NORTH CANTON, Ohio,
April 28, 2021 /PRNewswire/
-- The Timken Company (NYSE: TKR; www.timken.com), a
global industrial leader in engineered bearings and power
transmission products, today reported first-quarter
2021 sales of $1.03 billion, up 11 percent from the same
period a year ago. The increase was driven by organic growth across
most end-market sectors led by renewable energy and off-highway, as
well as the benefit of currency translation and the Aurora Bearing
acquisition. First quarter sales were up 15 percent from the fourth
quarter.
Timken posted net income of $113.3 million or
$1.47 per diluted share in the
first quarter, versus net income of $80.7 million
or $1.06 per diluted share for the same period a year
ago. The year-over-year increase was primarily driven by higher
volume, favorable manufacturing performance and lower selling,
general and administrative (SG&A) expenses, partially offset by
unfavorable mix and higher material and logistics costs. The
current period also benefited from a lower tax rate driven by
discrete tax benefits.
Excluding special items (detailed in the attached tables),
adjusted net income in the first quarter
was $106.7 million or a record $1.38 per diluted share, versus adjusted net
income of $84.7 million
or $1.11 per diluted share for the same period in
2020.
During the quarter, Timken returned $50.1
million of cash to shareholders with the payment of its
395th consecutive quarterly dividend and the repurchase of 350
thousand shares of company stock. The company ended the first
quarter with net debt to adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA) at 1.9 times.
"We posted an outstanding first quarter, achieving double-digit
revenue growth, margin expansion and record adjusted earnings per
share despite supply chain challenges and cost
headwinds," said Richard G.
Kyle, Timken president and chief executive officer. "Our
strong operational execution and diverse, market-leading portfolio
are delivering record results, while we continue to invest in
our long-term profitable growth."
First-Quarter 2021 Segment Results
Process Industries sales of $520.9 million
increased 14.1 percent from the same period a year ago. The
increase was driven mainly by organic growth in the renewable
energy, distribution and general industrial sectors and the benefit
of currency translation, offset partially by lower marine
revenue.
EBITDA for the quarter was $131.0 million
or 25.1 percent of sales, compared with EBITDA
of $107.5 million or 23.5 percent of sales for
the same period a year ago. The increase in EBITDA was driven
primarily by higher volume, favorable manufacturing performance,
lower SG&A expenses and the benefit of currency, partially
offset by unfavorable mix and higher material and logistics
costs.
Excluding special items (detailed in the attached tables),
adjusted EBITDA in the quarter was $135.7 million
or 26.0 percent of sales, compared
with $111.5 million or 24.4 percent of sales in the
first quarter last year.
Mobile Industries sales of $504.5 million
increased 8.1 percent compared with the same period a year ago. The
increase was driven mainly by organic growth in the off-highway,
heavy truck and automotive sectors and the favorable impact of
currency translation, partially offset by lower revenue in the rail
and aerospace sectors.
EBITDA for the quarter was $79.6 million
or 15.8 percent of sales, compared with EBITDA
of $75.1 million or 16.1 percent of sales for the
same period a year ago. The increase in EBITDA reflects higher
volume and lower SG&A expenses, partially offset by unfavorable
mix and higher material and logistics costs.
Excluding special items (detailed in the attached tables),
adjusted EBITDA in the quarter was $80.1 million
or 15.9 percent of sales, compared
with $76.0 million or 16.3 percent of sales in the
first quarter last year.
2021 Outlook
Timken now anticipates 2021 earnings per diluted share to range
from $5.00 to $5.30 for the full year on a GAAP basis.
Excluding special items (detailed in the attached tables), the
company now expects 2021 adjusted earnings per diluted share of
$5.15 to $5.45, which represents nearly 30 percent
adjusted earnings growth versus 2020 at the midpoint. The company
now expects 2021 revenue to be up approximately 18 percent at the
midpoint in total versus 2020, which is up from the prior outlook
of approximately 12 percent growth.
"We are raising our full-year outlook to reflect the robust and
improving market conditions as well as our strong operational
execution," said Kyle. "Our outgrowth initiatives are contributing
to our positive 2021 outlook, as we continue to win new business
with our differentiated products and engineering innovation. We
anticipate strong margin performance again this year, despite
supply chain and other cost challenges. Overall, we are on track to
deliver record results and we remain focused on executing our
strategy to win in the marketplace and deliver higher performance
for shareholders."
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:
|
Wednesday, April 28,
2021
|
|
11:00 a.m. Eastern
Time
|
|
Live Dial-In:
800-458-4121
|
|
Or +1
323-209-6672
|
|
(Call in 10 minutes
prior to be included.)
|
|
Conference ID:
Timken's 1Q Earnings Call
|
|
Or Click to Join:
https://tmkn.biz/3dvEorg
|
|
|
Conference Call
Replay:
|
Replay Dial-In
available through
|
|
May 12,
2021:
|
|
888-203-1112 or
719-457-0820
|
|
Replay Passcode:
7139853
|
|
|
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 $3.5 billion in sales in 2020
and employs more than 17,000 people globally, operating from 42
countries. Timken is recognized among America's Most Responsible
Companies by Newsweek, the World's Most Ethical
Companies® by Ethisphere and America's Best Employers by
Forbes.
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
"2021 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 2021; 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 effects of government-imposed
restrictions meant to address climate change; unanticipated
litigation, claims, investigations or assessments; 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, 2020, 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,
|
|
2021
|
2020
|
Net sales
|
$
|
1,025.4
|
|
$
|
923.4
|
|
Cost of products
sold
|
726.2
|
|
644.5
|
|
Gross
Profit
|
299.2
|
|
278.9
|
|
Selling, general
& administrative expenses
|
144.5
|
|
153.6
|
|
Impairment and
restructuring charges
|
4.0
|
|
3.6
|
|
Operating
Income
|
150.7
|
|
121.7
|
|
Non-service pension
and other postretirement income
|
4.0
|
|
3.4
|
|
Other income,
net
|
1.0
|
|
4.1
|
|
Interest expense,
net
|
(14.4)
|
|
(15.6)
|
|
Income Before
Income Taxes
|
141.3
|
|
113.6
|
|
Provision for income
taxes
|
25.3
|
|
29.6
|
|
Net
Income
|
116.0
|
|
84.0
|
|
Less: Net income
attributable to noncontrolling interest
|
2.7
|
|
3.3
|
|
Net Income
Attributable to The Timken Company
|
$
|
113.3
|
|
$
|
80.7
|
|
|
|
|
Net Income per
Common Share Attributable to The Timken Company Common
Shareholders
|
|
|
Basic Earnings per
share
|
$
|
1.49
|
|
$
|
1.07
|
|
Diluted Earnings per
share
|
$
|
1.47
|
|
$
|
1.06
|
|
|
|
|
Average Shares
Outstanding
|
75,820,157
|
|
75,461,254
|
|
Average Shares
Outstanding - assuming dilution
|
77,264,641
|
|
76,308,556
|
|
|
|
|
|
|
|
|
|
|
BUSINESS
SEGMENTS
|
|
|
(Unaudited)
|
|
|
|
Three Months
Ended
March 31,
|
(Dollars in
millions)
|
2021
|
2020
|
|
|
|
Mobile
Industries
|
|
|
Net sales
|
$
|
504.5
|
|
$
|
466.7
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
79.6
|
|
$
|
75.1
|
|
EBITDA Margin
(1)
|
15.8
|
%
|
16.1
|
%
|
Process
Industries
|
|
|
Net sales
|
$
|
520.9
|
|
$
|
456.7
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
131.0
|
|
$
|
107.5
|
|
EBITDA Margin
(1)
|
25.1
|
%
|
23.5
|
%
|
Unallocated corporate
expense
|
$
|
(11.6)
|
|
$
|
(11.1)
|
|
Corporate pension and
other postretirement benefit related expense
(2)
|
(0.9)
|
|
—
|
|
Acquisition-related
gain (3)
|
0.6
|
|
—
|
|
|
|
|
Consolidated
|
|
|
Net sales
|
$
|
1,025.4
|
|
$
|
923.4
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
(1)
|
$
|
198.7
|
|
$
|
171.5
|
|
EBITDA Margin
(1)
|
19.4
|
%
|
18.6
|
%
|
|
|
|
(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 expense
primarily represent actuarial (losses) and gains 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. 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) The
acquisition-related gain represents measurement period adjustments
to the bargain purchase price gain on the acquisition of the assets
of Aurora Bearing Company ("Aurora") that closed on November 30,
2020.
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Dollars in
millions)
|
(Unaudited)
|
|
|
March 31,
2021
|
December 31,
2020
|
ASSETS
|
|
|
Cash and cash
equivalents
|
$
|
302.3
|
|
$
|
320.3
|
|
Restricted
cash
|
0.8
|
|
0.8
|
|
Accounts receivable,
net
|
712.3
|
|
581.1
|
|
Unbilled
receivables
|
113.3
|
|
110.9
|
|
Inventories,
net
|
864.8
|
|
841.3
|
|
Other current
assets
|
150.1
|
|
145.9
|
|
Total Current
Assets
|
2,143.6
|
|
2,000.3
|
|
Property, plant and
equipment, net
|
1,020.6
|
|
1,035.6
|
|
Operating lease
assets
|
113.1
|
|
118.2
|
|
Goodwill and other
intangible assets
|
1,741.0
|
|
1,789.0
|
|
Non-current pension
assets
|
0.1
|
|
2.0
|
|
Other
assets
|
87.8
|
|
96.5
|
|
Total
Assets
|
$
|
5,106.2
|
|
$
|
5,041.6
|
|
LIABILITIES
|
|
|
Accounts
payable
|
$
|
362.6
|
|
$
|
351.4
|
|
Short-term debt,
including current portion of long-term debt
|
178.3
|
|
130.7
|
|
Short-term operating
lease liabilities
|
26.2
|
|
27.2
|
|
Income
taxes
|
24.9
|
|
16.1
|
|
Accrued
expenses
|
324.8
|
|
322.6
|
|
Total Current
Liabilities
|
916.8
|
|
848.0
|
|
Long-term
debt
|
1,423.7
|
|
1,433.9
|
|
Accrued pension
benefits
|
157.4
|
|
163.0
|
|
Accrued
postretirement benefits
|
52.1
|
|
41.3
|
|
Long-term operating
lease liabilities
|
70.9
|
|
75.5
|
|
Other non-current
liabilities
|
235.2
|
|
254.7
|
|
Total
Liabilities
|
2,856.1
|
|
2,816.4
|
|
EQUITY
|
|
|
The Timken Company
shareholders' equity
|
2,175.5
|
|
2,152.9
|
|
Noncontrolling
Interest
|
74.6
|
|
72.3
|
|
Total
Equity
|
2,250.1
|
|
2,225.2
|
|
Total Liabilities and
Equity
|
$
|
5,106.2
|
|
$
|
5,041.6
|
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
(Unaudited)
|
|
|
|
Three Months
Ended
March 31,
|
(Dollars in
millions)
|
2021
|
2020
|
Cash Provided by
(Used in)
|
|
|
OPERATING
ACTIVITIES
|
|
|
Net Income
|
$
|
116.0
|
|
$
|
84.0
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
43.0
|
|
42.3
|
|
Stock-based
compensation expense
|
6.5
|
|
5.6
|
|
Pension and other
postretirement income
|
(1.0)
|
|
(0.3)
|
|
Pension and other
postretirement benefit contributions and payments
|
(2.5)
|
|
(5.5)
|
|
Changes in operating
assets and liabilities:
|
|
|
Accounts
receivable
|
(138.9)
|
|
(47.6)
|
|
Unbilled
receivables
|
(2.5)
|
|
(8.3)
|
|
Inventories
|
(33.3)
|
|
0.3
|
|
Accounts
payable
|
19.9
|
|
—
|
|
Accrued
expenses
|
17.0
|
|
(34.3)
|
|
Income
taxes
|
1.6
|
|
7.4
|
|
Other,
net
|
5.9
|
|
12.6
|
|
Net Cash Provided by
Operating Activities
|
$
|
31.7
|
|
$
|
56.2
|
|
INVESTING
ACTIVITIES
|
|
|
Capital
expenditures
|
$
|
(29.4)
|
|
$
|
(31.8)
|
|
Investments in
short-term marketable securities, net
|
(10.0)
|
|
0.2
|
|
Net Cash Used in
Investing Activities
|
$
|
(39.4)
|
|
$
|
(31.6)
|
|
FINANCING
ACTIVITIES
|
|
|
Cash dividends paid
to shareholders
|
$
|
(23.8)
|
|
$
|
(22.9)
|
|
Purchase of treasury
shares
|
(26.3)
|
|
(42.3)
|
|
Proceeds from
exercise of stock options
|
14.1
|
|
7.5
|
|
Payments related to
tax withholding for stock-based compensation
|
(17.8)
|
|
(10.2)
|
|
Net proceeds from
credit facilities
|
49.7
|
|
237.3
|
|
Net payments on
long-term debt
|
(2.3)
|
|
(2.9)
|
|
Net Cash (Used in)
Provided by Financing Activities
|
$
|
(6.4)
|
|
$
|
166.5
|
|
Effect of exchange
rate changes on cash
|
(3.9)
|
|
(13.3)
|
|
(Decrease) Increase
in Cash, Cash Equivalents and Restricted Cash
|
$
|
(18.0)
|
|
$
|
177.8
|
|
Cash, Cash
Equivalents and Restricted Cash at Beginning of Period
|
321.1
|
|
216.2
|
|
Cash, Cash
Equivalents and Restricted Cash at End of Period
|
$
|
303.1
|
|
$
|
394.0
|
|
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,
|
|
2021
|
EPS
|
2020
|
EPS
|
Net Income
Attributable to The Timken Company
|
$
|
113.3
|
|
$
|
1.47
|
|
$
|
80.7
|
|
$
|
1.06
|
|
|
|
|
|
|
Adjustments:
(1)
|
|
|
|
|
Impairment, restructuring and
reorganization charges (2)
|
$
|
5.2
|
|
|
$
|
5.8
|
|
|
Corporate
pension and other postretirement benefit related expense
(3)
|
0.9
|
|
|
—
|
|
|
Acquisition-related (gain) charges
(4)
|
(0.8)
|
|
|
3.3
|
|
|
Property
(recoveries) losses and related expenses (5)
|
—
|
|
|
(2.2)
|
|
|
Noncontrolling interest of above
adjustments
|
0.2
|
|
|
—
|
|
|
Provision
for income taxes (6)
|
(12.1)
|
|
|
(2.9)
|
|
|
Total
Adjustments:
|
(6.6)
|
|
(0.09)
|
|
4.0
|
|
0.05
|
|
Adjusted Net Income
Attributable to The Timken Company
|
$
|
106.7
|
|
$
|
1.38
|
|
$
|
84.7
|
|
$
|
1.11
|
|
|
(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)
Corporate pension and other postretirement benefit related expense
represents actuarial losses and (gains) 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.
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) The
acquisition-related (gain) charges represent measurement period
adjustments to the bargain purchase gain on the acquisition of the
assets of Aurora that closed on November 30, 2020, as well as
acquisition transaction costs and the inventory step-up
impact.
|
|
(5)
Represents property loss and related expenses during the period
presented (net of insurance recoveries received in 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.
|
|
(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, 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,
|
|
2021
|
Percentage
to
Net Sales
|
2020
|
Percentage
to
Net Sales
|
Net Income
|
$
|
116.0
|
|
11.3
|
%
|
$
|
84.0
|
|
9.1
|
%
|
|
|
|
|
|
Provision for income
taxes
|
25.3
|
|
|
29.6
|
|
|
Interest
expense
|
14.9
|
|
|
17.1
|
|
|
Interest
income
|
(0.5)
|
|
|
(1.5)
|
|
|
Depreciation and
amortization
|
43.0
|
|
|
42.3
|
|
|
Consolidated
EBITDA
|
$
|
198.7
|
|
19.4
|
%
|
$
|
171.5
|
|
18.6
|
%
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Impairment, restructuring and
reorganization charges (1)
|
$
|
4.9
|
|
|
$
|
4.4
|
|
|
Corporate
pension and other postretirement benefit related expense
(2)
|
0.9
|
|
|
—
|
|
|
Acquisition-related (gain) charges
(3)
|
(0.8)
|
|
|
3.3
|
|
|
Property
(recoveries) losses and related expenses (4)
|
—
|
|
|
(2.2)
|
|
|
Total
Adjustments
|
5.0
|
|
0.5
|
%
|
5.5
|
|
0.6
|
%
|
Adjusted
EBITDA
|
$
|
203.7
|
|
19.9
|
%
|
$
|
177.0
|
|
19.2
|
%
|
|
|
|
|
|
(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; 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)
Corporate pension and other postretirement benefit related expense
represents actuarial losses and (gains) 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.
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) The
acquisition-related (gain) charges represent measurement period
adjustments to the bargain purchase gain on the acquisition of the
assets of Aurora that closed on November 30, 2020, as well as
acquisition transaction costs and the inventory step-up
impact.
|
|
(4)
Represents property loss and related expenses during the period
presented (net of insurance recoveries received in 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.
|
Reconciliation of
segment EBITDA Margin, After Adjustments, to segment EBITDA as a
Percentage of Sales and segment EBITDA, After Adjustments, to
segment EBITDA:
|
(Unaudited)
|
The following
reconciliation is provided as additional relevant information about
the Company's Mobile Industries and Process Industries segment
performance deemed useful to investors. Management believes that
non-GAAP measures of adjusted EBITDA and adjusted EBITDA margin for
the segments are useful to investors as they are representative of
each segment's core operations and are used in the management of
the business, including decisions concerning the allocation of
resources and assessment of performance.
|
|
Mobile
Industries
|
|
|
|
|
|
Three Months
Ended
March 31,
|
(Dollars in
millions)
|
2021
|
Percentage
to Net
Sales
|
2020
|
Percentage
to Net
Sales
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
|
$
|
79.6
|
|
15.8
|
%
|
$
|
75.1
|
|
16.1
|
%
|
Impairment, restructuring and
reorganization charges (1)
|
0.3
|
|
|
1.2
|
|
|
Acquisition-related charges
(2)
|
0.2
|
|
|
1.9
|
|
|
Property
(recoveries) losses and related expenses (3)
|
—
|
|
|
(2.2)
|
|
|
Adjusted
EBITDA
|
$
|
80.1
|
|
15.9
|
%
|
$
|
76.0
|
|
16.3
|
%
|
|
|
|
|
|
Process
Industries
|
|
|
|
|
|
Three Months
Ended
March 31,
|
(Dollars in
millions)
|
2021
|
Percentage
to Net
Sales
|
2020
|
Percentage
to Net
Sales
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA)
|
$
|
131.0
|
|
25.1
|
%
|
$
|
107.5
|
|
23.5
|
%
|
Impairment, restructuring and
reorganization charges (1)
|
4.6
|
|
|
3.1
|
|
|
Acquisition-related charges
(2)
|
0.1
|
|
|
0.9
|
|
|
Adjusted
EBITDA
|
$
|
135.7
|
|
26.0
|
%
|
$
|
111.5
|
|
24.4
|
%
|
|
(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
acquisition-related charges represent the inventory step-up
impact.
|
|
(3)
Represents property loss and related expenses during the period
presented (net of insurance recoveries received in 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.
|
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.
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,
2021
|
December 31,
2020
|
Short-term debt,
including current portion of long-term debt
|
$
|
178.3
|
|
$
|
130.7
|
|
Long-term
debt
|
1,423.7
|
|
1,433.9
|
|
Total
Debt
|
$
|
1,602.0
|
|
$
|
1,564.6
|
|
Less: Cash and cash
equivalents
|
(302.3)
|
|
(320.3)
|
|
Net Debt
|
$
|
1,299.7
|
|
$
|
1,244.3
|
|
|
|
|
Total
Equity
|
$
|
2,250.1
|
|
$
|
2,225.2
|
|
|
|
|
Ratio of Net Debt to
Capital
|
36.6
|
%
|
35.9
|
%
|
|
|
|
Adjusted EBITDA for
the Twelve Months Ended
|
$
|
685.6
|
|
$
|
658.9
|
|
|
|
|
Ratio of Net Debt to
Adjusted EBITDA
|
1.9
|
|
1.9
|
|
|
|
|
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,
|
|
2021
|
2020
|
Net cash provided by
operating activities
|
$
|
31.7
|
|
$
|
56.2
|
|
Less: capital
expenditures
|
(29.4)
|
|
(31.8)
|
|
Free cash
flow
|
$
|
2.3
|
|
$
|
24.4
|
|
|
|
|
|
|
|
|
|
|
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, 2021
|
Twelve Months
Ended
December 31, 2020
|
Net Income
|
$
|
324.4
|
|
$
|
292.4
|
|
Provision for income
taxes
|
99.6
|
|
103.9
|
|
Interest
expense
|
65.4
|
|
67.6
|
|
Interest
income
|
(2.7)
|
|
(3.7)
|
|
Depreciation and
amortization
|
167.8
|
|
167.1
|
|
Consolidated
EBITDA
|
$
|
654.5
|
|
$
|
627.3
|
|
Adjustments:
|
|
|
Impairment, restructuring and
reorganization charges (1)
|
$
|
26.4
|
|
$
|
25.9
|
|
Corporate
pension and other postretirement benefit related expense
(2)
|
19.4
|
|
18.5
|
|
Acquisition-related charges
(3)
|
0.2
|
|
3.7
|
|
Acquisition-related gain
(4)
|
(11.7)
|
|
(11.1)
|
|
Gain on
sale of real estate
|
(0.4)
|
|
(0.4)
|
|
Property
(recoveries) losses and related expenses (5)
|
(3.3)
|
|
(5.5)
|
|
Tax
indemnification and related items
|
0.5
|
|
0.5
|
|
Total
Adjustments
|
31.1
|
|
31.6
|
|
Adjusted
EBITDA
|
$
|
685.6
|
|
$
|
658.9
|
|
|
|
|
(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)
Corporate pension and other postretirement benefit related expense
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.
|
|
|
|
(3) The
acquisition-related charges represent transaction costs and the
inventory step-up impact.
|
|
|
|
(4) The
acquisition-related gain represents a bargain purchase gain on the
acquisition of the assets of Aurora that closed on November 30,
2020.
|
|
|
|
(5)
Represents property loss and related expenses during the periods
presented (net of insurance recoveries received in 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.
|
Reconciliation of
Adjusted Earnings per Share to GAAP Earnings per Share for Full
Year 2021 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
|
$
|
5.00
|
|
$
|
5.30
|
|
|
|
|
Forecasted
Adjustments:
|
|
|
Restructuring and other special items,
net (1)
|
0.15
|
|
0.15
|
|
Total
Adjustments:
|
$
|
0.15
|
|
$
|
0.15
|
|
Forecasted full year
adjusted diluted earnings per share
|
$
|
5.15
|
|
$
|
5.45
|
|
|
|
|
(1)
Restructuring and other special items, net do not include the
impact of any potential mark-to-market pension and other
postretirement remeasurement adjustments, because the amounts will
not be known until incurred.
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Free Cash Flow to GAAP Net Cash Provided by Operating Activities
for Full Year 2021 Outlook:
|
(Unaudited)
|
Forecasted full year
free cash flow is a non-GAAP measure that is useful to investors
because it is representative of the Company's expectation of cash
that will be generated from operating activities and available for
the execution of its business strategy.
|
(Dollars in
Millions)
|
Low End Free
Cash Flow
|
High End Free
Cash Flow
|
Net cash provided by
operating activities
|
$
|
475.0
|
|
$
|
500.0
|
|
Less: capital
expenditures
|
(150.0)
|
|
(150.0)
|
|
Free cash
flow
|
$
|
325.0
|
|
$
|
350.0
|
|
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)
|
|
Twelve Months
Ended
December 31,
|
|
|
2020
|
EPS
|
Net Income
Attributable to The Timken Company
|
|
$
|
284.5
|
|
$
|
3.72
|
|
|
|
|
|
Adjustments:
(1)
|
|
|
|
Impairment, restructuring and
reorganization charges (2)
|
|
$
|
29.0
|
|
|
Property
(recoveries) losses and related expenses (3)
|
|
(5.5)
|
|
|
Acquisition-related charges
(4)
|
|
3.7
|
|
|
Acquisition-related gain
(5)
|
|
(11.1)
|
|
|
Gain on
sale of real estate
|
|
(0.4)
|
|
|
Corporate
pension and other postretirement benefit related expense
(6)
|
|
18.5
|
|
|
Tax
indemnification and related items
|
|
0.5
|
|
|
Noncontrolling interest of above
adjustments
|
|
(0.1)
|
|
|
Provision
for income taxes (7)
|
|
(6.0)
|
|
|
Total
Adjustments:
|
|
28.6
|
|
0.38
|
|
Adjusted Net Income
Attributable to The Timken Company
|
|
$
|
313.1
|
|
$
|
4.10
|
|
|
(1)
Adjustments are pre-tax, with the net tax provision listed
separately.
|
|
(2)
Impairment, restructuring and reorganization charges (including
items recorded in cost of products sold) relate to: (i) plant
closures; (ii) the rationalization of certain plants; (iii)
severance related to cost reduction initiatives and (iv) related
depreciation and amortization. The Company re-assesses its
operating footprint and cost structure periodically, and makes
adjustments as needed that result in restructuring charges.
However, management believes these actions are not representative
of the Company's core operations.
|
|
(3)
Represents property loss and related expenses during the periods
presented (net of insurance recoveries received in 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) The
acquisition-related charges represent acquisition transaction costs
and the inventory step-up impact.
|
|
(5) The
acquisition-related gain represents a bargain purchase price gain
on the acquisition of the assets of Aurora that closed on November
30, 2020.
|
|
(6)
Corporate pension and other postretirement benefit related expense
(income) represents actuarial losses and (gains) 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. 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.
|
|
(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.
|
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SOURCE The Timken Company