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Timken Company$59.87($1.39)(2.27%)

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 Timken Reports Fourth-Quarter and Full-Year 2019 Results
   Wednesday, February 05, 2020 6:51:00 AM ET

NORTH CANTON, Ohio, Feb. 5, 2020 /PRNewswire/ -- The Timken Company (NYSE: TKR; ), a world leader in engineered bearings and power transmission products, today reported fourth-quarter 2019 sales of $896.2 million, down 1.5 percent from the same period a year ago. The decline was driven by lower demand mainly in the Mobile Industries segment and unfavorable currency, partially offset by the favorable impact of acquisitions and positive pricing.

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

In the fourth quarter, Timken posted net income of $113.5 million or $1.48 per diluted share, versus net income of $60.0 million or $0.77 per diluted share for the same period a year ago. The current period included pension and other postretirement plan remeasurement income, a net income tax credit driven by discrete items in the current period, and other special items detailed in the attached tables, which more than accounted for the year-over-year improvement in GAAP net income.

Excluding special items, adjusted net income in the fourth quarter of 2019 was $64.3 million or $0.84 per diluted share versus adjusted net income of $77.4 million or $1.00 per diluted share for the same period in 2018. The decline in adjusted net income reflects the impact of lower volume and higher manufacturing and SG&A costs, partially offset by positive pricing and lower material and logistics costs.

Net cash from operations for the quarter was $195.3 million, and free cash flow was $137.6 million. During the quarter, the company returned $27.7 million in capital to shareholders with the payment of its 390th consecutive quarterly dividend and the repurchase of more than 150 thousand shares. 

"Fourth quarter revenue was in line with our expectations and cash flow finished the year strong. While profitability fell short, a significant portion of this related to some higher than normal operating expenses in the quarter that are not expected to persist," said Richard G. Kyle, Timken president and chief executive officer. "In 2019, Timken delivered record earnings per share, operating margin expansion and solid revenue gains in sectors like renewable energy, aerospace and rail. Our strong financial performance in a relatively soft industrial market environment demonstrates the successful execution of our strategy. Our performance in 2019 underscores the enduring strength of our portfolio and reflects a stronger, more diverse Timken Company."

2019 Full-Year Results

For 2019, sales were $3.8 billion, up 5.8 percent compared with 2018. The increase was driven by the favorable impact of acquisitions, positive pricing and organic growth in Process Industries, partially offset by unfavorable currency and the impact of lower demand in Mobile Industries.

Net income was $362.1 million or a record $4.71 per diluted share for the year, compared with net income of $302.8 million or $3.86 per diluted share a year ago. The year-over-year improvement reflects favorable pricing, the benefit of acquisitions, and the impact of a lower tax rate driven by net discrete benefits, partially offset by the impact of lower volume, unfavorable currency and higher interest expense. The current period also benefited from pension and other retirement plan remeasurement income versus expense in the year-ago period.

Excluding special items detailed in the attached tables, adjusted net income was $353.8 million or record adjusted earnings of $4.60 per diluted share in 2019. This compares with adjusted net income of $327.5 million or adjusted earnings of $4.18 per diluted share in 2018. The improvement in adjusted net income reflects favorable pricing and the benefit of acquisitions, partially offset by the impact of lower volume, unfavorable currency and higher interest expense.

Timken generated strong cash flow in 2019, with net cash from operations for the full year of $550.1 million, and free cash flow of $409.5 million. The company ended the year with net debt to adjusted EBITDA at 2.1 times.

During the year, the company continued to broaden its reach through acquisitions. The addition of BEKA Lubrication (BEKA) makes Timken the world's second largest producer of industrial automatic lubrication systems1, and enhances the company's position in attractive markets such as wind and food and beverage. Diamond Chain expands Timken's leadership in high-performance roller chains for industrial markets and builds on the company's strong position in distribution. Together these acquisitions also expand the company's global presence in growing markets, especially in China and Europe, and both are expected to deliver significant cost and revenue synergies over time. Additionally, Timken paid dividends totaling $1.12 per share in 2019, which represents its sixth consecutive year of annual dividend increases, and repurchased over 1.4 million shares of stock. Between dividends and share repurchases, the company returned a total of $148 million to shareholders in 2019.

Fourth-Quarter 2019 Segment Results

Mobile Industries sales of $445.1 million decreased 3.6 percent compared with the same period a year ago. The decline was driven primarily by lower shipments in the off-highway and heavy truck sectors, partially offset by the benefit of acquisitions and growth in the rail and aerospace sectors.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the quarter were $57.5 million or 12.9 percent of sales, compared with EBITDA of $61.1 million or 13.2 percent of sales for the same period a year ago. The decrease in EBITDA reflects the impact of lower volume and higher manufacturing costs, partially offset by favorable price/mix and lower material and logistics costs.

Excluding special items detailed in the attached tables, adjusted EBITDA in the quarter was $60.3 million or 13.5 percent of sales, compared with $65.0 million or 14.1 percent of sales in the fourth quarter last year.

Process Industries sales of $451.1 million increased 0.6 percent from the same period a year ago, driven primarily by the favorable impact of acquisitions and strong growth in renewable energy, mostly offset by lower revenue in the industrial and marine sectors and unfavorable currency.

EBITDA for the quarter was $96.8 million or 21.5 percent of sales, compared with EBITDA of $101.2 million or 22.6 percent of sales for the same period a year ago. The decrease in EBITDA was driven by the impact of lower volume, unfavorable mix and higher operating expenses, partially offset by favorable pricing.

Excluding special items detailed in the attached tables, adjusted EBITDA in the quarter was $98.3 million or 21.8 percent of sales, compared with $109.4 million or 24.4 percent of sales in the fourth quarter last year.

2020 Outlook

The company expects 2020 revenue to be in the range of down 2 percent to up 2 percent, or roughly flat at the midpoint, versus 2019. This includes the benefit of acquisitions made during 2019, offset by expected organic declines in Mobile Industries and the impact of currency.

Timken anticipates 2020 earnings per diluted share to range from $4.00 to $4.40 for the full year on a GAAP basis. Excluding special items detailed in the attached tables, the company expects 2020 adjusted earnings per diluted share ranging from $4.25 to $4.65. Timken plans to generate net cash from operations of approximately $585 million and free cash flow of $425 million at the midpoint in 2020.

"We plan to deliver another strong year of cash generation and solid earnings performance in 2020 against a soft industrial economic backdrop," said Kyle. "We expect profitability to improve meaningfully from fourth-quarter levels, and we remain focused on driving outgrowth, integrating recent acquisitions and advancing our operational excellence initiatives. With our proven strategy and track record, we are confident in our ability to achieve our new five-year targets and deliver attractive shareholder returns for years to come."

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.

About The Timken Company

The Timken Company (NYSE: TKR; ) 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 "2020 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 fourth quarter and full-year of 2019; 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; political risks associated with governmental instability and 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; 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, 2018, 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

Investor Relations:
Neil Frohnapple

1Based on company and industry estimates.



















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