NORTH CANTON, Ohio, Oct. 29, 2018 /PRNewswire/ -- The Timken Company (NYSE: TKR; www.timken.com ), a world leader in engineered bearings and power transmission products, today reported third-quarter 2018 sales of $881.3 million, up 14.2 percent from the same period a year ago. The increase was driven by continued growth across most end markets, as well as the favorable impact of pricing and acquisitions, partially offset by unfavorable currency.
In the third quarter, Timken posted net income of $71.6 million or $0.91 per diluted share, versus net income of $53.5 million or $0.68 per diluted share for the same period a year ago. The year-over-year improvement was driven by higher volume, favorable price/mix and the impact of acquisitions, partially offset by higher material and logistics costs including tariffs. The current period also included higher pension- and acquisition-related charges.
Excluding special items (detailed in the attached tables), adjusted net income in the third quarter of 2018 was $82.9 million or $1.06 per diluted share, an earnings per share record for the third quarter, versus adjusted net income of $55.9 million or $0.71 per diluted share for the same period in 2017. Cash from operations for the quarter was $137.1 million, and free cash flow was $113.9 million.
"We posted another outstanding quarter," said Richard G. Kyle, Timken president and chief executive officer. "We generated double-digit top-line growth, expanded operating margins despite tariff and other cost headwinds and delivered a nearly 50 percent increase in adjusted earnings per share. Our recent acquisitions are off to a good start, and organically, we are doing an excellent job of serving our customers' needs while pursuing profitable growth opportunities."
During the quarter, the company:
- Completed the previously-announced acquisitions of Cone Drive, Rollon Group, and ABC Bearings, which add new and complementary products, capabilities and customers to the Timken portfolio,
- Priced a public offering of $400 million of 10-Year Senior Unsecured Notes at an interest rate of 4.50 percent, with the proceeds used to fund the acquisitions of Cone Drive and Rollon Group, and
- Returned $35 million in capital to shareholders with the payment of its 385th consecutive quarterly dividend and the repurchase of 300,000 shares, bringing full-year share repurchases up to 1.4 million shares.
Third-Quarter 2018 Segment Results
Mobile Industries reported sales of $464.2 million, up 9.8 percent compared with the same period a year ago, driven primarily by growth in the aerospace, automotive, off-highway and heavy truck sectors, partially offset by unfavorable currency.
Earnings before interest and taxes (EBIT) in the quarter were $50.6 million or 10.9 percent of sales, compared with EBIT of $35 million or 8.3 percent of sales for the same period a year ago. The increase in EBIT reflects the impact of higher volume and favorable price/mix, partially offset by higher material and logistics costs.
Excluding special items (detailed in the attached tables), adjusted EBIT in the quarter was $52.5 million or 11.3 percent of sales, compared with $37.7 million or 8.9 percent of sales in the third quarter last year.
Process Industries sales of $417.1 million increased 19.7 percent from the same period a year ago, driven by broad growth across all sectors, as well as the favorable impact of pricing and acquisitions, partially offset by unfavorable currency.
EBIT for the quarter was $81.8 million or 19.6 percent of sales, compared with EBIT of $61.7 million or 17.7 percent 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 and logistics costs including tariffs, as well as increased selling, general and administrative expenses.
Excluding special items (detailed in the attached tables), adjusted EBIT in the quarter was $84 million or 20.1 percent of sales, compared with $61.7 million or 17.7 percent of sales in the third quarter last year.
"Looking ahead to the fourth quarter, our markets remain strong, and we continue to execute well and advance the company's strategy," said Kyle. "As a result, we have modestly increased our earnings outlook for the year, and we are planning for our strong execution and positive market momentum to carry into 2019."
The company expects 2018 revenue to be up approximately 19.5 percent in total versus 2017. This includes expected organic growth of approximately 14 percent plus the benefit of acquisitions, including the recently completed ABC Bearings, Cone Drive and Rollon Group acquisitions. Within its segments, the company estimates for full-year 2018:
- Mobile Industries sales to be up approximately 16 percent, driven primarily by broad growth across all sectors, led by off-highway, rail and heavy truck, as well as the benefit of acquisitions, and
- Process Industries sales to be up approximately 24 percent, reflecting growth across the distribution, original equipment and services sectors, as well as the benefit of acquisitions.
Timken now anticipates 2018 earnings per diluted share of $3.98 to $4.03 for the full year on a GAAP basis. Excluding special items (detailed in the attached tables), the company expects record 2018 adjusted earnings per diluted share in the range of $4.18 to $4.23, which at the midpoint represents an increase of 60 percent from 2017.
Conference Call Information
Timken will host a conference call tomorrow at 9 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.
About The Timken Company
The Timken Company (NYSE: TKR; www.timken.com ) engineers, manufactures and markets bearings, gear drives, automated lubrication systems, belts, chain, couplings and linear motion 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 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®, Rollon® and Cone Drive®. Known for its quality products and collaborative technical sales model, Timken posted $3 billion in sales in 2017. With more than 17,000 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 third 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 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; 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; and the actual impact of the Tax Cuts and Jobs Act of 2017 on the full-year 2018 global effective tax rate. 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.
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