- Sales of $1.19 billion,
down 5.7 percent from last year
- First-quarter earnings per share of $1.46; adjusted EPS of $1.77
- Strong margin performance in the quarter, with net income
margin of 8.7 percent and adjusted EBITDA margin of 20.7
percent
- Raises full-year 2024 outlook; now expects EPS of
$5.10-$5.40, with adjusted EPS of $6.00-$6.30, on
improved organic revenue
NORTH
CANTON, Ohio, April 30,
2024 /PRNewswire/ -- The Timken Company (NYSE:
TKR; www.timken.com), a global technology leader in engineered
bearings and industrial motion, today reported first-quarter
2024 sales of $1.19 billion, down 5.7 percent from the
same period a year ago. The decrease was driven by lower demand,
including a significant decline in renewable energy in China, and unfavorable foreign currency
translation, partially offset by the benefit of acquisitions (net
of divestitures) and favorable pricing.
Timken posted net income in the first quarter
of $103.5 million or $1.46 per diluted share. This compares to
net income of $122.3 million or $1.67 per diluted
share for the same period a year ago. The company's net income
margin in the quarter was 8.7 percent, compared to 9.7 percent in
the first quarter of last year.
Excluding special items (detailed in the attached tables),
adjusted net income in the first quarter was $125.7 million or $1.77 per diluted share. This compares to
adjusted net income of $153.5 million
or $2.09 per diluted share for the
same period in 2023. Adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA) in the quarter
was $246.4 million or 20.7 percent of sales,
compared with $265.5 million or 21 percent of sales
in the first quarter of last year.
During the quarter, Timken returned $24.5
million of cash to shareholders through the payment of its
407th consecutive quarterly dividend. As of the end of
the first quarter, the company's net debt-to-adjusted EBITDA ratio
was 2.1 times.
"Timken posted solid results in the first quarter," said
Richard G. Kyle, Timken president
and chief executive officer. "While below last year's record level,
revenue in the quarter modestly exceeded our expectations. We also
delivered strong margin performance, with improved execution and
favorable price-cost largely mitigating the impact of lower
year-over-year organic revenue. Our results continue to demonstrate
the strength and resiliency of Timken's diverse portfolio and
differentiated business model through dynamic economic conditions."
In March, Timken announced its CEO succession plan, naming
industry veteran Tarak Mehta as its
next president and CEO, succeeding Richard
G. Kyle. Mehta will join Timken in September, and Kyle, who
has led the company since 2014, will move into an advisory role for
a short transition period before retiring. Kyle will continue to
serve on the company's board of directors.
Among other first-quarter highlights, Ethisphere
recognized Timken as one of the World's Most Ethical Companies for
the 13th time, and Fast Company featured Timken
on its list of the World's Most Innovative
Companies®.
First-Quarter 2024 Segment Results
Engineered Bearings sales
of $802.5 million decreased 10.9 percent from the same
period a year ago. The decrease was driven by lower demand and
unfavorable foreign currency translation, partially offset by
higher pricing. Among market sectors, renewable energy was down
significantly in the quarter, off-highway was also lower, while
rail was notably higher.
EBITDA for the quarter was $178.7 million
or 22.3 percent of sales, compared with EBITDA
of $205.0 million or 22.8 percent of sales for
the same period a year ago. The decrease in EBITDA was driven
primarily by the impact of lower volume, partially offset by
favorable price/mix and improved operating cost performance.
Excluding special items, adjusted EBITDA in the quarter
was $181.4 million or 22.6 percent of sales,
compared with $203.8 million or 22.6 percent of sales in
the first quarter of last year.
Industrial Motion sales of $387.8 million
increased 7.1 percent compared with the same period a year ago. The
increase was driven by the benefit of acquisitions and higher
pricing, partially offset by lower demand. Most platforms were down
from last year, with the belts and chain platform posting the
largest decline, while services revenue was notably up.
EBITDA for the quarter was $77.3 million
or 19.9 percent of sales, compared with EBITDA
of $48.2 million or 13.3 percent of sales for the
same period a year ago. The increase in EBITDA was driven primarily
by lower impairment charges, the benefit of acquisitions, improved
operating cost performance and favorable price/mix, partially
offset by the impact of lower volume.
Excluding special items, adjusted EBITDA in the quarter
was $82.1 million or 21.2 percent of sales,
compared with $76.9 million or 21.2 percent of sales
in the first quarter of last year.
2024 Outlook
Timken is increasing its full-year 2024 outlook, with earnings
per diluted share now forecasted to be in the range of $5.10 to $5.40 and
adjusted earnings per diluted share in the range of $6.00 to $6.30. The
company now expects revenue to be down 2 to 4 percent in total from
2023.
"We are increasing our full-year outlook for revenue, margins
and earnings per share to take into account our first-quarter
performance and expectations for the rest of the year," said Kyle.
"Our revenue outlook reflects improvement across multiple
end-market sectors, offset partially by lower expectations for wind
energy and unfavorable foreign currency translation. On the bottom
line, we expect improved mix and strong operational execution to
drive higher margins and earnings per share as compared to our
prior outlook."
Kyle concluded, "While the macroeconomic environment remains
uncertain in many areas, Timken has a proven track record of
achieving higher and sustainable levels of performance through
cycles. Our first-quarter results and full-year outlook reflect the
positive changes to the Timken portfolio over the last decade. We
are confident in our ability to deliver solid results in 2024, and
we remain focused on advancing our profitable growth strategy to
drive shareholder value for years to come."
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:
|
Tuesday, April 30,
2024
|
|
11:00 a.m. Eastern
Time
|
|
Live Dial-In:
833-470-1428
|
|
Or
404-975-4839
|
|
Access Code:
660675
|
|
(Call in 10 minutes
prior to be included.)
|
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through
|
|
May 14,
2024:
|
|
866-813-9403 or
929-458-6194
|
|
Replay Access Code:
639103
|
|
|
|
Live Webcast:
|
http://investors.timken.com
|
About The Timken Company
The Timken Company (NYSE: TKR; www.timken.com), a
global technology leader in engineered bearings and industrial
motion, designs a growing portfolio of next-generation products for
diverse industries. For 125 years, Timken has used its specialized
expertise to innovate and create customer-centric solutions that
increase reliability and efficiency. The company
posted $4.8 billion in sales in 2023 and employs more
than 19,000 people globally, operating from 45 countries. Timken is
one of the World's Most Innovative Companies, according
to Fast Company, and has been recognized
among America's Most Responsible
Companies and America's Greatest Workplaces for
Diversity by Newsweek, the World's Most Ethical
Companies® by Ethisphere and America's Most
Innovative Companies by Fortune.
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
"2024 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 first
quarter of 2024; 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;
logistical issues associated with port closures or congestion,
delays or increased 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, sanctions and
hostilities; strained geopolitical relations between countries in
which we have significant operations; weakness in global or
regional general economic conditions and capital markets (as a
result of financial stress affecting the banking system or
otherwise); the impact of inflation on employee expenses, shipping
costs, raw material costs, energy and fuel prices, and other
production costs; the company's ability to satisfy its obligations
under its debt agreements and renew or refinance borrowings on
favorable terms in a high interest rate environment; 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, synergies, and expected cashflow
generation within expected timeframes or at all; fluctuations in
customer demand; the company's ability to effectively adjust prices
for its products in response to changing dynamics; 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 effects of government-imposed
restrictions, commercial requirements, and company goals associated
with climate change and emissions or other sustainability
initiatives; unanticipated litigation, claims, investigations
remediation, or assessments; changes in the global regulatory
landscape; restrictions on the use of, or claims or remediation
associated with, per- and polyfluoroalkyl substances; the company's
ability to maintain positive relations with unions and works
councils; the company's ability to compete for skilled labor and to
attract, retain and develop management, other key employees, and
skilled personnel at all levels of the organization; negative
impacts to the company's operations or financial position as a
result of pandemics, epidemics, or other public health concerns and
associated governmental measures; 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,
2023, 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:
Meghan
Elmblad
234.262.7112
investors@timken.com
|
The Timken Company
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
|
|
|
|
(Dollars in millions, except share data)
(Unaudited)
|
|
|
|
Three Months Ended
March 31,
|
|
2024
|
2023
|
|
Net sales
|
$
|
1,190.3
|
|
$
|
1,262.8
|
|
|
Cost of products
sold
|
792.7
|
|
846.0
|
|
|
Selling, general &
administrative expenses
|
190.7
|
|
186.8
|
|
|
Amortization of
intangible assets
|
20.0
|
|
13.5
|
|
|
Impairment and
restructuring charges
|
2.3
|
|
28.9
|
|
|
Operating Income
|
184.6
|
|
187.6
|
|
|
Non-service pension and
other postretirement (expense) income
|
(1.0)
|
|
0.1
|
|
|
Other (expense) income,
net
|
(0.9)
|
|
3.1
|
|
|
Interest expense,
net
|
(29.4)
|
|
(22.6)
|
|
|
Income Before Income Taxes
|
153.3
|
|
168.2
|
|
|
Provision for income
taxes
|
42.7
|
|
42.5
|
|
|
Net Income
|
110.6
|
|
125.7
|
|
|
Less: Net income
attributable to noncontrolling interest
|
7.1
|
|
3.4
|
|
|
Net Income Attributable to The Timken
Company
|
$
|
103.5
|
|
$
|
122.3
|
|
|
|
|
|
Net Income per Common Share Attributable to The
Timken Company Common Shareholders
|
|
|
|
Basic Earnings per
share
|
$
|
1.47
|
|
$
|
1.69
|
|
|
Diluted Earnings per
share
|
$
|
1.46
|
|
$
|
1.67
|
|
|
|
|
|
Average Shares Outstanding
|
70,266,660
|
|
72,499,928
|
|
|
Average Shares Outstanding - assuming
dilution
|
70,880,015
|
|
73,360,854
|
|
|
BUSINESS SEGMENTS
|
|
|
|
(Unaudited)
|
|
|
|
Three Months Ended
March 31,
|
|
(Dollars in
millions)
|
2024
|
2023
|
|
Engineered Bearings
|
|
|
|
Net sales
|
$
|
802.5
|
|
$
|
900.7
|
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
178.7
|
|
$
|
205.0
|
|
|
EBITDA Margin
(1)
|
22.3
|
%
|
22.8
|
%
|
|
Industrial Motion
|
|
|
|
Net sales
|
$
|
387.8
|
|
$
|
362.1
|
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
77.3
|
|
$
|
48.2
|
|
|
EBITDA Margin
(1)
|
19.9
|
%
|
13.3
|
%
|
|
Unallocated corporate
expense
|
$
|
(18.0)
|
|
$
|
(17.7)
|
|
|
Corporate pension and
other postretirement benefit related
income(2)
|
—
|
|
0.9
|
|
|
|
|
|
Consolidated
|
|
|
|
Net sales
|
$
|
1,190.3
|
|
$
|
1,262.8
|
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
238.0
|
|
$
|
236.4
|
|
|
EBITDA Margin
(1)
|
20.0
|
%
|
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 primarily represents
actuarial gains and losses that resulted from the remeasurement of
plan assets and obligations as a result of changes in assumptions
or experience. 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)
|
|
|
|
March 31,
2024
|
|
December 31,
2023
|
|
ASSETS
|
|
|
|
|
Cash and cash
equivalents
|
$
|
421.9
|
|
|
$
|
418.9
|
|
|
Restricted
cash
|
0.4
|
|
|
0.4
|
|
|
Accounts receivable,
net
|
770.4
|
|
|
671.7
|
|
|
Unbilled
receivables
|
134.8
|
|
|
144.5
|
|
|
Inventories,
net
|
1,231.2
|
|
|
1,229.1
|
|
|
Other current
assets
|
141.9
|
|
|
170.3
|
|
|
Total Current
Assets
|
2,700.6
|
|
|
2,634.9
|
|
|
Property, plant and
equipment, net
|
1,299.0
|
|
|
1,311.9
|
|
|
Operating lease
assets
|
122.8
|
|
|
119.7
|
|
|
Goodwill and other
intangible assets
|
2,343.0
|
|
|
2,401.0
|
|
|
Other assets
|
78.6
|
|
|
74.2
|
|
|
Total Assets
|
$
|
6,544.0
|
|
|
$
|
6,541.7
|
|
|
LIABILITIES
|
|
|
|
|
Accounts
payable
|
$
|
373.0
|
|
|
$
|
367.2
|
|
|
Short-term debt,
including current portion of long-term debt
|
601.9
|
|
|
605.6
|
|
|
Income taxes
|
25.4
|
|
|
19.9
|
|
|
Accrued
expenses
|
442.4
|
|
|
478.6
|
|
|
Total Current
Liabilities
|
1,442.7
|
|
|
1,471.3
|
|
|
Long-term
debt
|
1,797.9
|
|
|
1,790.3
|
|
|
Accrued pension
benefits
|
162.7
|
|
|
172.3
|
|
|
Accrued postretirement
benefits
|
30.3
|
|
|
30.2
|
|
|
Long-term operating
lease liabilities
|
82.2
|
|
|
78.7
|
|
|
Other non-current
liabilities
|
293.2
|
|
|
296.5
|
|
|
Total
Liabilities
|
3,809.0
|
|
|
3,839.3
|
|
|
EQUITY
|
|
|
|
|
The Timken Company
shareholders' equity
|
2,608.3
|
|
|
2,582.4
|
|
|
Noncontrolling
interest
|
126.7
|
|
|
120.0
|
|
|
Total Equity
|
2,735.0
|
|
|
2,702.4
|
|
|
Total Liabilities and
Equity
|
$
|
6,544.0
|
|
|
$
|
6,541.7
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
|
|
|
(Unaudited)
|
|
|
|
Three Months Ended
March 31,
|
|
(Dollars in
millions)
|
2024
|
2023
|
|
Cash Provided by (Used
in)
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
Net Income
|
$
|
110.6
|
|
$
|
125.7
|
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
55.3
|
|
45.6
|
|
|
Impairment
charges
|
—
|
|
28.3
|
|
|
Gain on
divestitures
|
—
|
|
(4.0)
|
|
|
Stock-based
compensation expense
|
4.5
|
|
11.0
|
|
|
Pension and other
postretirement expense
|
1.6
|
|
0.4
|
|
|
Pension and other
postretirement benefit contributions and payments
|
(12.2)
|
|
(4.8)
|
|
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts
receivable
|
(106.1)
|
|
(50.3)
|
|
|
Unbilled
receivables
|
9.5
|
|
(11.1)
|
|
|
Inventories
|
(11.1)
|
|
6.1
|
|
|
Accounts
payable
|
20.7
|
|
(9.4)
|
|
|
Accrued
expenses
|
(31.2)
|
|
(44.8)
|
|
|
Income
taxes
|
20.5
|
|
(12.2)
|
|
|
Other,
net
|
(12.8)
|
|
(1.9)
|
|
|
Net Cash Provided by
Operating Activities
|
$
|
49.3
|
|
$
|
78.6
|
|
|
INVESTING ACTIVITIES
|
|
|
|
Capital
expenditures
|
$
|
(44.1)
|
|
$
|
(41.7)
|
|
|
Acquisitions, net of
cash received
|
(0.2)
|
|
(29.2)
|
|
|
Proceeds from
divestitures, net of cash divested
|
—
|
|
5.7
|
|
|
Investments in
short-term marketable securities, net
|
19.7
|
|
0.8
|
|
|
Other, net
|
0.1
|
|
(0.1)
|
|
|
Net Cash Used in
Investing Activities
|
$
|
(24.5)
|
|
$
|
(64.5)
|
|
|
FINANCING ACTIVITIES
|
|
|
|
Cash dividends paid to
shareholders
|
$
|
(24.5)
|
|
$
|
(23.6)
|
|
|
Purchase of treasury
shares
|
—
|
|
(54.0)
|
|
|
Proceeds from exercise
of stock options
|
2.0
|
|
12.7
|
|
|
Payments related to tax
withholding for stock-based compensation
|
(8.9)
|
|
(13.8)
|
|
|
Net proceeds from
credit facilities
|
17.7
|
|
61.9
|
|
|
Net payments on
long-term debt
|
(1.3)
|
|
(0.7)
|
|
|
Net Cash Used in
Financing Activities
|
$
|
(15.0)
|
|
$
|
(17.5)
|
|
|
Effect of exchange rate
changes on cash
|
(6.8)
|
|
1.8
|
|
|
Increase (Decrease) in
Cash, Cash Equivalents and Restricted Cash
|
$
|
3.0
|
|
$
|
(1.6)
|
|
|
Cash, Cash Equivalents
and Restricted Cash at Beginning of Period
|
419.3
|
|
340.7
|
|
|
Cash, Cash Equivalents
and Restricted Cash at End of Period
|
$
|
422.3
|
|
$
|
339.1
|
|
|
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
March 31,
|
|
2024
|
|
EPS
|
|
2023
|
|
EPS
|
|
Net Income Attributable
to The Timken Company
|
$
|
103.5
|
|
|
$
|
1.46
|
|
|
$
|
122.3
|
|
|
$
|
1.67
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
(1)
|
|
|
|
|
|
|
|
|
Acquisition intangible
amortization
|
$
|
20.0
|
|
|
|
|
$
|
13.5
|
|
|
|
|
Impairment,
restructuring and reorganization charges (2)
|
4.8
|
|
|
|
|
30.0
|
|
|
|
|
Corporate
pension and other postretirement benefit related
income(3)
|
—
|
|
|
|
|
(0.9)
|
|
|
|
|
Russia-related charges
(4)
|
—
|
|
|
|
|
0.3
|
|
|
|
|
Acquisition-related charges
(5)
|
4.7
|
|
|
|
|
4.7
|
|
|
|
|
Gain on
divestitures and sale of certain assets (6)
|
(0.7)
|
|
|
|
|
(4.8)
|
|
|
|
|
Noncontrolling interest of above
adjustments
|
(0.1)
|
|
|
|
|
(0.2)
|
|
|
|
|
Provision
for income taxes (7)
|
(6.5)
|
|
|
|
|
(11.4)
|
|
|
|
|
Total
Adjustments:
|
22.2
|
|
|
0.31
|
|
|
31.2
|
|
|
0.42
|
|
|
Adjusted Net Income
Attributable to The Timken Company
|
$
|
125.7
|
|
|
$
|
1.77
|
|
|
$
|
153.5
|
|
|
$
|
2.09
|
|
|
|
|
|
|
|
|
|
|
(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; (iv)
impairment of assets; and (v) related depreciation and
amortization. Impairment, restructuring and reorganization charges
for 2023 included $28.3 million related to the impairment of
goodwill. 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)
Corporate pension and other
postretirement benefit related income represents actuarial gains
and losses that resulted from the remeasurement of plan assets and
obligations as a result of changes in assumptions or experience.
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.
|
|
|
|
|
|
|
|
|
|
(4)
Russia-related charges include impairments or allowances recorded
against certain property, plant and equipment, inventory and trade
receivables to reflect the current impact of Russia's invasion of
Ukraine (and associated sanctions) on the Company's operations.
Refer to the Russia Operations in Management Discussion and
Analysis within the Company's annual report on Form 10-K for
additional information.
|
|
|
|
|
|
|
|
|
|
(5)
Acquisition-related charges represent
deal-related expenses associated with completed transactions and
any resulting inventory step-up impact.
|
|
|
|
|
|
|
|
|
|
(6)
Represents the net gain resulting from divestitures and sale of
certain assets.
|
|
|
|
|
|
|
|
|
|
(7)
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
March 31,
|
|
2024
|
Percentage to
Net Sales
|
2023
|
Percentage to
Net Sales
|
|
Net Income
|
$
|
110.6
|
|
9.3
|
%
|
$
|
125.7
|
|
10.0
|
%
|
|
|
|
|
|
|
Provision for income
taxes
|
42.7
|
|
|
42.5
|
|
|
|
Interest
expense
|
32.2
|
|
|
24.1
|
|
|
|
Interest
income
|
(2.8)
|
|
|
(1.5)
|
|
|
|
Depreciation and
amortization
|
55.3
|
|
|
45.6
|
|
|
|
Consolidated
EBITDA
|
$
|
238.0
|
|
20.0
|
%
|
$
|
236.4
|
|
18.7
|
%
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Impairment,
restructuring and reorganization charges (1)
|
$
|
4.4
|
|
|
$
|
29.8
|
|
|
|
Corporate
pension and other postretirement benefit related
income(2)
|
—
|
|
|
(0.9)
|
|
|
|
Russia-related charges
(3)
|
—
|
|
|
0.3
|
|
|
|
Acquisition-related charges
(4)
|
4.7
|
|
|
4.7
|
|
|
|
Gain on
divestitures and sale of certain assets (5)
|
(0.7)
|
|
|
(4.8)
|
|
|
|
Total Adjustments
|
8.4
|
|
0.7
|
%
|
29.1
|
|
2.3
|
%
|
|
Adjusted
EBITDA
|
$
|
246.4
|
|
20.7
|
%
|
$
|
265.5
|
|
21.0
|
%
|
|
|
|
|
|
|
(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; (iii) severance related to cost
reduction initiatives; and (iv) impairment of assets. Impairment,
restructuring and reorganization charges for 2023 included $28.3
million related to the impairment of goodwill. 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)
Corporate pension and other
postretirement benefit related income represents actuarial gains
and losses that resulted from the remeasurement of plan assets and
obligations as a result of changes in assumptions or experience.
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.
|
|
|
|
|
|
|
(3)
Russia-related charges include impairments or allowances recorded
against certain property, plant and equipment, inventory and trade
receivables to reflect the current impact of Russia's invasion of
Ukraine (and associated sanctions) on the Company's operations.
Refer to the Russia Operations in Management Discussion and
Analysis within the Company's annual report on Form 10-K for
additional information.
|
|
|
|
|
|
|
(4)
Acquisition-related charges represent
deal-related expenses associated with completed transactions and
any resulting inventory step-up impact.
|
|
|
|
|
|
|
(5)
Represents the net gain resulting from
divestitures and sale of certain assets.
|
|
Reconciliation of segment EBITDA, after adjustments,
to segment EBITDA, and segment EBITDA, after adjustments, as a
percentage of sales to segment EBITDA, as a percentage of
sales:
|
|
(Unaudited)
|
|
|
|
|
|
|
The following
reconciliation is provided as additional relevant information about
the Company's Engineered Bearings and Industrial Motion 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.
|
|
|
|
|
|
|
|
Engineered Bearings
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
(Dollars in millions)
|
2024
|
Percentage to
Net Sales
|
|
2023
|
Percentage to
Net Sales
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
|
$
|
178.7
|
|
22.3
|
%
|
|
$
|
205.0
|
|
22.8
|
%
|
|
Impairment,
restructuring and reorganization charges (1)
|
2.5
|
|
|
|
1.1
|
|
|
|
Russia-related charges
(2)
|
—
|
|
|
|
0.3
|
|
|
|
Acquisition-related charges
(3)
|
0.9
|
|
|
|
2.2
|
|
|
|
Gain on
divestitures and sale of certain assets (4)
|
(0.7)
|
|
|
|
(4.8)
|
|
|
|
Adjusted
EBITDA
|
$
|
181.4
|
|
22.6
|
%
|
|
$
|
203.8
|
|
22.6
|
%
|
|
|
|
|
|
|
|
Industrial Motion
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
(Dollars in millions)
|
2024
|
Percentage to
Net Sales
|
|
2023
|
Percentage to
Net Sales
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
|
$
|
77.3
|
|
19.9
|
%
|
|
$
|
48.2
|
|
13.3
|
%
|
|
Impairment,
restructuring and reorganization charges (1)
|
1.8
|
|
|
|
28.7
|
|
|
|
Acquisition-related charges
(3)
|
3.0
|
|
|
|
—
|
|
|
|
Adjusted
EBITDA
|
$
|
82.1
|
|
21.2
|
%
|
|
$
|
76.9
|
|
21.2
|
%
|
|
|
|
|
|
|
|
(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; (iii) severance related to cost
reduction initiatives; and (iv) impairment of assets. Impairment,
restructuring and reorganization charges for 2023 included $28.3
million related to the impairment of goodwill. 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)
Russia-related charges include impairments or allowances recorded
against certain property, plant and equipment, inventory and trade
receivables to reflect the current impact of Russia's invasion of
Ukraine (and associated sanctions) on the Company's operations.
Refer to the Russia Operations in Management Discussion and
Analysis within the Company's annual report on Form 10-K for
additional information.
|
|
|
|
|
|
|
|
(3)
The acquisition-related charges represent
the inventory step-up impact of the completed
acquisitions.
|
|
|
|
|
|
|
|
(4)
Represents the net gain resulting from
divestitures and sale of certain assets.
|
|
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 prior page), 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. The Company presents net debt to adjusted EBITDA because
it believes it is more representative of the Company's financial
position as it is reflective of the ability to cover its net debt
obligations with results from its core operations.
|
|
|
|
|
(Dollars in millions)
|
|
|
|
March 31,
2024
|
December 31,
2023
|
|
Short-term debt,
including current portion of long-term debt
|
$
|
601.9
|
|
$
|
605.6
|
|
|
Long-term
debt
|
1,797.9
|
|
1,790.3
|
|
|
Total
Debt
|
$
|
2,399.8
|
|
$
|
2,395.9
|
|
|
Less: Cash and cash
equivalents
|
(421.9)
|
|
(418.9)
|
|
|
Net Debt
|
$
|
1,977.9
|
|
$
|
1,977.0
|
|
|
|
|
|
Total Equity
|
$
|
2,735.0
|
|
$
|
2,702.4
|
|
|
|
|
|
Ratio of Net Debt to
Capital
|
42.0
|
%
|
42.2
|
%
|
|
|
|
|
Adjusted EBITDA for the
Twelve Months Ended
|
$
|
920.6
|
|
$
|
939.7
|
|
|
|
|
|
Ratio of Net Debt to
Adjusted EBITDA
|
2.1
|
|
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
March 31,
|
|
2024
|
2023
|
|
Net cash provided by
operating activities
|
$
|
49.3
|
|
$
|
78.6
|
|
|
Less: capital
expenditures
|
(44.1)
|
|
(41.7)
|
|
|
Free cash
flow
|
$
|
5.2
|
|
$
|
36.9
|
|
|
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
March 31, 2024
|
Twelve Months Ended
December 31, 2023
|
|
Net Income
|
$
|
392.9
|
|
$
|
408.0
|
|
|
Provision for income
taxes
|
122.7
|
|
122.5
|
|
|
Interest
expense
|
118.8
|
|
110.7
|
|
|
Interest
income
|
(10.6)
|
|
(9.3)
|
|
|
Depreciation and
amortization
|
211.0
|
|
201.3
|
|
|
Consolidated
EBITDA
|
$
|
834.8
|
|
$
|
833.2
|
|
|
Adjustments:
|
|
|
|
Impairment,
restructuring and reorganization charges (1)
|
$
|
25.4
|
|
$
|
50.8
|
|
|
Corporate
pension and other postretirement benefit related expense
(2)
|
21.5
|
|
20.6
|
|
|
Acquisition-related charges
(3)
|
31.8
|
|
31.8
|
|
|
Gain on
divestitures and sale of certain assets (4)
|
(1.1)
|
|
(5.2)
|
|
|
Russia-related charges
(5)
|
8.2
|
|
8.5
|
|
|
Total Adjustments
|
85.8
|
|
106.5
|
|
|
Adjusted
EBITDA
|
$
|
920.6
|
|
$
|
939.7
|
|
|
|
|
|
(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; (iii) severance related to cost
reduction initiatives; and (iv) impairment of assets. In addition,
impairment, restructuring and reorganization charges for the twelve
months ended December 31, 2023 included $28.3 million related
to the impairment of goodwill. 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) Corporate pension and other postretirement
benefit related expense represents actuarial losses that resulted
from the remeasurement of plan assets and obligations as a result
of changes in assumptions or experience. The Company recognizes
actuarial losses and gains in connection with the annual
remeasurement in the fourth quarter, or if specific events trigger
a remeasurement.
|
|
|
|
|
(3)
Acquisition-related charges represent
deal-related expenses associated with completed transactions and
any resulting inventory step-up impact.
|
|
|
|
|
(4)
Represents the net gain resulting from divestitures and sale of
certain assets.
|
|
|
(5) Russia-related charges include impairments or
allowances recorded against certain property, plant and equipment,
inventory and trade receivables and write-down of a 51%-owned joint
venture ("Russian JV") to reflect the current impact of Russia's
invasion of Ukraine (and associated sanctions) on the Company's
operations. Refer to the Russia Operations in Management Discussion
and Analysis within the Company's annual report on Form 10-K for
additional information.
|
|
Reconciliation of Net Sales to Organic
Sales
|
|
(Unaudited)
|
|
The following
reconciliation is provided as additional relevant information about
the Company's performance deemed useful to investors. Management
believes that net sales, excluding the impact of acquisitions,
divestitures and foreign currency exchange rate changes, allow
investors and the Company to meaningfully evaluate the percentage
change in net sales on a comparable basis from period to
period.
|
|
Three Months Ended
March 31, 2024
|
|
Three Months
Ended
March 31, 2023
|
|
$ Change
|
% Change
|
|
Net sales
|
$
|
1,190.3
|
|
|
$
|
1,262.8
|
|
|
$
|
(72.5)
|
|
(5.7)
|
%
|
|
Less: Acquisitions and
divestitures
|
50.0
|
|
|
—
|
|
|
50.0
|
|
NM
|
|
Currency
|
(6.5)
|
|
|
—
|
|
|
(6.5)
|
|
NM
|
|
Net sales, excluding
the impact of acquisitions, divestitures and currency
|
$
|
1,146.8
|
|
|
$
|
1,262.8
|
|
|
$
|
(116.0)
|
|
(9.2)
|
%
|
|
Reconciliation of Adjusted Earnings per Share to GAAP
Earnings per Share for Full Year 2024
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
|
$
|
5.10
|
|
|
$
|
5.40
|
|
|
|
|
|
|
Forecasted
Adjustments:
|
|
|
|
|
Impairment, restructuring and
other special items, net (1)
|
0.10
|
|
|
0.10
|
|
|
Acquisition-related
intangible amortization expense, net
|
0.80
|
|
|
0.80
|
|
|
Forecasted full year
adjusted diluted earnings per share
|
$
|
6.00
|
|
|
$
|
6.30
|
|
|
|
|
|
|
(1) Impairment, restructuring and other special
items, net do not include the impact of any potential future
mark-to-market pension and other postretirement remeasurement
adjustments, because the amounts will not be known until
incurred.
|
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SOURCE The Timken Company