Timken Reports First-Quarter 2017 Results; Raises Full-Year Outlook

— Reports sales of $704 million in the first quarter, up almost 3% from the same period last year
— Generates earnings per diluted share of $0.48 on a GAAP basis, with adjusted earnings per diluted share of $0.55
— Raises 2017 outlook; now expects 2017 GAAP earnings of $2.15 to $2.25 per diluted share and adjusted earnings of $2.35 to $2.45 per diluted share

NORTH CANTON, Ohio, April 26, 2017 /PRNewswire/ — The Timken Company (NYSE: TKR; www.timken.com), a global leader in bearings and mechanical power transmission products, today reported first-quarter 2017 sales of $703.8 million, up 2.9 percent from the same period a year ago. The results reflect increased industrial distribution and off-highway demand, as well as the benefit of acquisitions, partially offset by lower rail, wind energy and aerospace shipments.

In the first quarter, Timken posted net income of $38.2 million or $0.48 per diluted share, versus net income of $65.9 million or $0.82 per diluted share for the same period a year ago. The year-ago period included CDSOA1income of approximately $31 million after-tax. The year-over-year change in net income also reflects the impact of higher volume, improved manufacturing performance and lower restructuring charges, partially offset by unfavorable price/mix and a pension mark-to-market remeasurement charge in the quarter.

Excluding special items (detailed in the attached tables), adjusted net income in the first quarter of 2017 was $43.7 million or $0.55 per diluted share, up from $39.9 million or $0.50 per diluted share for the same period in 2016. The increase in adjusted net income reflects the impact of higher volume and improved manufacturing performance, partially offset by unfavorable price/mix. The company generated cash from operations of $46.7 million and free cash flow of $27.4 million in the first quarter.

“We had a solid start to the year, with stronger demand in sectors like industrial distribution and off-highway,” said Richard G. Kyle, Timken president and chief executive officer. “We responded well to the increase in demand, improved operating margins and generated solid cash flow, while continuing to advance our strategy across the globe.”

Recently, the company:

  • Added to its mechanical power transmission product portfolio with the acquisition of Torsion Control Products, Inc., a manufacturer of engineered torsional couplings, which complements the Lovejoy acquisition made last year; and
  • Returned $28 million in capital to shareholders in the first quarter through the repurchase of 185,000 shares and the payment of its 379th consecutive quarterly dividend.

First-Quarter Segment Results

Mobile Industries reported first-quarter sales of $383 million, roughly flat compared to the same period a year ago, with increased demand in the mining and agriculture sectors offset by softness in rail and aerospace.

Earnings before interest and taxes (EBIT) in the quarter were $30.8 million or 8 percent of sales, compared with EBIT of $32 million or 8.4 percent of sales for the same period a year ago. The decrease in EBIT primarily reflects unfavorable price/mix in the quarter partially offset by favorable currency.

Excluding special items (detailed in the attached tables), adjusted EBIT in the quarter was $36.6 million or 9.6 percent of sales, compared with $37.7 million or 9.8 percent of sales in the first quarter last year.

Process Industries sales of $320.8 million for the first quarter were up 6.6 percent from the same period a year ago, driven primarily by increased industrial distribution demand, higher marine revenue and the benefit of acquisitions, partially offset by lower revenue in wind energy and services.

EBIT for the quarter was $43 million or 13.4 percent of sales, compared with EBIT of $33.8 million or 11.2 percent of sales for the same period a year ago. The increase in EBIT was driven by the impact of higher volume, improved manufacturing performance, lower SG&A expenses and the benefit of acquisitions, partially offset by unfavorable price/mix. In addition to these operating factors, year-on-year results were also impacted by lower restructuring charges in the quarter.

Excluding special items (detailed in the attached tables), adjusted EBIT in the quarter was $44.2 million or 13.8 percent of sales, compared with $37.4 million or 12.4 percent of sales in the first quarter last year.

2017 Outlook

“Encouraged by our start to the year, we are raising our revenue and earnings outlook, with the expectation that markets sustain their recent improvements,” said Kyle. “We are confident in our ability to generate solid bottom-line growth in 2017.”

The company now expects 2017 revenue to be up 5 to 6 percent in total versus 2016. Within its segments, the company estimates full-year 2017:

  • Mobile Industries’ sales to be up 2-3 percent, driven primarily by improved demand in the off-highway and heavy truck sectors and the benefit of acquisitions, partially offset by continued weakness in the rail sector.
  • Process Industries’ sales to be up 9-10 percent, reflecting growth across most end-market sectors and the benefit of acquisitions, offset partially by unfavorable currency.

Timken now anticipates 2017 earnings per diluted share to range from $2.15 to $2.25 for the full year on a GAAP basis, which does not include the impact of any potential mark-to-market pension remeasurement adjustments in the fourth quarter.

The company expects 2017 adjusted earnings per diluted share to range from $2.35 to $2.45.

Recast of 2016 Earnings for Change in Accounting Principle

In the first quarter of 2017, Timken implemented a change in accounting principle for pension and OPEB costs. Prior to 2017, the Company amortized actuarial gains and losses into earnings over time. Under the new principle, the company will recognize actuarial gains and losses as a mark-to-market remeasurement gain or loss when they occur rather than amortizing them to earnings over time. In addition, the Company has changed its accounting policy for measuring the market-related value of plan assets from a calculated amount (based on a smoothing of asset returns) to fair value. As a result of these changes, 2016 earnings have been recast to make the company’s results comparable year-over-year. First-quarter 2016 earnings have been recast from $0.78 to $0.82 per diluted share. First-quarter 2016 adjusted earnings have been recast from $0.46 to $0.50 per diluted share. More information on the 2016 impact of this change in accounting principle can be found in the Form 8-K filed by the company on April 24, 2017.

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 26, 2017

11:00 a.m. Eastern Time

Live Dial-In: 877-545-1407 or 719-325-4795

(Call in 10 minutes prior to be included.)

Conference ID: Timken’s 1Q Earnings Call

Conference Call Replay:

Replay Dial-In available through May 10, 2017:

888-203-1112 or 719-457-0820

Replay Passcode: 1748373

Live Webcast:

http://investors.timken.com

About The Timken Company

The Timken Company (NYSE: TKR; www.timken.com) engineers, manufactures and markets bearings, gear drives, belts, chain, couplings, and related products, and offers a spectrum of powertrain rebuild and repair services. The leading authority on tapered roller bearings, Timken today applies its deep knowledge of metallurgy, tribology and mechanical power transmission across a variety of bearings and related systems to improve reliability and efficiency of machinery and equipment all around the world. The company’s growing product and services portfolio features many strong industrial brands including Timken®, Fafnir®, Philadelphia Gear®, Drives®, Lovejoy® and Interlube™. Known for its quality products and collaborative technical sales model, Timken posted $2.7 billion in sales in 2016. With more than 14,000 employees operating from 28 countries, Timken makes the world more productive and keeps industry in motion.

Certain statements in this release (including statements regarding the company’s forecasts, estimates plans and expectations) that are not historical in nature are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, the statements related to expectations regarding the company’s future financial performance, including information under the heading “Outlook,” are forward-looking.

The company cautions that actual results may differ materially from those projected or implied in forward-looking statements due to a variety of important factors, including: the finalization of the company’s financial statements for the first quarter of 2017; the company’s ability to respond to the changes in its end markets that could affect demand for the company’s products; unanticipated changes in business relationships with customers or their purchases from the company; changes in the financial health of the company’s customers, which may have an impact on the company’s revenues, earnings and impairment charges; fluctuations in raw material and energy costs; the impact of changes to the company’s accounting methods; weakness in global or regional economic conditions and capital markets; fluctuations in currency valuations; changes in the expected costs associated with product warranty claims; the ability to achieve satisfactory operating results in the integration of acquired companies; the impact on operations of general economic conditions; fluctuations in customer demand; the impact on the company’s pension obligations due to changes in interest rates, investment performance and other tactics designed to reduce risk; the company’s ability to complete and achieve the benefits of announced plans, programs, initiatives, and capital investments; and retention of U.S. Continued Dumping and Subsidy Offset Act distributions. Additional factors are discussed in the company’s filings with the Securities and Exchange Commission, including the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2016, 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.

1 Represents funds received by the company under the U.S. Continued Dumping and Subsidy Offset Act (CDSOA).

Media Relations:
234.262.3514
mediarelations@timken.com

Investor Relations:
Jason Hershiser
234.262.7101
jason.hershiser@timken.com

Source: The Timken Company

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Author: MyMotorWheels

I am a mechanical engineer and an automobile enthusiast.

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