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Timken Company$56.93($.23)(.40%)

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 Timken Reports Strong Second-Quarter 2018 Results; Raises Full-Year Outlook
   Tuesday, July 31, 2018 6:51:00 AM ET

NORTH CANTON, Ohio, July 31, 2018 /PRNewswire/ --The Timken Company (NYSE: TKR; ), a world leader in engineered bearings and power transmission products,today reported second-quarter 2018 sales of$906.3million, up approximately 21 percent from the same period a year ago. The increase was driven by continued strength across most end markets, as well as the benefit of acquisitions and currency.

The Timken Company Logo. (PRNewsfoto/The Timken Company)

In the second quarter, Timken posted net income of$91million or$1.16per diluted share, versus net income of$82.5million or$1.04per diluted share for the same period a year ago. In the quarter, the company benefitted from higher volume, favorable price/mix and manufacturing performance, and the impact of acquisitions, which were partially offset by higher material, logistics and selling, general and administrative (SG&A) costs. The year-ago period also included a large tax benefit.

Excluding special items (detailed in the attached tables), adjusted net income in the second quarter of 2018 was$87.2million ora record $1.11per diluted share, versus net income of $54million or$0.68per diluted share for the same period in 2017.

"We delivered an outstanding quarter and remain on track for an excellent year," said Richard G. Kyle, Timken president and chief executive officer. "We are successfully growing our business organically, and the acquisitions we completed last year are performing at high levels. As a result, we posted significant revenue gains, expanded operating margins and reported record earnings per share. In addition, we further advanced our strategy, announcing plans to add Cone Drive and Rollon to our Timken portfolio of strong industrial brands."

Cash from operations for the quarter was $102.1 million, and free cash flow was $80.3 million. The company ended the quarter with net debt of $899.8 million, or 36.7 percent of capital.

Among recent developments, the company:

  • Announced that it will acquire Cone Drive, a leader in precision drives, and Rollon, a leader in linear motion, further expanding the company's portfolio and strengthening its presence in attractive markets around the world,
  • Increased the company's quarterly dividend by 4 percent to 28 cents per share, and
  • Returned $49 million in capital to shareholders in the second quarter through the repurchase of 570,000 shares and the payment of its 384th consecutive quarterly dividend.

Second-Quarter 2018 Segment Results

Mobile Industries reported sales of$489.1 million, up 19.8 percent compared with the same period a year ago. Acquisitions added revenue of $30.7 million in the quarter, or 7.5 percent. Excluding acquisitions, revenue was up 12.2 percent, driven primarily by increased demand in the off-highway, rail and heavy truck sectors.

Earnings before interest and taxes (EBIT) in the quarter were$54.5million or11.1percent of sales, compared with EBIT of$34.4 million or8.4percent of sales for the same period a year ago. The increase in EBIT reflects the impact of higher volume, favorable price/mix and manufacturing performance, and the benefit of acquisitions, partially offset by higher material and SG&A costs.

Excluding special items (detailed in the attached tables), adjusted EBIT in the quarter was $54.9 million or11.2percent of sales, compared with$35.9million or8.8 percent of sales in the second quarter last year.

Process Industries sales of$417.2million increased 21.9 percent from the same period a year ago, driven by broad strength across the distribution, original equipment and services sectors, as well as the impact of favorable pricing and currency.

EBIT for the quarter was$90.6million or21.7percent of sales, compared with EBIT of$60.2million or17.6percent of sales for the same period a year ago. The increase in EBIT was driven by higher volume and favorable price/mix, partially offset by higher material, logistics and SG&A costs.

Excluding special items (detailed in the attached tables), adjusted EBIT in the quarter was $90.8 million or21.8percent of sales, compared with$60.2million or17.6 percent of sales in the second quarter last year.

2018 Outlook

"We continue to see strong growth in our markets and are successfully capturing new business," said Kyle. "As we advance our strategy, we are expanding our industry-leading portfolio to serve existing and new customers in attractive end markets around the world. We are raising our outlook for the year, despite currency and trade headwinds, and we remain confident in the company's future."

The company now expects 2018 revenue to be up approximately 21 percent in total versus 2017. This includes expected organic growth of approximately 15 percent plus the benefit of acquisitions, including the recently announced Cone Drive and Rollon acquisitions. Within its segments, the company estimates for full-year 2018:

  • Mobile Industries sales to be up approximately 18 percent, driven primarily by organic growth in the off-highway, heavy truck and rail sectors, as well as the benefit of acquisitions.
  • Process Industries sales to be up approximately 25 percent, reflecting strong demand across the distribution, original equipment and services sectors, as well as the benefit of acquisitions and favorable currency.

Timken now anticipates 2018 earnings per diluted share of $3.90 to $4.00 for the full year on a GAAP basis. Excluding special items (detailed in the attached tables), the company expects 2018 adjusted earnings per diluted share to range from $4.10 to $4.20, which at the midpoint represents an increase of 58 percent from 2017.

Conference Call Information

Timken will host a conference call today at 11a.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.

About The Timken Company

The Timken Company (NYSE: TKR; ) engineers, manufactures and markets bearings, gear drives, automated lubrication systems, 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 the 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, Groeneveld, Drives and Lovejoy. Known for its quality products and collaborative technical sales model, Timken posted $3 billion in sales in 2017. With more than 15,000 employees operating from 33 countries, Timken makes the world more productive and keeps industry in motion.

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

The company cautions that actual results may differ materially from those projected or implied in forward-looking statements due to a variety of important factors, including: the finalization of the company's financial statements for the second quarter of 2018; 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; recent world events that have increased the risks posted by international trade disputes, tariffs and sanctions; 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 and assets 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, acquisitions and capital investments; the actual impact of the Tax Cuts and Jobs Act of 2017 on the full-year 2018 global effective tax rate; and retention of CDSOA 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, 2017, 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:

Investor Relations:
Jason Hershiser

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