NORTH CANTON, Ohio,
July 28, 2016 /PRNewswire/ -- The
Timken Company (NYSE: TKR; www.timken.com), a global leader in
bearings, reports second-quarter 2016 sales of
$674 million, 7.5 percent lower than the same period a year
ago. Excluding an unfavorable currency impact of 1.7 percent, sales
were down 5.8 percent, due to weakness across most end
markets, partially offset by growth in automotive and the net
benefit of acquisitions.
In the second quarter, Timken posted net income of $44.9 million or $0.57 per diluted share, versus net income of
$36.7 million or $0.43 per diluted share for the same period a
year ago. The year-over-year increase in net income reflects lower
material and manufacturing costs, SG&A expenses and pension
settlement charges, and income related to distributions under the
U.S. Continued Dumping Subsidy Offset Act (CDSOA). These items were
partially offset by lower volume, unfavorable price/mix and
currency, and higher restructuring charges.
Net income in the quarter included income from CDSOA,
restructuring expense and other items totaling $1.2 million of income (net). Excluding these
items, adjusted net income was $43.7 million or $0.55 per diluted share. This compares with
adjusted net income of $49.1 million
or $0.57 per diluted share for the
same period in 2015 (reference table below).
Reconciliations to
Net Income & Earnings Per
Share
|
2016 –
2Q
|
2015
– 2Q
|
|
($M)
|
EPS
|
($M)
|
EPS
|
Net Income
Attributable to The Timken Company
|
$
44.9
|
$ 0.57
|
$ 36.7
|
$ 0.43
|
Adjustments*:
|
|
|
|
|
Pension settlement
charges
|
$
0.4
|
|
$
4.4
|
|
Impairment and
restructuring charges
|
3.4
|
|
1.4
|
|
Loss on
divestitures
|
---
|
|
0.3
|
|
Acquisition related
charges
|
0.8
|
|
---
|
|
CDSOA income, net of
related expenses
|
(6.1)
|
|
---
|
|
Provision (benefit)
for income taxes
|
0.3
|
|
6.3
|
|
Total
adjustments
|
(1.2)
|
(0.02)
|
12.4
|
0.14
|
Adjusted Net
Income/Adjusted EPS
|
$
43.7
|
$ 0.55
|
$ 49.1
|
$ 0.57
|
|
|
|
|
|
*Adjustments are
pre-tax, with net tax provision (benefit) listed
separately.
|
"We performed well in the quarter despite challenging market
conditions, generating strong cash flow and delivering double-digit
operating margins," Timken President and Chief Executive Officer
Richard G. Kyle said. "We also
continued to advance our strategic priorities including the recent
acquisition of Lovejoy. While we expect our target markets to
weaken further in the second half, we are maintaining our full-year
adjusted earnings guidance primarily on the strength of our
operational excellence initiatives."
Cash from operations for the quarter was $155.5 million. Free cash flow for the quarter
was $129.3 million. Cash from
operations for the second quarter benefited from $48.1 million of cash receipts from CDSOA, lower
tax payments and working capital.
Recently, the company:
- Added to its mechanical power transmission product portfolio
with the acquisition of Lovejoy, Inc., a manufacturer of premium
industrial couplings and universal joints;
- Opened a new service center in Denver for the repair of electric motors,
generators and gearboxes, providing new and existing customers a
broader offering of powertrain repair solutions;
- Continued to advance its manufacturing footprint initiatives
with the closure of a bearing plant in the U.K.;
- Returned $53.6 million in
capital to shareholders in the second quarter through the
repurchase of nearly 1 million shares and the payment of its
376th consecutive quarterly dividend; and
- Received a credit rating upgrade from BBB- to BBB
from S&P Global Ratings.
Second-Quarter Segment Results
Mobile Industries reported second-quarter sales of
$367.8 million, 5.4 percent
lower than the same period a year ago. Excluding unfavorable
currency of 1.5 percent, sales were down 3.9 percent compared with
the prior year, as growth in automotive and the net benefit of
acquisitions were offset by declines in other end markets.
Earnings before interest and taxes (EBIT) in the quarter were
$35.3 million or 9.6 percent of
sales, compared with EBIT of $36.0
million or 9.3 percent of sales for the same period a
year ago. The slight decrease in EBIT reflects lower volume,
unfavorable price/mix and currency, and higher restructuring costs
offset by favorable material and manufacturing costs, and lower
SG&A expenses.
EBIT in the quarter included restructuring charges of
$2.3 million. Excluding this,
adjusted EBIT was $37.6 million or
10.2 percent of sales, compared with $37.0 million or 9.5 percent of sales
in the second quarter last year.
Process Industries sales of $305.8
million for the second quarter declined 9.9 percent
from the same period a year ago. Excluding unfavorable currency of
1.9 percent, sales were down 8 percent, driven by weaker
demand in the industrial aftermarket and heavy industries,
partially offset by higher military marine revenue and the benefit
of acquisitions.
EBIT for the quarter was $46.7 million or 15.3 percent of sales,
compared with EBIT of $56.7 million or 16.7 percent of sales for
the same period a year ago. The decrease in EBIT was driven by the
impact of lower volume and unfavorable price/mix, partially offset
by lower SG&A expenses and the benefit of acquisitions.
EBIT in the quarter included restructuring charges and other
items totaling $1 million of expense. Excluding these items,
adjusted EBIT was $47.7 million
or 15.6 percent of sales, compared with $57.5 million or 16.9 percent of sales
in the second quarter last year.
2016 Outlook
The company expects 2016 revenue to be down approximately 6
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 6 to 7 percent. Excluding
an estimated unfavorable currency impact of 1.5 percent, sales are
expected to decline around 5 percent, reflecting lower demand
in rail, off-highway, aerospace and heavy truck, partially offset
by growth in automotive and the net benefit of
acquisitions/divestitures.
- Process Industries' sales to be down 5 to 6 percent. Excluding
an estimated unfavorable currency impact of 2 percent, sales are
expected to decline around 3 to 4 percent, driven by declines
in the industrial aftermarket and heavy industries, partially
offset by the benefit of acquisitions (including the recently
announced Lovejoy acquisition).
Timken now anticipates 2016 earnings per diluted share to range
from $1.70 to $1.80 for the full year
on a GAAP basis. The company expects 2016 adjusted earnings per
diluted share to range from $1.90 to
$2.00, unchanged from its prior estimate.
Conference Call Information
Timken will host a conference call today at 11:00 a.m.
Eastern Time to review its financial results. Presentation
materials will be available online in advance of the call for
interested investors and securities analysts.
Conference
Call:
Thursday, July 28, 2016
11:00 a.m. Eastern Time
Live Dial-In: 800-474-8920 or
719-325-2161
(Call in 10 minutes prior to be included.)
Conference ID: Timken's 2Q Earnings Call
Live Webcast:
http://investors.timken.com
Conference Call Replay: Replay Dial-In available
through August 11, 2016:
888-203-1112 or 719-457-0820
Replay Passcode: 4617515
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 InterlubeTM. Known for its
quality products and collaborative technical sales model, Timken
posted $2.9 billion in sales in
2015. With more than 15,000 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 second
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:
Shelly
Chadwick
Vice President – Treasury & Investor Relations
234.262.3223
shelly.chadwick@timken.com
|
The Timken
Company
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
(Dollars in millions,
except per share data)
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2016
|
2015
|
|
2016
|
2015
|
Net sales
|
$
|
673.6
|
|
$
|
728.0
|
|
|
$
|
1,357.6
|
|
$
|
1,450.5
|
|
Cost of products
sold
|
491.3
|
|
522.9
|
|
|
994.4
|
|
1,042.9
|
|
Gross
Profit
|
182.3
|
|
205.1
|
|
|
363.2
|
|
407.6
|
|
Selling, general
& administrative expenses (SG&A)
|
110.2
|
|
126.1
|
|
|
228.5
|
|
254.6
|
|
Impairment and
restructuring charges
|
2.9
|
|
1.4
|
|
|
13.4
|
|
7.6
|
|
Pension settlement
charges
|
0.4
|
|
4.4
|
|
|
1.6
|
|
219.6
|
|
Loss on
divestitures
|
—
|
|
0.3
|
|
|
—
|
|
0.3
|
|
Operating Income
(Loss)
|
68.8
|
|
72.9
|
|
|
119.7
|
|
(74.5)
|
|
Continued Dumping and
Subsidy Offset Act income, net of related
expenses(1)
|
6.1
|
|
—
|
|
|
53.8
|
|
—
|
|
Other (expense)
income, net
|
(1.7)
|
|
1.4
|
|
|
(1.7)
|
|
—
|
|
Earnings (Loss)
Before Interest and Taxes (EBIT)(2)
|
73.2
|
|
74.3
|
|
|
171.8
|
|
(74.5)
|
|
Interest expense,
net
|
(8.3)
|
|
(7.7)
|
|
|
(16.4)
|
|
(15.0)
|
|
Income (Loss)
Before Income Taxes
|
64.9
|
|
66.6
|
|
|
155.4
|
|
(89.5)
|
|
Provision for income
taxes
|
20.0
|
|
28.9
|
|
|
47.6
|
|
7.6
|
|
Net Income
(Loss)
|
44.9
|
|
37.7
|
|
|
107.8
|
|
(97.1)
|
|
Less: Net (loss)
income attributable to non-controlling interest
|
—
|
|
1.0
|
|
|
(0.1)
|
|
1.4
|
|
Net Income (Loss)
Attributable to The Timken Company
|
$
|
44.9
|
|
$
|
36.7
|
|
|
$
|
107.9
|
|
$
|
(98.5)
|
|
|
|
|
|
|
|
Net Income (Loss)
per Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
|
|
|
Basic Earnings (Loss) per
share
|
$
|
0.57
|
|
$
|
0.43
|
|
|
$
|
1.36
|
|
$
|
(1.14)
|
|
|
|
|
|
|
|
Diluted Earnings (Loss)
per share
|
$
|
0.57
|
|
$
|
0.43
|
|
|
$
|
1.35
|
|
$
|
(1.14)
|
|
|
|
|
|
|
|
Average Shares
Outstanding
|
78,671,509
|
|
85,326,526
|
|
|
79,225,703
|
|
86,514,517
|
|
Average Shares
Outstanding - assuming dilution
|
79,312,774
|
|
86,156,775
|
|
|
79,880,222
|
|
86,514,517
|
|
|
|
|
|
|
|
(1) U.S.
Continued Dumping and Subsidy Offset Act (CDSOA) income, net of
related expenses, 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
June 30,
|
|
Six Months
Ended
June 30,
|
(Dollars in
millions)
|
2016
|
2015
|
|
2016
|
2015
|
|
|
|
|
|
|
Mobile
Industries
|
|
|
|
|
|
Net sales
|
$
|
367.8
|
|
$
|
388.6
|
|
|
$
|
751.0
|
|
$
|
781.6
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
35.3
|
|
$
|
36.0
|
|
|
$
|
65.5
|
|
$
|
71.4
|
|
EBIT Margin
(1)
|
9.6
|
%
|
9.3
|
%
|
|
8.7
|
%
|
9.1
|
%
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
Net sales
|
$
|
305.8
|
|
$
|
339.4
|
|
|
$
|
606.6
|
|
$
|
668.9
|
|
Earnings before
interest and taxes (EBIT) (1)
|
$
|
46.7
|
|
$
|
56.7
|
|
|
$
|
79.3
|
|
$
|
101.9
|
|
EBIT Margin
(1)
|
15.3
|
%
|
16.7
|
%
|
|
13.1
|
%
|
15.2
|
%
|
|
|
|
|
|
|
Unallocated corporate
expense
|
$
|
(14.5)
|
|
$
|
(14.0)
|
|
|
$
|
(25.2)
|
|
$
|
(28.2)
|
|
Unallocated pension
settlement charges (2)
|
(0.4)
|
|
(4.4)
|
|
|
(1.6)
|
|
(219.6)
|
|
CDSOA income, net of
related expenses(3)
|
6.1
|
|
—
|
|
|
|
53.8
|
|
|
—
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
Net sales
|
$
|
673.6
|
|
$
|
728.0
|
|
|
$
|
1,357.6
|
|
$
|
1,450.5
|
|
Earnings (loss)
before interest and taxes (EBIT) (1)
|
$
|
73.2
|
|
$
|
74.3
|
|
|
$
|
171.8
|
|
$
|
(74.5)
|
|
EBIT Margin
(1)
|
10.9
|
%
|
10.2
|
%
|
|
12.7
|
%
|
(5.1)
|
%
|
|
|
|
|
|
|
(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 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, net of related expenses, 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)
June 30, 2016
|
|
December 31,
2015
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
156.0
|
|
|
$
|
129.6
|
|
Restricted
cash
|
0.2
|
|
|
0.2
|
|
Accounts
receivable
|
452.3
|
|
|
454.6
|
|
Inventories,
net
|
555.4
|
|
|
543.2
|
|
Other current
assets
|
73.2
|
|
|
78.8
|
|
Total Current
Assets
|
1,237.1
|
|
|
1,206.4
|
|
Property, plant and
equipment, net
|
772.5
|
|
|
777.8
|
|
Goodwill and other
intangible assets
|
586.7
|
|
|
598.6
|
|
Non-current pension
assets
|
85.6
|
|
|
86.3
|
|
Other
assets
|
112.5
|
|
|
115.0
|
|
Total
Assets
|
$
|
2,794.4
|
|
|
$
|
2,784.1
|
|
|
|
|
|
LIABILITIES
|
|
|
|
Accounts
payable
|
$
|
172.9
|
|
|
$
|
159.7
|
|
Short-term debt,
including current portion of long-term debt
|
28.4
|
|
|
77.1
|
|
Income
taxes
|
34.4
|
|
|
13.1
|
|
Accrued
expenses
|
239.3
|
|
|
255.4
|
|
Total Current
Liabilities
|
475.0
|
|
|
505.3
|
|
|
|
|
|
Long-term
debt
|
604.2
|
|
|
579.4
|
|
Accrued pension
cost
|
147.6
|
|
|
146.9
|
|
Accrued
postretirement benefits cost
|
132.6
|
|
|
136.1
|
|
Other non-current
liabilities
|
75.8
|
|
|
71.8
|
|
Total
Liabilities
|
1,435.2
|
|
|
1,439.5
|
|
|
|
|
|
EQUITY
|
|
|
|
The Timken Company
shareholders' equity
|
1,333.4
|
|
|
1,324.5
|
|
Noncontrolling
Interest
|
25.8
|
|
|
20.1
|
|
Total
Equity
|
1,359.2
|
|
|
1,344.6
|
|
Total Liabilities and
Equity
|
$
|
2,794.4
|
|
|
$
|
2,784.1
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
June
30,
|
Six Months
Ended
June
30,
|
(Dollars in
millions)
|
2016
|
2015
|
2016
|
2015
|
Cash Provided
(Used)
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net income (loss)
attributable to The Timken Company
|
$
|
44.9
|
|
$
|
36.7
|
|
$
|
107.9
|
|
$
|
(98.5)
|
|
Net (loss) income
attributable to noncontrolling interest
|
—
|
|
1.0
|
|
(0.1)
|
|
1.4
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
32.4
|
|
32.1
|
|
65.0
|
|
65.6
|
|
Impairment
charges
|
—
|
|
0.6
|
|
2.6
|
|
3.3
|
|
Loss on sale of
assets
|
0.2
|
|
1.4
|
|
0.8
|
|
1.7
|
|
CDSOA
receivable
|
41.9
|
|
—
|
|
(6.2)
|
|
—
|
|
Pension and other
postretirement expense
|
9.6
|
|
12.9
|
|
18.9
|
|
238.0
|
|
Pension and other
postretirement benefit contributions and payments
|
(4.1)
|
|
(10.0)
|
|
(14.3)
|
|
(16.9)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
9.6
|
|
6.9
|
|
4.7
|
|
(22.7)
|
|
Inventories
|
(8.1)
|
|
10.0
|
|
(8.2)
|
|
(2.8)
|
|
Accounts
payable
|
(4.0)
|
|
1.0
|
|
12.5
|
|
28.9
|
|
Accrued
expenses
|
20.9
|
|
8.8
|
|
(7.5)
|
|
(54.7)
|
|
Income
taxes
|
3.8
|
|
(14.8)
|
|
26.2
|
|
(44.5)
|
|
Other, net
|
8.4
|
|
1.9
|
|
0.3
|
|
6.7
|
|
Net Cash Provided by
Operating Activities
|
$
|
155.5
|
|
$
|
88.5
|
|
$
|
202.6
|
|
$
|
105.5
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Capital
expenditures
|
$
|
(26.2)
|
|
$
|
(23.8)
|
|
$
|
(50.4)
|
|
$
|
(43.5)
|
|
Other
|
(0.2)
|
|
4.5
|
|
(0.6)
|
|
10.2
|
|
Net Cash Used in
Investing Activities
|
$
|
(26.4)
|
|
$
|
(19.3)
|
|
$
|
(51.0)
|
|
$
|
(33.3)
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Cash dividends paid
to shareholders
|
$
|
(20.4)
|
|
$
|
(22.1)
|
|
$
|
(41.1)
|
|
$
|
(44.0)
|
|
Purchase of treasury
shares
|
(33.2)
|
|
(80.4)
|
|
(68.2)
|
|
(177.2)
|
|
Net (payments)
proceeds from credit facilities
|
(55.6)
|
|
114.1
|
|
(24.4)
|
|
110.5
|
|
Net (payments)
proceeds from long-term debt
|
—
|
|
—
|
|
—
|
|
(1.1)
|
|
Other
|
0.1
|
|
0.9
|
|
5.2
|
|
3.5
|
|
Net Cash (Used in)
Provided by Financing Activities
|
$
|
(109.1)
|
|
$
|
12.5
|
|
$
|
(128.5)
|
|
$
|
(108.3)
|
|
Effect of exchange
rate changes on cash
|
(1.3)
|
|
0.7
|
|
3.3
|
|
(5.9)
|
|
Increase (Decrease)
in Cash and Cash Equivalents
|
$
|
18.7
|
|
$
|
82.4
|
|
$
|
26.4
|
|
$
|
(42.0)
|
|
Cash and cash
equivalents at Beginning of Period
|
137.3
|
|
154.4
|
|
129.6
|
|
278.8
|
|
Cash and Cash
Equivalents at End of Period
|
$
|
156.0
|
|
$
|
236.8
|
|
$
|
156.0
|
|
$
|
236.8
|
|
|
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
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
2016
|
|
EPS
|
2015
|
|
EPS
|
|
2016
|
|
EPS
|
2015
|
|
EPS
|
Income (Loss) from
The Timken Company
|
|
$
|
44.9
|
|
|
|
$
|
37.7
|
|
|
|
|
$
|
107.8
|
|
|
|
$
|
(97.1)
|
|
|
|
Less: Net (loss) income
attributable to noncontrolling interest
|
|
—
|
|
|
|
1.0
|
|
|
|
|
(0.1)
|
|
|
|
1.4
|
|
|
|
Net Income (Loss)
Attributable to The Timken Company
|
|
$
|
44.9
|
|
|
$
|
0.57
|
|
$
|
36.7
|
|
|
$
|
0.43
|
|
|
$
|
107.9
|
|
|
$
|
1.35
|
|
$
|
(98.5)
|
|
|
$
|
(1.14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
settlement charges(2)
|
|
$
|
0.4
|
|
|
|
$
|
4.4
|
|
|
|
|
$
|
1.6
|
|
|
|
$
|
219.6
|
|
|
|
Impairment and restructuring
charges(3)
|
|
3.4
|
|
|
|
1.4
|
|
|
|
|
14.1
|
|
|
|
8.0
|
|
|
|
Loss on
divestitures
|
|
—
|
|
|
|
0.3
|
|
|
|
|
—
|
|
|
|
0.3
|
|
|
|
Acquisition related charges
(4)
|
|
0.8
|
|
|
|
—
|
|
|
|
|
0.8
|
|
|
|
—
|
|
|
|
CDSOA
income, net of related expenses(5)
|
|
(6.1)
|
|
|
|
—
|
|
|
|
|
(53.8)
|
|
|
|
—
|
|
|
|
Gain on
dissolution of a subsidiary
|
|
—
|
|
|
|
—
|
|
|
|
|
(1.4)
|
|
|
|
—
|
|
|
|
Provision
(benefit) for income taxes(6)
|
|
0.3
|
|
|
|
6.3
|
|
|
|
|
11.4
|
|
|
|
(36.0)
|
|
|
|
Total
Adjustments:
|
|
(1.2)
|
|
|
(0.02)
|
|
12.4
|
|
|
0.14
|
|
|
(27.3)
|
|
|
(0.34)
|
|
191.9
|
|
|
2.21
|
|
Adjusted Net Income
from The Timken Company
|
|
$
|
43.7
|
|
|
$
|
0.55
|
|
$
|
49.1
|
|
|
$
|
0.57
|
|
|
$
|
80.6
|
|
|
$
|
1.01
|
|
$
|
93.4
|
|
|
$
|
1.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Adjustments are pre-tax, with net
tax provision (benefit) listed separately.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) 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, those efforts 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 charges related to the acquisition of Lovejoy, Inc.
(Lovejoy), including one-time transaction costs.
|
|
(5) CDSOA
income, net of related expenses, 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)
Provision (benefit) 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
June 30,
|
|
Six Months
Ended
June 30,
|
|
2016
|
Percentage to Net
Sales
|
2015
|
Percentage to Net
Sales
|
|
2016
|
Percentage to Net
Sales
|
2015
|
Percentage
to Net
Sales
|
Net Income
(Loss)
|
$
|
44.9
|
|
6.7
|
%
|
$
|
37.7
|
|
5.2
|
%
|
|
$
|
107.8
|
|
7.9
|
%
|
$
|
(97.1)
|
|
(6.7)
|
%
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
20.0
|
|
3.0
|
%
|
28.9
|
|
4.0
|
%
|
|
47.6
|
|
3.5
|
%
|
7.6
|
|
0.5
|
%
|
Interest
expense
|
8.7
|
|
1.3
|
%
|
8.4
|
|
1.2
|
%
|
|
17.1
|
|
1.3
|
%
|
16.4
|
|
1.1
|
%
|
Interest
income
|
(0.4)
|
|
—
|
%
|
(0.7)
|
|
(0.1)
|
%
|
|
(0.7)
|
|
(0.1)
|
%
|
(1.4)
|
|
(0.1)
|
%
|
Consolidated earnings
(loss) before interest and taxes (EBIT)
|
$
|
73.2
|
|
10.9
|
%
|
$
|
74.3
|
|
10.2
|
%
|
|
$
|
171.8
|
|
12.7
|
%
|
$
|
(74.5)
|
|
(5.1)
|
%
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Pension
settlement charges (1)
|
$
|
0.4
|
|
—
|
%
|
$
|
4.4
|
|
0.6
|
%
|
|
$
|
1.6
|
|
—
|
%
|
$
|
219.6
|
|
15.1
|
%
|
Impairment and restructuring
charges(2)
|
3.4
|
|
0.5
|
%
|
1.4
|
|
0.2
|
%
|
|
14.1
|
|
1.0
|
%
|
8.0
|
|
0.6
|
%
|
CDSOA
income, net of related expenses(3)
|
(6.1)
|
|
(0.9)
|
%
|
—
|
|
—
|
%
|
|
(53.8)
|
|
(4.0)
|
%
|
—
|
|
—
|
%
|
Loss on
divestitures
|
—
|
|
—
|
%
|
0.3
|
|
—
|
%
|
|
—
|
|
—
|
%
|
0.3
|
|
—
|
%
|
Acquisition related
charges(4)
|
0.8
|
|
—
|
%
|
—
|
|
—
|
%
|
|
0.8
|
|
—
|
%
|
—
|
|
—
|
%
|
Gain on
dissolution of a subsidiary
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
(1.4)
|
|
—
|
%
|
—
|
|
—
|
%
|
Total
Adjustments
|
(1.5)
|
|
(0.4)
|
%
|
6.1
|
|
0.8
|
%
|
|
(38.7)
|
|
(3.0)
|
%
|
227.9
|
|
15.7
|
%
|
Adjusted consolidated
earnings before interest and taxes (EBIT)
|
$
|
71.7
|
|
10.6
|
%
|
$
|
80.4
|
|
11.0
|
%
|
|
$
|
133.1
|
|
9.8
|
%
|
$
|
153.4
|
|
10.6
|
%
|
|
|
|
|
|
|
|
|
|
|
(1) 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, 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.
|
|
|
|
|
|
|
|
|
|
|
(3) CDSOA
income, net of related expenses, 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 charges related to the acquisition of Lovejoy,
including one time transaction costs.
|
|
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 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
June 30,
2016
|
Percentage to Net
Sales
|
Three
Months
Ended
June 30,
2015
|
Percentage to Net
Sales
|
|
Six
Months
Ended
June 30,
2016
|
Percentage to Net
Sales
|
Six
Months
Ended
June, 2015
|
Percentage to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
|
35.3
|
|
9.6
|
%
|
$
|
36.0
|
|
9.3
|
%
|
|
$
|
65.5
|
|
8.7
|
%
|
$
|
71.4
|
|
9.1
|
%
|
|
|
|
|
|
|
|
|
|
|
Impairment and
restructuring charges (1)
|
2.3
|
|
0.6
|
%
|
1.0
|
|
0.3
|
%
|
|
9.4
|
|
1.3
|
%
|
2.0
|
|
0.3
|
%
|
Gain on dissolution
of a subsidiary
|
—
|
|
—
|
%
|
—
|
|
—
|
%
|
|
(1.4)
|
|
(0.2)
|
%
|
—
|
|
—
|
%
|
Adjusted earnings
before interest and taxes (EBIT)
|
$
|
37.6
|
|
10.2
|
%
|
$
|
37.0
|
|
9.5
|
%
|
|
$
|
73.5
|
|
9.8
|
%
|
$
|
73.4
|
|
9.4
|
%
|
|
|
|
|
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Three
Months
Ended
June 30,
2016
|
Percentage to Net
Sales
|
Three
Months
Ended
June 30,
2015
|
Percentage to Net
Sales
|
|
Six Months
Ended
June 30,
2016
|
Percentage to Net
Sales
|
Six Months
Ended
June, 2015
|
Percentage to Net
Sales
|
Earnings before
interest and taxes (EBIT)
|
$
|
46.7
|
|
15.3
|
%
|
$
|
56.7
|
|
16.7
|
%
|
|
$
|
79.3
|
|
13.1
|
%
|
$
|
101.9
|
|
15.2
|
%
|
|
|
|
|
|
|
|
|
|
|
Impairment and
restructuring charges(1)
|
1.0
|
|
0.3
|
%
|
0.5
|
|
0.1
|
%
|
|
4.6
|
|
0.8
|
%
|
6.1
|
|
0.9
|
%
|
Loss on
divestitures
|
—
|
|
—
|
%
|
0.3
|
|
0.1
|
%
|
|
—
|
|
—
|
%
|
0.3
|
|
0.1
|
%
|
Adjusted earnings
before interest and taxes (EBIT)
|
$
|
47.7
|
|
15.6
|
%
|
$
|
57.5
|
|
16.9
|
%
|
|
$
|
83.9
|
|
13.9
|
%
|
$
|
108.3
|
|
16.2
|
%
|
|
|
|
|
|
|
|
|
|
|
(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.
|
|
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 non-GAAP measures of the
Company's financial position, due to the amount of cash and cash
equivalents on hand.
|
|
|
|
|
(Dollars in
millions)
|
|
|
|
|
|
|
June 30,
2016
|
December 31,
2015
|
Short-term debt,
including current portion of long-term debt
|
|
|
$
|
28.4
|
|
$
|
77.1
|
|
Long-term
debt
|
|
|
604.2
|
|
579.4
|
|
Total
Debt
|
|
|
$
|
632.6
|
|
$
|
656.5
|
|
Less: Cash, cash
equivalents and restricted cash
|
|
|
(156.2)
|
|
(129.8)
|
|
Net Debt
|
|
|
$
|
476.4
|
|
$
|
526.7
|
|
|
|
|
|
|
Total
equity
|
|
|
$
|
1,359.2
|
|
$
|
1,344.6
|
|
|
|
|
|
|
Ratio of Total Debt
to Capital
|
|
|
31.8
|
%
|
32.8
|
%
|
Ratio of Net Debt to
Capital
|
|
|
26.0
|
%
|
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
June 30,
|
Six Months
Ended
June 30,
|
|
2016
|
2015
|
2016
|
2015
|
Net cash provided by
operating activities
|
$
|
155.5
|
|
$
|
88.5
|
|
$
|
202.6
|
|
$
|
105.5
|
|
Less: capital
expenditures
|
(26.2)
|
|
(23.8)
|
|
(50.4)
|
|
(43.5)
|
|
Free cash
flow
|
$
|
129.3
|
|
$
|
64.7
|
|
$
|
152.2
|
|
$
|
62.0
|
|
|
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
|
$
|
1.70
|
|
|
$
|
1.80
|
|
|
|
|
|
Forecasted
Adjustments: (1)
|
|
|
|
CDSOA
income, net of related expenses (2)
|
(0.67)
|
|
|
(0.67)
|
|
Pension
settlement charges (3)
|
0.40
|
|
|
0.40
|
|
Restructuring charges
(4)
|
0.45
|
|
|
0.45
|
|
Provision
for income taxes (5)
|
0.02
|
|
|
0.02
|
|
Total
Adjustments:
|
$
|
0.20
|
|
|
$
|
0.20
|
|
Forecasted full year
adjusted diluted earnings per share
|
$
|
1.90
|
|
|
$
|
2.00
|
|
|
|
|
|
(1) Forecasted adjustments are
pre-tax, with net tax provision (benefit) listed
separately.
|
|
|
|
|
(2) CDSOA
income, net of related expenses, 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) Restructuring charges relate to
severance and other cost reduction initiatives.
|
|
|
|
|
(5) Provision for income taxes
includes the net tax impact on CDSOA income, net of related
expenses, and pension settlement and restructuring charges, which
are separately subject to income tax at different rates ranging
from 0% - to approximately 33% and the impact of discrete tax
items recorded during the year.
|
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SOURCE The Timken Company