
Profit
|
263.7
|
|
277.5
|
|
|
772.9
|
|
885.8
|
|
Selling, general
& administrative expenses
|
132.7
|
|
148.0
|
|
|
398.1
|
|
459.4
|
|
Impairment and
restructuring charges
|
12.0
|
|
1.6
|
|
|
18.7
|
|
3.5
|
|
Operating Income
|
119.0
|
|
127.9
|
|
|
356.1
|
|
422.9
|
|
Non-service pension
and other postretirement income (expense)
|
15.3
|
|
(14.4)
|
|
|
13.4
|
|
(14.1)
|
|
Other income
(expense), net
|
(1.0)
|
|
5.8
|
|
|
1.1
|
|
10.5
|
|
Interest expense,
net
|
(15.4)
|
|
(17.1)
|
|
|
(49.3)
|
|
(52.0)
|
|
Income
Before Income Taxes
|
117.9
|
|
102.2
|
|
|
321.3
|
|
367.3
|
|
Provision for income
taxes
|
26.6
|
|
35.5
|
|
|
84.2
|
|
110.4
|
|
Net
Income
|
91.3
|
|
66.7
|
|
|
237.1
|
|
256.9
|
|
Less: Net income attributable to
noncontrolling interest
|
2.5
|
|
2.5
|
|
|
5.7
|
|
8.3
|
|
Net
Income Attributable to The Timken Company
|
$
|
88.8
|
|
$
|
64.2
|
|
|
$
|
231.4
|
|
$
|
248.6
|
|
Net Income per
Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
|
|
|
Basic Earnings per
share
|
$
|
1.18
|
|
$
|
0.85
|
|
|
$
|
3.07
|
|
$
|
3.28
|
|
|
|
|
|
|
|
Diluted Earnings per
share
|
$
|
1.16
|
|
$
|
0.84
|
|
|
$
|
3.04
|
|
$
|
3.23
|
|
|
|
|
|
|
|
Average Shares
Outstanding
|
75,223,462
|
|
75,628,410
|
|
|
75,288,567
|
|
75,864,544
|
|
Average Shares
Outstanding - assuming dilution
|
76,286,136
|
|
76,592,694
|
|
|
76,131,920
|
|
76,902,426
|
|
BUSINESS
SEGMENTS
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
September 30,
|
Nine Months
Ended
September 30,
|
(Dollars in
millions)
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
Net sales
|
$
|
428.6
|
|
$
|
455.1
|
|
$
|
1,237.9
|
|
$
|
1,448.8
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
64.0
|
|
$
|
70.1
|
|
$
|
177.9
|
|
$
|
227.4
|
|
EBITDA Margin
(1)
|
14.9
|
%
|
15.4
|
%
|
14.4
|
%
|
15.7
|
%
|
Process
Industries
|
|
|
|
|
Net sales
|
$
|
466.0
|
|
$
|
458.9
|
|
$
|
1,383.6
|
|
$
|
1,444.9
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
109.2
|
|
$
|
116.5
|
|
$
|
343.0
|
|
$
|
369.8
|
|
EBITDA Margin
(1)
|
23.4
|
%
|
25.4
|
%
|
24.8
|
%
|
25.6
|
%
|
Corporate earnings
before interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
(10.6)
|
|
$
|
(11.2)
|
|
$
|
(28.2)
|
|
$
|
(40.6)
|
|
Corporate pension and
other postretirement benefit related income (expense)
(2)
|
11.9
|
|
(16.9)
|
|
3.1
|
|
(16.9)
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
Net sales
|
$
|
894.6
|
|
$
|
914.0
|
|
$
|
2,621.5
|
|
$
|
2,893.7
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
174.5
|
|
$
|
158.5
|
|
$
|
495.8
|
|
$
|
539.7
|
|
EBITDA Margin
(1)
|
19.5
|
%
|
17.3
|
%
|
18.9
|
%
|
18.7
|
%
|
|
|
|
|
|
(1) EBITDA is a
non-GAAP measure defined as operating income plus other income
(expense) and excluding depreciation and amortization. EBITDA
Margin is a non-GAAP measure defined as EBITDA as a percentage of
net sales. EBITDA and EBITDA Margin are important financial
measures used in the management of the business, including
decisions concerning the allocation of resources and assessment of
performance. Management believes that reporting EBITDA and
EBITDA Margin is useful to investors as these measures are
representative of the core operations of the segments and Company,
respectively.
|
|
|
|
|
|
(2) Corporate pension
and other postretirement benefit related income (expense) represent
actuarial gains and (losses) that resulted from the remeasurement
of plan assets and obligations as a result of changes in
assumptions. The Company recognizes actuarial gains and (losses) in
connection with the annual remeasurement in the fourth quarter, or
if specific events trigger a remeasurement. Refer to the Retirement
Benefit Plans and Other Postretirement Benefit Plans footnotes
within the Company's annual reports on Form 10-K and quarterly
reports on Form 10-Q for additional discussion.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Dollars in
millions)
|
(Unaudited)
|
|
|
|
September 30,
2020
|
|
December 31,
2019
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
313.1
|
|
$
|
209.5
|
Restricted
cash
|
0.9
|
|
6.7
|
Accounts receivable,
net
|
571.5
|
|
545.1
|
Unbilled
receivables
|
141.1
|
|
129.2
|
Inventories,
net
|
789.9
|
|
842.0
|
Other current
assets
|
148.0
|
|
142.1
|
Total Current
Assets
|
1,964.5
|
|
1,874.6
|
Property, plant and
equipment, net
|
980.2
|
|
989.2
|
Operating lease
assets
|
105.4
|
|
114.1
|
Goodwill and other
intangible assets
|
1,758.3
|
|
1,752.2
|
Non-current pension
assets
|
9.0
|
|
3.4
|
Non-current other
postretirement benefit assets
|
—
|
|
36.6
|
Other
assets
|
91.7
|
|
89.8
|
Total
Assets
|
$
|
4,909.1
|
|
$
|
4,859.9
|
LIABILITIES
|
|
|
|
Accounts
payable
|
$
|
306.7
|
|
$
|
301.7
|
Short-term debt,
including current portion of long-term debt
|
75.6
|
|
82.0
|
Short-term operating
lease liabilities
|
26.6
|
|
28.3
|
Income
taxes
|
23.3
|
|
17.8
|
Accrued
expenses
|
308.2
|
|
306.8
|
Total Current
Liabilities
|
740.4
|
|
736.6
|
Long-term
debt
|
1,533.0
|
|
1,648.1
|
Accrued pension
benefits
|
161.5
|
|
165.1
|
Accrued
postretirement benefits
|
44.8
|
|
31.8
|
Long-term operating
lease liabilities
|
66.0
|
|
71.3
|
Other non-current
liabilities
|
264.4
|
|
252.2
|
Total
Liabilities
|
2,810.1
|
|
2,905.1
|
EQUITY
|
|
|
|
The Timken Company
shareholders' equity
|
2,028.1
|
|
1,868.2
|
Noncontrolling
Interest
|
70.9
|
|
86.6
|
Total
Equity
|
2,099.0
|
|
1,954.8
|
Total Liabilities and
Equity
|
$
|
4,909.1
|
|
$
|
4,859.9
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(Dollars in
millions)
|
2020
|
2019
|
|
2020
|
2019
|
Cash Provided by
(Used in)
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
Net Income
|
$
|
91.3
|
|
$
|
66.7
|
|
|
$
|
237.1
|
|
$
|
256.9
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
41.2
|
|
39.2
|
|
|
125.2
|
|
120.4
|
|
Stock-based
compensation expense
|
7.8
|
|
5.8
|
|
|
19.2
|
|
20.7
|
|
Pension and other
postretirement (income) expense
|
(12.1)
|
|
17.4
|
|
|
(3.9)
|
|
23.2
|
|
Pension and other
postretirement benefit contributions and payments
|
(4.3)
|
|
(28.2)
|
|
|
(12.9)
|
|
(37.1)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
(19.2)
|
|
29.5
|
|
|
(27.6)
|
|
(6.4)
|
|
Unbilled
receivables
|
(14.9)
|
|
1.6
|
|
|
(11.9)
|
|
(35.0)
|
|
Inventories
|
6.6
|
|
21.2
|
|
|
47.9
|
|
37.8
|
|
Accounts
payable
|
31.7
|
|
(20.8)
|
|
|
2.8
|
|
(7.4)
|
|
Accrued
expenses
|
44.1
|
|
16.4
|
|
|
49.4
|
|
(28.7)
|
|
Income
taxes
|
(18.1)
|
|
8.3
|
|
|
5.7
|
|
10.7
|
|
Other,
net
|
(0.5)
|
|
(12.2)
|
|
|
26.2
|
|
(0.3)
|
|
Net Cash Provided by
Operating Activities
|
$
|
153.6
|
|
$
|
144.9
|
|
|
$
|
457.2
|
|
$
|
354.8
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
Capital
expenditures
|
$
|
(29.2)
|
|
$
|
(43.7)
|
|
|
$
|
(85.7)
|
|
$
|
(82.9)
|
|
Acquisitions, net of
cash received
|
—
|
|
0.3
|
|
|
(6.7)
|
|
(82.7)
|
|
Investments in
short-term marketable securities, net
|
(8.8)
|
|
(0.1)
|
|
|
(10.4)
|
|
0.1
|
|
Other, net
|
1.3
|
|
1.1
|
|
|
1.4
|
|
3.3
|
|
Net Cash Used in
Investing Activities
|
$
|
(36.7)
|
|
$
|
(42.4)
|
|
|
$
|
(101.4)
|
|
$
|
(162.2)
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
Cash dividends paid
to shareholders
|
$
|
(21.1)
|
|
$
|
(21.2)
|
|
|
$
|
(65.0)
|
|
$
|
(63.8)
|
|
Purchase of treasury
shares
|
—
|
|
(32.5)
|
|
|
(42.3)
|
|
(56.1)
|
|
Proceeds from
exercise of stock options
|
10.7
|
|
1.0
|
|
|
18.2
|
|
9.9
|
|
Payments related to
tax withholding for stock-based compensation
|
(1.6)
|
|
(1.2)
|
|
|
(12.0)
|
|
(9.3)
|
|
Net (payments)
proceeds from credit facilities
|
(187.5)
|
|
2.0
|
|
|
(76.0)
|
|
41.8
|
|
Net payments on
long-term debt
|
(11.1)
|
|
(28.3)
|
|
|
(63.2)
|
|
(57.7)
|
|
Other, net
|
(15.8)
|
|
(0.3)
|
|
|
(17.4)
|
|
(2.2)
|
|
Net Cash Used
in Financing Activities
|
$
|
(226.4)
|
|
$
|
(80.5)
|
|
|
$
|
(257.7)
|
|
$
|
(137.4)
|
|
Effect of exchange
rate changes on cash
|
7.4
|
|
(7.5)
|
|
|
(0.3)
|
|
(6.4)
|
|
Increase
(Decrease) in Cash, Cash Equivalents and Restricted Cash
|
$
|
(102.1)
|
|
$
|
14.5
|
|
|
$
|
97.8
|
|
$
|
48.8
|
|
Cash, Cash
Equivalents and Restricted Cash at Beginning of Period
|
416.1
|
|
167.4
|
|
|
216.2
|
|
133.1
|
|
Cash, Cash
Equivalents and Restricted Cash at End of Period
|
$
|
314.0
|
|
$
|
181.9
|
|
|
$
|
314.0
|
|
$
|
181.9
|
|
Reconciliations of
Adjusted Net Income to GAAP Net Income and Adjusted Earnings Per
Share to GAAP Earnings Per Share:
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following
reconciliation is provided as additional relevant information about
the Company's performance deemed useful to investors.
Management believes that the non-GAAP measures of adjusted net
income and adjusted diluted earnings per share are important
financial measures used in the management of the business,
including decisions concerning the allocation of resources and
assessment of performance. Management believes that reporting
adjusted net income and adjusted diluted earnings per share is
useful to investors as these measures are representative of the
Company's core operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions, except share data)
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2020
|
|
EPS
|
2019
|
|
EPS
|
|
2020
|
|
EPS
|
2019
|
|
EPS
|
Net Income
Attributable to The Timken Company
|
$
|
88.8
|
|
|
$
|
1.16
|
|
$
|
64.2
|
|
|
$
|
0.84
|
|
|
$
|
231.4
|
|
|
$
|
3.04
|
|
$
|
248.6
|
|
|
$
|
3.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization charges (2)
|
$
|
13.3
|
|
|
|
$
|
2.3
|
|
|
|
|
$
|
24.9
|
|
|
|
$
|
4.5
|
|
|
|
Property
(recoveries) losses and related expenses (3)
|
(1.7)
|
|
|
|
0.7
|
|
|
|
|
(3.8)
|
|
|
|
6.5
|
|
|
|
Acquisition-related charges
(4)
|
(0.5)
|
|
|
|
2.9
|
|
|
|
|
3.7
|
|
|
|
10.8
|
|
|
|
Brazil
legal matter (5)
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
3.3
|
|
|
|
Gain on
sale of real estate (6)
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(1.7)
|
|
|
|
Corporate
pension and other postretirement benefit related (income) expense
(7)
|
(11.9)
|
|
|
|
16.9
|
|
|
|
|
(3.1)
|
|
|
|
16.9
|
|
|
|
Tax
indemnification and related items
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
0.5
|
|
|
|
Noncontrolling interest of above
adjustments
|
—
|
|
|
|
0.1
|
|
|
|
|
—
|
|
|
|
(0.1)
|
|
|
|
Provision
for income taxes (8)
|
(1.6)
|
|
|
|
0.3
|
|
|
|
|
(5.0)
|
|
|
|
0.2
|
|
|
|
Total
Adjustments:
|
(2.4)
|
|
|
(0.03)
|
|
23.2
|
|
|
0.30
|
|
|
16.7
|
|
|
0.21
|
|
40.9
|
|
|
0.52
|
|
Adjusted Net Income
Attributable to The Timken Company
|
$
|
86.4
|
|
|
$
|
1.13
|
|
$
|
87.4
|
|
|
$
|
1.14
|
|
|
$
|
248.1
|
|
|
$
|
3.25
|
|
$
|
289.5
|
|
|
$
|
3.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Adjustments are
pre-tax, with the net tax provision listed separately.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Impairment,
restructuring and reorganization charges (including items recorded
in cost of products sold) relate to: (i) plant closures; (ii) the
rationalization of certain plants, (iii) severance related to cost
reduction initiatives and (iv) related depreciation and
amortization. The Company re-assesses its operating footprint and
cost structure periodically, and makes adjustments as needed that
result in restructuring charges. However, management believes
these actions are not representative of the Company's core
operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) Represents
property loss and related expenses during the periods presented
(net of insurance recoveries received in first and third quarter of
2020) resulting from property loss that occurred during the first
quarter of 2019 at one of the Company's warehouses in Knoxville,
Tennessee and during the third quarter of 2019 at one of the
Company's warehouses in Yantai, China.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)
Acquisition-related charges in the third quarter of 2020 primarily
related to the BEKA Lubrication ("BEKA") acquisition, including
transaction costs and inventory step-up impact. Acquisition-related
charges in the third quarter of 2019 primarily related to the
Rollon S.p.A. ("Rollon") and The Diamond Chain Company ("Diamond
Chain") acquisitions, including transaction costs and inventory
step-up impact.
|
|
|
|
|
|
|
|
|
(5) The Brazil legal
matter represents expense recorded to establish a liability
associated with an investigation into alleged antitrust violations
in the bearing industry that was settled in the fourth quarter of
2019.
|
|
|
|
|
|
|
|
|
(6) The gain on sale
of real estate is related to the sale of a manufacturing facility
in Pulaski, Tennessee. This amount was recorded in other
income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) Corporate pension
and other postretirement benefit related (income) expense represent
actuarial (gains) and losses that resulted from the remeasurement
of plan assets and obligations as a result of changes in
assumptions. The Company recognizes actuarial (gains) and losses in
connection with the annual remeasurement in the fourth quarter, or
if specific events trigger a remeasurement. Refer to the Retirement
Benefit Plans and Other Postretirement Benefit Plans footnotes
within the Company's annual reports on Form 10-K and quarterly
reports on Form 10-Q for additional discussion.
|
|
|
|
|
|
|
|
|
(8) Provision for
income taxes includes the net tax impact on pre-tax adjustments
(listed above), the impact of discrete tax items recorded during
the respective periods, as well as other adjustments to reflect the
use of one overall effective tax rate on adjusted pre-tax income in
interim periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
EBITDA to GAAP Net Income, EBITDA Margin to Net Income as a
Percentage of Sales, and EBITDA Margin, After Adjustments, to Net
Income as a Percentage of Sales, and EBITDA, After Adjustments, to
Net Income:
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
The following
reconciliation is provided as additional relevant information about
the Company's performance deemed useful to investors.
Management believes consolidated earnings before interest,
taxes, depreciation and amortization (EBITDA) is a non-GAAP measure
that is useful to investors as it is representative of the
Company's performance and that it is appropriate to compare GAAP
net income to consolidated EBITDA. Management also believes that
adjusted EBITDA, adjusted EBITDA margin and EBITDA margin are
useful to investors as they are representative of the Company's
core operations and are used in the management of the business,
including decisions concerning the allocation of resources and
assessment of performance.
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2020
|
Percentage
to
Net Sales
|
2019
|
Percentage
to
Net Sales
|
|
2020
|
Percentage
to
Net Sales
|
2019
|
Percentage
to
Net Sales
|
Net Income
|
$
|
91.3
|
|
10.2
|
%
|
$
|
66.7
|
|
7.3
|
%
|
|
$
|
237.1
|
|
9.0
|
%
|
$
|
256.9
|
|
8.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
26.6
|
|
|
35.5
|
|
|
|
84.2
|
|
|
110.4
|
|
|
Interest
expense
|
16.3
|
|
|
18.2
|
|
|
|
52.3
|
|
|
55.5
|
|
|
Interest
income
|
(0.9)
|
|
|
(1.1)
|
|
|
|
(3.0)
|
|
|
(3.5)
|
|
|
Depreciation and
amortization
|
41.2
|
|
|
39.2
|
|
|
|
125.2
|
|
|
120.4
|
|
|
Consolidated
EBITDA
|
$
|
174.5
|
|
19.5
|
%
|
$
|
158.5
|
|
17.3
|
%
|
|
$
|
495.8
|
|
18.9
|
%
|
$
|
539.7
|
|
18.7
|
%
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization charges (1)
|
$
|
13.1
|
|
|
$
|
2.3
|
|
|
|
$
|
22.1
|
|
|
$
|
4.5
|
|
|
Property
(recoveries) losses and related expenses (2)
|
(1.7)
|
|
|
0.7
|
|
|
|
(3.8)
|
|
|
6.5
|
|
|
Acquisition-related charges
(3)
|
(0.5)
|
|
|
2.9
|
|
|
|
3.7
|
|
|
10.8
|
|
|
Brazil
legal matter (4)
|
—
|
|
|
—
|
|
|
|
—
|
|
|
3.3
|
|
|
Gain on
sale of real estate (5)
|
—
|
|
|
—
|
|
|
|
—
|
|
|
(1.7)
|
|
|
Corporate
pension and other postretirement benefit related
(income)
expense
(6)
|
(11.9)
|
|
|
16.9
|
|
|
|
(3.1)
|
|
|
16.9
|
|
|
Tax
indemnification and related items
|
—
|
|
|
—
|
|
|
|
—
|
|
|
0.5
|
|
|
Total
Adjustments
|
(1.0)
|
|
(0.1)
|
%
|
22.8
|
|
2.5
|
%
|
|
18.9
|
|
0.7
|
%
|
40.8
|
|
1.4
|
%
|
Adjusted
EBITDA
|
$
|
173.5
|
|
19.4
|
%
|
$
|
181.3
|
|
19.8
|
%
|
|
$
|
514.7
|
|
19.6
|
%
|
$
|
580.5
|
|
20.1
|
%
|
|
|
|
|
|
|
|
|
|
|
(1) Impairment,
restructuring and reorganization charges (including items recorded
in cost of products sold) relate to: (i) plant closures; (ii) the
rationalization of certain plants and (iii) severance related to
cost reduction initiatives. The Company re-assesses its operating
footprint and cost structure periodically, and makes adjustments as
needed that result in restructuring charges. However,
management believes these actions are not representative of the
Company's core operations.
|
|
|
|
|
|
|
|
|
|
|
(2) Represents
property loss and related expenses during the periods presented
(net of insurance recoveries received in first and third quarter of
2020) resulting from property loss that occurred during the first
quarter of 2019 at one of the Company's warehouses in Knoxville,
Tennessee and during the third quarter of 2019 at one of the
Company's warehouses in Yantai, China.
|
|
|
|
|
|
|
|
|
|
|
(3)
Acquisition-related charges in the third quarter of 2020 primarily
related to the BEKA acquisition, including transaction costs and
inventory step-up impact. Acquisition-related charges in the third
quarter of 2019 primarily related to the Rollon and Diamond Chain
acquisitions, including transaction costs and inventory step-up
impact.
|
|
|
|
|
|
|
|
|
|
|
(4) The Brazil legal
matter represents expense recorded to establish a liability
associated with an investigation into alleged antitrust violations
in the bearing industry that was settled in the fourth quarter of
2019.
|
|
|
|
|
|
|
|
|
|
|
(5) The gain on sale
of real estate is related to the sale of a manufacturing facility
in Pulaski, Tennessee. This amount was recorded in other
income.
|
|
|
|
|
|
|
|
|
|
|
(6) Corporate pension
and other postretirement benefit related (income) expense represent
actuarial (gains) and losses that resulted from the remeasurement
of plan assets and obligations as a result of changes in
assumptions. The Company recognizes actuarial (gains) and losses in
connection with the annual remeasurement in the fourth quarter, or
if specific events trigger a remeasurement. Refer to the Retirement
Benefit Plans and Other Postretirement Benefit Plans footnotes
within the Company's annual reports on Form 10-K and quarterly
reports on Form 10-Q for additional discussion.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
segment EBITDA Margin, After Adjustments, to segment EBITDA as a
Percentage of Sales and segment EBITDA, After Adjustments, to
segment EBITDA:
|
(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 EBITDA and adjusted EBITDA margin for
the segments are useful to investors as they are representative of
each segment's core operations and are used in the management of
the business, including decisions concerning the allocation of
resources and assessment of performance.
|
|
|
|
|
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(Dollars in
millions)
|
2020
|
Percentage
to Net
Sales
|
2019
|
Percentage
to Net
Sales
|
|
2020
|
Percentage
to Net
Sales
|
2019
|
Percentage
to Net
Sales
|
Earnings before
interest, taxes, depreciation and amortization
(EBITDA)
|
$
|
64.0
|
|
14.9
|
%
|
$
|
70.1
|
|
15.4
|
%
|
|
$
|
177.9
|
|
14.4
|
%
|
$
|
227.4
|
|
15.7
|
%
|
Impairment, restructuring and
reorganization charges (1)
|
6.6
|
|
|
1.1
|
|
|
|
10.2
|
|
|
2.1
|
|
|
Gain on
sale of real estate (2)
|
—
|
|
|
—
|
|
|
|
—
|
|
|
(1.7)
|
|
|
Property
(recoveries) losses and related expenses (3)
|
(1.7)
|
|
|
0.7
|
|
|
|
(3.8)
|
|
|
6.5
|
|
|
Acquisition-related charges
(4)
|
(0.5)
|
|
|
—
|
|
|
|
2.1
|
|
|
0.1
|
|
|
Adjusted
EBITDA
|
$
|
68.4
|
|
16.0
|
%
|
$
|
71.9
|
|
15.8
|
%
|
|
$
|
186.4
|
|
15.1
|
%
|
$
|
234.4
|
|
16.2
|
%
|
|
|
|
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(Dollars in
millions)
|
2020
|
Percentage
to Net
Sales
|
2019
|
Percentage
to Net
Sales
|
|
2020
|
Percentage
to Net
Sales
|
2019
|
Percentage
to Net
Sales
|
Earnings before
interest, taxes, depreciation and amortization
(EBITDA)
|
$
|
109.2
|
|
23.4
|
%
|
$
|
116.5
|
|
25.4
|
%
|
|
$
|
343.0
|
|
24.8
|
%
|
$
|
369.8
|
|
25.6
|
%
|
Impairment, restructuring and
reorganization charges (1)
|
6.2
|
|
|
1.2
|
|
|
|
11.5
|
|
|
2.4
|
|
|
Acquisition-related charges
(4)
|
(0.2)
|
|
|
1.5
|
|
|
|
1.0
|
|
|
7.9
|
|
|
Adjusted
EBITDA
|
$
|
115.2
|
|
24.7
|
%
|
$
|
119.2
|
|
26.0
|
%
|
|
$
|
355.5
|
|
25.7
|
%
|
$
|
380.1
|
|
26.3
|
%
|
|
|
|
|
|
|
|
|
|
|
(1) Impairment,
restructuring and reorganization charges (including items recorded
in cost of products sold) relate to: (i) plant closures; (ii) the
rationalization of certain plants and (iii) severance related to
cost reduction initiatives. The Company re-assesses its operating
footprint and cost structure periodically, and makes adjustments as
needed that result in restructuring charges. However,
management believes these actions are not representative of the
Company's core operations.
|
|
|
|
|
|
|
|
|
|
|
(2) The gain on sale
of real estate is related to the sale of a manufacturing facility
in Pulaski, Tennessee. This amount was recorded in other
income.
|
|
|
|
|
|
|
|
|
|
|
(3) Represents
property loss and related expenses during the periods presented
(net of insurance recoveries received in first and third quarter of
2020) resulting from property loss that occurred during the first
quarter of 2019 at one of the Company's warehouses in Knoxville,
Tennessee and during the third quarter of 2019 at one of the
Company's warehouses in Yantai, China.
|
|
|
|
|
|
|
|
|
|
|
(4)
Acquisition-related charges in the third quarter of 2020 primarily
related to the inventory step-up impact of the BEKA acquisition.
Acquisition-related charges in the third quarter of 2019 primarily
related to the inventory step-up impact of the Rollon and Diamond
Chain acquisitions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Total Debt to Net Debt, the Ratio of Net Debt to Capital, and the
Ratio of Net Debt to Adjusted EBITDA:
|
(Unaudited)
|
|
|
|
|
These reconciliations
are provided as additional relevant information about the Company's
financial position deemed useful to investors. Capital, used for
the ratio of net debt to capital, is a non-GAAP measure defined as
total debt less cash and cash equivalents plus total shareholders'
equity. Management believes Net Debt, the Ratio of Net Debt to
Capital, Adjusted EBITDA (see below), and the Ratio of Net Debt to
Adjusted EBITDA are important measures of the Company's financial
position, due to the amount of cash and cash equivalents on
hand.
|
|
|
|
|
|
(Dollars in
millions)
|
|
|
|
|
|
|
|
September 30,
2020
|
December 31,
2019
|
Short-term debt,
including current portion of long-term debt
|
|
|
$
|
75.6
|
|
$
|
82.0
|
|
Long-term
debt
|
|
|
1,533.0
|
|
1,648.1
|
|
Total
Debt
|
|
|
$
|
1,608.6
|
|
$
|
1,730.1
|
|
Less: Cash and cash
equivalents
|
|
|
(313.1)
|
|
(209.5)
|
|
Net Debt
|
|
|
$
|
1,295.5
|
|
$
|
1,520.6
|
|
|
|
|
|
|
Total
Equity
|
|
|
$
|
2,099.0
|
|
$
|
1,954.8
|
|
|
|
|
|
|
Ratio of Net Debt to
Capital
|
|
|
38.2
|
%
|
43.8
|
%
|
|
|
|
|
|
Adjusted EBITDA for
the Twelve Months Ended
|
|
|
$
|
660.5
|
|
$
|
726.3
|
|
|
|
|
|
|
Ratio of Net Debt to
Adjusted EBITDA
|
|
|
2.0
|
|
2.1
|
|
|
|
|
|
|
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,
|
|
2020
|
2019
|
2020
|
2019
|
Net cash provided by
operating activities
|
$
|
153.6
|
|
$
|
144.9
|
|
$
|
457.2
|
|
$
|
354.8
|
|
Less: capital
expenditures
|
(29.2)
|
|
(43.7)
|
|
(85.7)
|
|
(82.9)
|
|
Free cash
flow
|
$
|
124.4
|
|
$
|
101.2
|
|
$
|
371.5
|
|
$
|
271.9
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
EBITDA, After Adjustments, to GAAP Net Income:
|
(Unaudited)
|
|
|
The following
reconciliation is provided as additional relevant information about
the Company's performance deemed useful to investors. Management
believes consolidated earnings before interest, taxes, depreciation
and amortization (EBITDA) is a non-GAAP measure that is useful to
investors as it is representative of the Company's performance and
that it is appropriate to compare GAAP net income to consolidated
EBITDA. Management also believes that the non-GAAP measure of
adjusted EBITDA is useful to investors as it is representative of
the Company's core operations and is used in the management of the
business, including decisions concerning the allocation of
resources and assessment of performance.
|
|
|
|
(Dollars in
millions)
|
Twelve Months
Ended
September 30, 2020
|
Twelve Months
Ended
December 31, 2019
|
Net Income
|
$
|
354.9
|
|
$
|
374.7
|
|
Provision for income
taxes
|
71.5
|
|
97.7
|
|
Interest
expense
|
68.9
|
|
72.1
|
|
Interest
income
|
(4.4)
|
|
(4.9)
|
|
Depreciation and
amortization
|
165.4
|
|
160.6
|
|
Consolidated
EBITDA
|
$
|
656.3
|
|
$
|
700.2
|
|
Adjustments:
|
|
|
Impairment, restructuring and
reorganization charges (1)
|
$
|
26.7
|
|
$
|
9.1
|
|
Acquisition-related charges
(2)
|
8.4
|
|
15.5
|
|
Brazil
legal matter (3)
|
(1.5)
|
|
1.8
|
|
Gain on
sale of real estate (4)
|
(2.8)
|
|
(4.5)
|
|
Corporate
pension and other postretirement benefit related (income) expense
(5)
|
(24.1)
|
|
(4.1)
|
|
Insurance
(proceeds) / property loss and related expenses (6)
|
(2.7)
|
|
7.6
|
|
Tax
indemnification and related items
|
0.2
|
|
0.7
|
|
Total
Adjustments
|
4.2
|
|
26.1
|
|
Adjusted
EBITDA
|
$
|
660.5
|
|
$
|
726.3
|
|
|
|
|
(1) Impairment,
restructuring and reorganization charges (including items recorded
in cost of products sold) relate to: (i) plant closures; (ii) the
rationalization of certain plants and (iii) severance related to
cost reduction initiatives. The Company re-assesses its operating
footprint and cost structure periodically, and makes adjustments as
needed that result in restructuring charges. However,
management believes these actions are not representative of the
Company's core operations.
|
|
|
|
(2)
Acquisition-related charges in 2020 primarily related to the BEKA
acquisition, including transaction costs and inventory step-up
impact. Acquisition-related charges in 2019 primarily related to
the Rollon, Diamond Chain and BEKA acquisitions, including
transaction costs and inventory step-up impact.
|
|
|
|
(3) The Brazil legal
matter represents expense recorded to establish a liability
associated with an investigation into alleged antitrust violations
in the bearing industry that was settled in the fourth quarter of
2019.
|
|
|
|
(4) The gain on sale
of real estate related to the sale of a manufacturing facility in
Pulaski, Tennessee during the first quarter of 2019 and disposal of
land in Colmar, France during the fourth quarter of 2019. These
amounts were recorded in other income.
|
|
|
|
(5) Corporate pension
and other postretirement benefit related charges represent
actuarial (gains) and losses that resulted from the remeasurement
of plan assets and obligations as a result of changes in
assumptions. The Company recognizes actuarial (gains) and losses in
connection with the annual remeasurement in the fourth quarter, or
if specific events trigger a remeasurement.
|
|
|
|
(6) Represents
property loss and related expenses during the periods presented
(net of insurance proceeds received in first and third quarter of
2020) resulting from property loss that occurred during the first
quarter of 2019 at one of the Company's warehouses in Knoxville,
Tennessee and during the third quarter of 2019 at one of the
Company's warehouses in Yantai, China.
|
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SOURCE The Timken Company