NORTH CANTON, Ohio,
May 1, 2020 /PRNewswire/
-- The Timken Company (NYSE: TKR; www.timken.com), a
world leader in engineered bearings and power transmission
products, today reported first-quarter 2020 sales
of $923.4 million, down 5.7 percent from the same period
a year ago. The decline was driven by lower demand in most end
markets and unfavorable currency, partially offset by the favorable
impact of acquisitions and positive pricing.
In the first quarter, Timken posted net income
of $80.7 million or $1.06 per diluted share,
versus net income of $91.9 million or $1.19 per
diluted share for the same period a year ago. The year-over-year
decrease was driven primarily by the impact of lower volume and
related manufacturing utilization due in part to COVID-19, and
unfavorable currency, partially offset by favorable price/mix,
lower material and logistics costs, and lower organic selling,
general and administrative (SG&A) expenses. In addition,
special items in the quarter were favorable versus the year-ago
period, driven mainly by reduced property losses and lower discrete
tax expenses, offset partially by higher restructuring charges.
Excluding special items, adjusted net income in the first
quarter of 2020 was $84.7 million or $1.11 per
diluted share versus adjusted net income of $104.2 million or $1.35 per
diluted share for the same period in 2019.
"First quarter revenue and profitability improved meaningfully
from the fourth quarter of 2019 as we expected, despite the impact
from the COVID-19 pandemic," said Richard
G. Kyle, Timken president and chief executive officer. "The
Timken team responded quickly to the pandemic, prioritizing the
health and safety of our global associates and stakeholders. We
have also taken significant short-term cost-reduction actions
across the enterprise to mitigate the impact of COVID-19 on our
second-quarter performance. We are confident in our ability to
successfully manage through the challenges that lie
ahead."
Net cash from operations for the quarter was $56.2 million and free cash flow was $24.4 million. During the quarter, Timken paid
its 391st consecutive quarterly dividend and repurchased
one million shares of company stock. Due to the uncertainty caused
by COVID-19, the company has suspended its share buyback program
until further notice.
First-Quarter 2020 Segment Results
Mobile Industries sales of $466.7 million decreased
6.7 percent compared with the same period a year ago. The decline
was driven primarily by lower shipments in the off-highway,
automotive and heavy truck sectors, along with unfavorable
currency, partially offset by the benefit of acquisitions and
growth in the aerospace sector.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) in the quarter was $75.1 million
or 16.1 percent of sales, compared with EBITDA
of $79.3 million or 15.9 percent of sales for the
same period a year ago. The decrease in EBITDA reflects the impact
of lower volume and related manufacturing utilization due in part
to COVID-19, and unfavorable currency, partially offset by
favorable price/mix, lower material and logistics costs, reduced
property losses versus the year-ago period and the favorable impact
of acquisitions.
Excluding special items detailed in the attached tables,
adjusted EBITDA in the quarter was $76.0 million
or 16.3 percent of sales, compared
with $83.9 million or 16.8 percent of sales in the
first quarter last year.
Process Industries sales of $456.7 million
decreased 4.8 percent from the same period a year ago. The
year-over-year decrease was driven primarily by lower revenue in
the industrial distribution and general and heavy industrial
sectors, along with unfavorable currency, partially offset by the
benefit of acquisitions and strong growth in renewable energy.
EBITDA for the quarter was $107.5 million
or 23.5 percent of sales, compared with EBITDA
of $127.6 million or 26.6 percent of sales for
the same period a year ago. The decrease in EBITDA was driven by
the impact of lower volume and related manufacturing utilization
due in part to COVID-19, and unfavorable currency, partially offset
by lower SG&A expenses and the favorable impact of
acquisitions.
Excluding special items detailed in the attached tables,
adjusted EBITDA in the quarter was $111.5 million
or 24.4 percent of sales, compared
with $131.2 million or 27.4 percent of sales in the
first quarter last year.
Balance Sheet, Cash Flow and Capital Allocation
Update
Timken has sufficient liquidity to meet its near-term needs with
$388 million of cash and cash
equivalents on the balance sheet as of March
31, 2020. The company drew $350
million on its revolving credit facility on April 3, 2020, to enhance financial flexibility
during this period of uncertainty caused by the COVID-19 pandemic.
As of April 3, 2020, the company had
over $700 million of cash on
hand.
Timken ended the first quarter with a net debt to EBITDA ratio
of 2.2 times. The company expects to generate strong free cash flow
for the remainder of 2020, and will be focused on reducing net
debt.
"The health and safety of our associates and our communities has
been a top priority and we will continue to adopt best practices
everywhere we operate," said Kyle. "The COVID-19 pandemic has
created a shock to demand across most of our markets. While we are
confident that demand for our products and technology will endure
and recover, the timing and strength of the rebound remain highly
uncertain. Timken is taking actions in response by enhancing
liquidity, reducing costs and generating strong cash flow. While
short-term uncertainty remains high, we know that our products, our
technology and the value we bring to the world are essential, and
we are confident that Timken will emerge from this environment well
positioned to advance as a global industrial leader."
On April 3, 2020, Timken withdrew
its 2020 financial guidance due to the evolving impact of COVID-19
on the economy. Given the continued uncertainty surrounding
COVID-19, the company has suspended its practice of providing
detailed sales and earnings guidance. Timken is planning for
revenue to decline significantly in the second quarter of 2020
compared to the year-ago period, with markets anticipated to
improve from second-quarter levels over the remainder of the year.
The company expects to generate strong free cash flow in 2020.
Timken plans to reinstate full-year financial guidance at the
earliest reasonable opportunity.
Conference Call Information
Timken will host a conference call today at 10 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:
|
Friday, May 1,
2020
|
|
10:00 a.m. Eastern
Time
|
|
Live Dial-In:
800-458-4121
|
|
or
323-794-2093
|
|
(Call in 10 minutes
prior to be included.)
|
|
Conference ID:
Timken's 1Q Earnings Call
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through
|
|
May 15,
2020:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
7402465
|
|
|
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 18,000 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, including information under the heading
"Balance Sheet, Cash Flow and Capital Allocation Update," are
forward-looking. Statements regarding expectations for full-year
performance are based on the assumption that the second quarter of
2020 is the low point for the company's sales revenue and markets
gradually improve through the balance of the year.
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 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
March 31,
|
|
2020
|
2019
|
Net sales
|
$
|
923.4
|
|
$
|
979.7
|
|
Cost of products
sold
|
644.5
|
|
677.1
|
|
Gross
Profit
|
278.9
|
|
302.6
|
|
Selling, general
& administrative expenses
|
153.6
|
|
152.7
|
|
Impairment and
restructuring charges
|
3.6
|
|
—
|
|
Operating
Income
|
121.7
|
|
149.9
|
|
Non-service pension
and other postretirement income
|
3.4
|
|
0.1
|
|
Other income,
net
|
4.1
|
|
3.3
|
|
Interest expense,
net
|
(15.6)
|
|
(16.7)
|
|
Income Before
Income Taxes
|
113.6
|
|
136.6
|
|
Provision for income
taxes
|
29.6
|
|
41.3
|
|
Net
Income
|
84.0
|
|
95.3
|
|
Less: Net income
attributable to noncontrolling interest
|
3.3
|
|
3.4
|
|
Net Income
Attributable to The Timken Company
|
$
|
80.7
|
|
$
|
91.9
|
|
Net Income per
Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
Basic Earnings per
share
|
$
|
1.07
|
|
$
|
1.21
|
|
|
|
|
Diluted Earnings per
share
|
$
|
1.06
|
|
$
|
1.19
|
|
|
|
|
Average Shares
Outstanding
|
75,461,254
|
|
75,986,285
|
|
Average Shares
Outstanding - assuming dilution
|
76,308,556
|
|
77,012,573
|
|
|
|
|
|
|
|
|
|
|
|
|
BUSINESS
SEGMENTS
|
|
|
(Unaudited)
|
|
|
|
Three Months
Ended
March 31,
|
(Dollars in
millions)
|
2020
|
2019
|
|
|
|
Mobile
Industries
|
|
|
Net sales
|
$
|
466.7
|
|
$
|
500.0
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
75.1
|
|
$
|
79.3
|
|
EBITDA Margin
(1)
|
16.1
|
%
|
15.9
|
%
|
Process
Industries
|
|
|
Net sales
|
$
|
456.7
|
|
$
|
479.7
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
107.5
|
|
$
|
127.6
|
|
EBITDA Margin
(1)
|
23.5
|
%
|
26.6
|
%
|
Corporate earnings
before interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
(11.1)
|
|
$
|
(14.1)
|
|
|
|
|
Consolidated
|
|
|
Net sales
|
$
|
923.4
|
|
$
|
979.7
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
171.5
|
|
$
|
192.8
|
|
EBITDA
Margin (1)
|
18.6
|
%
|
19.7
|
%
|
|
|
|
(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.
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
(Dollars in
millions)
|
(Unaudited)
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
387.5
|
|
|
$
|
209.5
|
|
Restricted
cash
|
6.5
|
|
|
6.7
|
|
Accounts receivable,
net
|
577.7
|
|
|
545.1
|
|
Unbilled
receivables
|
137.4
|
|
|
129.2
|
|
Inventories,
net
|
819.7
|
|
|
842.0
|
|
Other current
assets
|
163.4
|
|
|
142.1
|
|
Total Current
Assets
|
2,092.2
|
|
|
1,874.6
|
|
Property, plant and
equipment, net
|
961.6
|
|
|
989.2
|
|
Operating lease
assets
|
112.8
|
|
|
114.1
|
|
Goodwill and other
intangible assets
|
1,723.2
|
|
|
1,752.2
|
|
Non-current pension
assets
|
7.1
|
|
|
3.4
|
|
Non-current other
postretirement benefit assets
|
—
|
|
|
36.6
|
|
Other
assets
|
83.1
|
|
|
89.8
|
|
Total
Assets
|
$
|
4,980.0
|
|
|
$
|
4,859.9
|
|
LIABILITIES
|
|
|
|
Accounts
payable
|
$
|
296.0
|
|
|
$
|
301.7
|
|
Short-term debt,
including current portion of long-term debt
|
173.1
|
|
|
82.0
|
|
Short-term operating
lease liabilities
|
28.6
|
|
|
28.3
|
|
Income
taxes
|
15.8
|
|
|
17.8
|
|
Accrued
expenses
|
256.3
|
|
|
306.8
|
|
Total Current
Liabilities
|
769.8
|
|
|
736.6
|
|
Long-term
debt
|
1,785.8
|
|
|
1,648.1
|
|
Accrued pension
benefits
|
164.5
|
|
|
165.1
|
|
Accrued
postretirement benefits
|
44.8
|
|
|
31.8
|
|
Long-term operating
lease liabilities
|
70.8
|
|
|
71.3
|
|
Other non-current
liabilities
|
244.0
|
|
|
252.2
|
|
Total
Liabilities
|
3,079.7
|
|
|
2,905.1
|
|
EQUITY
|
|
|
|
The Timken Company
shareholders' equity
|
1,817.4
|
|
|
1,868.2
|
|
Noncontrolling
Interest
|
82.9
|
|
|
86.6
|
|
Total
Equity
|
1,900.3
|
|
|
1,954.8
|
|
Total Liabilities and
Equity
|
$
|
4,980.0
|
|
|
$
|
4,859.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
(Unaudited)
|
|
|
|
Three Months
Ended
March 31,
|
(Dollars in
millions)
|
2020
|
2019
|
Cash Provided by
(Used in)
|
|
|
OPERATING
ACTIVITIES
|
|
|
Net Income
|
$
|
84.0
|
|
$
|
95.3
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
42.3
|
|
39.5
|
|
Stock-based
compensation expense
|
5.6
|
|
7.8
|
|
Pension and other
postretirement (income) expense
|
(0.3)
|
|
2.9
|
|
Pension and other
postretirement benefit contributions and payments
|
(5.5)
|
|
(4.9)
|
|
Changes in operating
assets and liabilities:
|
|
|
Accounts
receivable
|
(47.6)
|
|
(65.0)
|
|
Unbilled
receivables
|
(8.3)
|
|
(6.6)
|
|
Inventories
|
0.3
|
|
(4.1)
|
|
Accounts
payable
|
—
|
|
20.2
|
|
Accrued
expenses
|
(34.3)
|
|
(58.0)
|
|
Income
taxes
|
7.4
|
|
25.1
|
|
Other, net
|
12.6
|
|
0.1
|
|
Net Cash Provided by
Operating Activities
|
$
|
56.2
|
|
$
|
52.3
|
|
INVESTING
ACTIVITIES
|
|
|
Capital
expenditures
|
$
|
(31.8)
|
|
$
|
(16.2)
|
|
Acquisitions, net of
cash received
|
—
|
|
(2.9)
|
|
Other, net
|
0.2
|
|
(0.5)
|
|
Net Cash Used in
Investing Activities
|
$
|
(31.6)
|
|
$
|
(19.6)
|
|
FINANCING
ACTIVITIES
|
|
|
Cash dividends paid
to shareholders
|
$
|
(22.9)
|
|
$
|
(21.3)
|
|
Purchase of treasury
shares
|
(42.3)
|
|
(8.3)
|
|
Proceeds from
exercise of stock options
|
7.5
|
|
1.0
|
|
Payments related to
tax withholding for stock-based compensation
|
(10.2)
|
|
(6.4)
|
|
Net proceeds from
credit facilities
|
237.3
|
|
116.2
|
|
Net payments on
long-term debt
|
(2.9)
|
|
(7.8)
|
|
Net Cash Provided by
Financing Activities
|
$
|
166.5
|
|
$
|
73.4
|
|
Effect of exchange
rate changes on cash
|
(13.3)
|
|
0.9
|
|
Increase in Cash,
Cash Equivalents and Restricted Cash
|
$
|
177.8
|
|
$
|
107.0
|
|
Cash, Cash
Equivalents and Restricted Cash at Beginning of Period
|
216.2
|
|
133.1
|
|
Cash, Cash
Equivalents and Restricted Cash at End of Period
|
$
|
394.0
|
|
$
|
240.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
2020
|
|
EPS
|
2019
|
|
EPS
|
Net Income
Attributable to The Timken Company
|
$
|
80.7
|
|
|
$
|
1.06
|
|
$
|
91.9
|
|
|
$
|
1.19
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
(1)
|
|
|
|
|
|
|
|
|
Impairment, restructuring and
reorganization charges (2)
|
$
|
5.8
|
|
|
|
$
|
—
|
|
|
|
|
Property
loss and related expenses, net of insurance proceeds
(3)
|
(2.2)
|
|
|
|
6.0
|
|
|
|
Acquisition-related charges
(4)
|
3.3
|
|
|
|
4.8
|
|
|
|
Gain on
sale of real estate (5)
|
—
|
|
|
|
(1.7)
|
|
|
|
Tax
indemnification and related items
|
—
|
|
|
|
0.5
|
|
|
|
|
Noncontrolling interest of above
adjustments
|
—
|
|
|
|
0.1
|
|
|
|
|
Provision
for income taxes (6)
|
(2.9)
|
|
|
|
2.6
|
|
|
|
|
Total
Adjustments:
|
4.0
|
|
|
0.05
|
|
12.3
|
|
|
0.16
|
|
Adjusted Net Income
Attributable to The Timken Company
|
$
|
84.7
|
|
|
$
|
1.11
|
|
$
|
104.2
|
|
|
$
|
1.35
|
|
|
|
|
|
|
|
|
(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 proceeds received in first 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 first quarter of 2020 primarily
related to the BEKA Lubrication ("BEKA") acquisition, including
transaction costs and inventory step-up impact. Acquisition-related
charges in the first 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 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)
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, 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 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,
|
|
2020
|
Percentage
to
Net Sales
|
2019
|
Percentage
to
Net Sales
|
Net Income
|
$
|
84.0
|
|
9.1
|
%
|
$
|
95.3
|
|
9.7
|
%
|
|
|
|
|
|
|
|
Provision for income
taxes
|
29.6
|
|
3.2
|
%
|
41.3
|
|
4.2
|
%
|
Interest
expense
|
17.1
|
|
1.9
|
%
|
18.0
|
|
1.8
|
%
|
Interest
income
|
(1.5)
|
|
(0.2)
|
%
|
(1.3)
|
|
(0.1)
|
%
|
Depreciation and
amortization
|
42.3
|
|
4.6
|
%
|
39.5
|
|
4.1
|
%
|
Consolidated
EBITDA
|
$
|
171.5
|
|
18.6
|
%
|
$
|
192.8
|
|
19.7
|
%
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Impairment, restructuring and
reorganization charges (1)
|
$
|
4.4
|
|
0.5
|
%
|
$
|
—
|
|
—
|
%
|
Property
loss and related expenses, net of insurance proceeds
(2)
|
(2.2)
|
|
(0.3)
|
%
|
6.0
|
|
0.6
|
%
|
Acquisition-related charges
(3)
|
3.3
|
|
0.4
|
%
|
4.8
|
|
0.5
|
%
|
Gain on
sale of real estate (4)
|
—
|
|
—
|
%
|
(1.7)
|
|
(0.2)
|
%
|
Tax
indemnification and related items
|
—
|
|
—
|
%
|
0.5
|
|
0.1
|
%
|
Total
Adjustments
|
5.5
|
|
0.6
|
%
|
9.6
|
|
1.0
|
%
|
Adjusted
EBITDA
|
$
|
177.0
|
|
19.2
|
%
|
$
|
202.4
|
|
20.7
|
%
|
|
|
|
|
|
(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 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
proceeds received in the first 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 first quarter of 2020
primarily related to the BEKA acquisition, including transaction
costs and inventory step-up impact. Acquisition-related charges in
the first quarter of 2019 primarily related to the Rollon and
Diamond Chain acquisitions, including transaction costs and
inventory step-up impact.
|
|
|
|
|
|
(4) 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
(Dollars in
millions)
|
Three Months
Ended
March 31, 2020
|
Percentage
to Net
Sales
|
Three Months
Ended
March 31, 2019
|
Percentage
to Net
Sales
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
|
$
|
75.1
|
|
16.1
|
%
|
$
|
79.3
|
|
15.9
|
%
|
Impairment, restructuring and
reorganization charges (1)
|
1.2
|
|
0.3
|
%
|
0.3
|
|
—
|
%
|
Gain on
sale of real estate (2)
|
—
|
|
—
|
%
|
(1.7)
|
|
(0.3)
|
%
|
Property
loss and related expenses, net of insurance proceeds
(3)
|
(2.2)
|
|
(0.5)
|
%
|
6.0
|
|
1.2
|
%
|
Acquisition-related charges
(4)
|
1.9
|
|
0.4
|
%
|
—
|
|
—
|
%
|
Adjusted
EBITDA
|
$
|
76.0
|
|
16.3
|
%
|
$
|
83.9
|
|
16.8
|
%
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
(Dollars in
millions)
|
Three Months
Ended
March 31, 2020
|
Percentage
to Net
Sales
|
Three Months
Ended
March 31, 2019
|
Percentage
to Net
Sales
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
|
$
|
107.5
|
|
23.5
|
%
|
$
|
127.6
|
|
26.6
|
%
|
Impairment, restructuring and
reorganization charges (1)
|
3.1
|
|
0.7
|
%
|
(0.3)
|
|
—
|
%
|
Acquisition-related charges
(4)
|
0.9
|
|
0.2
|
%
|
3.9
|
|
0.8
|
%
|
Adjusted
EBITDA
|
$
|
111.5
|
|
24.4
|
%
|
$
|
131.2
|
|
27.4
|
%
|
|
|
|
|
|
(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 proceeds received in the first 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 first quarter of 2020 primarily related to the inventory
step-up impact of the BEKA acquisition. Acquisition-related charges
in the first quarter of 2019 primarily related to the inventory
step-up impact of the Rollon acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
|
March 31,
2020
|
December 31,
2019
|
Short-term debt,
including current portion of long-term debt
|
$
|
173.1
|
|
$
|
82.0
|
|
Long-term
debt
|
1,785.8
|
|
1,648.1
|
|
Total
Debt
|
$
|
1,958.9
|
|
$
|
1,730.1
|
|
Less: Cash and cash
equivalents
|
(387.5)
|
|
(209.5)
|
|
Net Debt
|
$
|
1,571.4
|
|
$
|
1,520.6
|
|
|
|
|
Total
Equity
|
$
|
1,900.3
|
|
$
|
1,954.8
|
|
|
|
|
Ratio of Net Debt to
Capital
|
45.3
|
%
|
43.8
|
%
|
|
|
|
Adjusted EBITDA for
the Twelve Months Ended
|
$
|
700.9
|
|
$
|
726.3
|
|
|
|
|
|
|
Ratio of Net Debt to
Adjusted EBITDA
|
2.2
|
|
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,
|
|
2020
|
2019
|
Net cash provided by
operating activities
|
$
|
56.2
|
|
$
|
52.3
|
|
Less: capital
expenditures
|
(31.8)
|
|
(16.2)
|
|
Free cash
flow
|
$
|
24.4
|
|
$
|
36.1
|
|
|
|
|
|
|
|
|
|
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 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)
|
Twelve Months
Ended
March 31, 2020
|
Twelve Months
Ended
December 31, 2019
|
Net Income
|
$
|
363.4
|
|
$
|
374.7
|
|
Provision for income
taxes
|
86.0
|
|
97.7
|
|
Interest
expense
|
71.2
|
|
72.1
|
|
Interest
income
|
(5.1)
|
|
(4.9)
|
|
Depreciation and
amortization
|
163.4
|
|
160.6
|
|
Consolidated
EBITDA
|
$
|
678.9
|
|
$
|
700.2
|
|
Adjustments:
|
|
|
Impairment, restructuring and
reorganization charges (1)
|
$
|
13.5
|
|
$
|
9.1
|
|
Acquisition-related charges
(2)
|
14.0
|
|
15.5
|
|
Brazil
legal matter (3)
|
1.8
|
|
1.8
|
|
Gain on
sale of real estate (4)
|
(2.8)
|
|
(4.5)
|
|
Corporate
pension and other postretirement benefit related charges
(5)
|
(4.1)
|
|
(4.1)
|
|
Property
loss and related expenses, net of insurance proceeds
(6)
|
(0.6)
|
|
7.6
|
|
Tax
indemnification and related items
|
0.2
|
|
0.7
|
|
Total
Adjustments
|
22.0
|
|
26.1
|
|
Adjusted
EBITDA
|
$
|
700.9
|
|
$
|
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) 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