PR Newswire
NORTH CANTON, Ohio, Aug. 3, 2023
- Record sales of $1.27 billion, up 10 percent from last year
- Second-quarter EPS of $1.73; adjusted EPS of $2.01
- Net income margin of 9.8 percent; adjusted EBITDA margin of 20.7 percent
- Repurchased 1.3 million shares during the quarter
- Updates 2023 outlook; now expects 2023 EPS of $5.70-$6.10, with adjusted EPS of $6.90-$7.30
NORTH CANTON, Ohio, Aug. 3, 2023 /PRNewswire/ -- The Timken Company (NYSE: TKR; www.timken.com), a global leader in engineered bearings and industrial motion products, today reported second-quarter 2023 sales of $1.27 billion, up 10.3 percent from the same period a year ago. The increase was driven by the benefit of acquisitions (net of divestitures) and continued organic growth in both segments led by Industrial Motion, partially offset by unfavorable foreign currency translation.
Timken posted net income in the second quarter of $125.2 million or $1.73 per diluted share, a record for the second quarter. This compares to net income of $105.0 million or $1.42 per diluted share for the same period a year ago.
Excluding special items (detailed in the attached tables), adjusted net income in the second quarter was $146.1 million or $2.01 per diluted share, a record for the second quarter. This compares to adjusted net income of $131.8 million or $1.78 per diluted share for the same period in 2022. Adjusted EBITDA in the quarter was $263.0 million or 20.7 percent of sales, compared with $231.2 million or 20.0 percent of sales in the second quarter of last year.
Net cash from operations for the quarter was $144.0 million and free cash flow was $94.4 million. During the quarter, Timken repurchased approximately 1.3 million shares of company stock, or nearly 2 percent of outstanding shares, and increased its quarterly dividend by 6 percent. In total, the company returned $124.3 million of cash to shareholders through dividends and share repurchases during the second quarter. In April, Timken closed on the previously announced acquisition of Nadella Group, and in June, the company completed the sale of a portion of its controlling stake in Timken India Limited.
"Timken delivered strong results in the second quarter, achieving double-digit sales and earnings growth and year-over-year margin expansion," said Richard G. Kyle, Timken president and chief executive officer. "Our performance reflects improved operational execution across the enterprise and the continued positive impact of our strategic growth and capital allocation initiatives."
Second-Quarter 2023 Segment Results
Engineered Bearings sales of $857.2 million increased 7.4 percent from the same period a year ago. The increase was driven by the benefit of acquisitions and modest organic growth, partially offset by unfavorable foreign currency translation.
EBITDA for the quarter was $185.5 million or 21.6 percent of sales, compared with EBITDA of $167.5 million or 21.0 percent of sales for the same period a year ago. The increase in EBITDA was driven primarily by the impact of favorable price/mix and lower material & logistics costs, as well as the benefit of acquisitions and lower Russia-related charges, partially offset by higher manufacturing costs and the impact of lower volume.
Excluding special items, adjusted EBITDA in the quarter was $189.6 million or 22.1 percent of sales, compared with $176.6 million or 22.1 percent of sales in the second quarter of last year.
Industrial Motion sales of $415.1 million increased 16.8 percent compared with the same period a year ago. The increase was driven by strong organic growth led by the drive systems and services platforms, as well as the benefit of acquisitions (net).
EBITDA for the quarter was $80.9 million or 19.5 percent of sales, compared with EBITDA of $65.1 million or 18.3 percent of sales for the same period a year ago. The increase in EBITDA was driven primarily by the impact of favorable price/mix and higher volume, partially offset by higher SG&A costs.
Excluding special items, adjusted EBITDA in the quarter was $85.9 million or 20.7 percent of sales, compared with $67.4 million or 19.0 percent of sales in the second quarter of last year.
2023 Outlook
Timken is updating its 2023 outlook, with full-year earnings per diluted share now forecasted to be in the range of $5.70 to $6.10 and adjusted earnings per diluted share in the range of $6.90 to $7.30. The company is now planning for 2023 revenue to be up approximately 8 percent in total at the midpoint from 2022.
"We have updated our outlook to reflect current order trends and continued near-term economic uncertainty," said Kyle. "Macro drivers remain constructive across most of the markets we serve, and Timken is on track to deliver all-time record results in 2023. Looking ahead, we will continue to focus on advancing our proven strategy to drive profitable growth and resilient performance."
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: | Thursday, August 3, 2023 |
11:00 a.m. Eastern Time | |
Live Dial-In: 833-470-1428 | |
Or 404-975-4839 | |
Access Code: 023620 | |
(Call in 10 minutes prior to be included.) | |
Conference Call Replay: | Replay Dial-In available through |
August 17, 2023: | |
866-813-9403 or 929-458-6194 | |
Replay Passcode: 189497 | |
Live Webcast: |
About The Timken Company
The Timken Company (NYSE: TKR; www.timken.com) designs a growing portfolio of engineered bearings and industrial motion 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 $4.5 billion in sales in 2022 and employs more than 19,000 people globally, operating from 46 countries. Timken has been recognized among America's Most Responsible Companies by Newsweek, the World's Most Ethical Companies® by Ethisphere, America's Most Innovative Companies by Fortune and America's Best Large Employers, Best Employers for New Graduates and Best Employers for Women 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 "2023 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 2023; 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; logistical issues associated with port closures or congestion, delays or increased 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, sanctions and hostilities; weakness in global or regional general economic conditions and capital markets (as a result of financial stress affecting the banking system or otherwise); the impact of inflation on employee expenses, shipping costs, raw material costs, energy and fuel prices, and other production costs; the company's ability to satisfy its obligations under its debt agreements and renew or refinance borrowings on favorable terms in a rising interest rate environment; 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, synergies, and expected cashflow generation within expected timeframes or at all; 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, commercial requirements, and company goals associated with climate change and emissions or other waste reduction initiatives; unanticipated litigation, claims, investigations or assessments; the company's ability to maintain positive relations with unions and works councils; the company's ability to compete for skilled labor and to attract, retain and develop management and other key employees; negative impacts to the company's operations or financial position as a result of COVID-19 or other epidemics and associated governmental measures; 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, 2022, 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
[email protected]
Investor Relations:
Neil Frohnapple
234.262.2310
[email protected]
The Timken Company | |||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||
(Dollars in millions, except share data) (Unaudited) | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
Net sales | $ | 1,272.3 | $ | 1,153.7 | $ | 2,535.1 | $ | 2,278.3 | |||||||||
Cost of products sold | 866.9 | 801.3 | 1,712.9 | 1,587.6 | |||||||||||||
Selling, general & administrative expenses | 184.9 | 155.9 | 371.7 | 310.0 | |||||||||||||
Amortization of intangible assets | 17.3 | 10.6 | 30.8 | 21.5 | |||||||||||||
Impairment and restructuring charges | 2.5 | 10.0 | 31.4 | 11.0 | |||||||||||||
Operating Income | 200.7 | 175.9 | 388.3 | 348.2 | |||||||||||||
Non-service pension and other postretirement income (expense) | 0.1 | (7.9) | 0.2 | (6.6) | |||||||||||||
Other income (expense), net | 2.2 | (1.1) | 5.3 | (0.9) | |||||||||||||
Interest expense, net | (26.4) | (17.3) | (49.0) | (31.0) | |||||||||||||
Income Before Income Taxes | 176.6 | 149.6 | 344.8 | 309.7 | |||||||||||||
Provision for income taxes | 47.1 | 44.0 | 89.6 | 82.2 | |||||||||||||
Net Income | 129.5 | 105.6 | 255.2 | 227.5 | |||||||||||||
Less: Net income attributable to noncontrolling interest | 4.3 | 0.6 | 7.7 | 4.3 | |||||||||||||
Net Income Attributable to The Timken Company | $ | 125.2 | $ | 105.0 | $ | 247.5 | $ | 223.2 | |||||||||
Net Income per Common Share Attributable to The Timken Company Common Shareholders | |||||||||||||||||
Basic Earnings per share | $ | 1.74 | $ | 1.43 | $ | 3.43 | $ | 3.01 | |||||||||
Diluted Earnings per share | $ | 1.73 | $ | 1.42 | $ | 3.39 | $ | 2.98 | |||||||||
Average Shares Outstanding | 71,882,843 | 73,660,410 | 72,162,267 | 74,234,300 | |||||||||||||
Average Shares Outstanding - assuming dilution | 72,512,991 | 74,182,793 | 72,907,804 | 74,877,248 | |||||||||||||
BUSINESS SEGMENTS | ||||||||||||||
(Unaudited) | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
(Dollars in millions) | 2023 | 2022 | 2023 | 2022 | ||||||||||
Engineered Bearings | ||||||||||||||
Net sales | $ | 857.2 | $ | 798.3 | $ | 1,757.9 | $ | 1,570.7 | ||||||
Earnings before interest, taxes, depreciation and amortization (EBITDA) (1) | $ | 185.5 | $ | 167.5 | $ | 390.5 | $ | 335.8 | ||||||
EBITDA Margin (1) | 21.6 | % | 21.0 | % | 22.2 | % | 21.4 | % | ||||||
Industrial Motion | ||||||||||||||
Net sales | $ | 415.1 | $ | 355.4 | $ | 777.2 | $ | 707.6 | ||||||
Earnings before interest, taxes, depreciation and amortization (EBITDA) (1) | $ | 80.9 | $ | 65.1 | $ | 129.1 | $ | 127.5 | ||||||
EBITDA Margin (1) | 19.5 | % | 18.3 | % | 16.6 | % | 18.0 | % | ||||||
Unallocated corporate expense | $ | (13.2) | $ | (13.4) | $ | (30.9) | $ | (26.3) | ||||||
Corporate pension and other postretirement benefit related income (expense) (2) | 1.0 | (11.6) | 1.9 | (14.2) | ||||||||||
Consolidated | ||||||||||||||
Net sales | $ | 1,272.3 | $ | 1,153.7 | $ | 2,535.1 | $ | 2,278.3 | ||||||
Earnings before interest, taxes, depreciation and amortization (EBITDA) (1) | $ | 254.2 | $ | 207.6 | $ | 490.6 | $ | 422.8 | ||||||
EBITDA Margin(1) | 20.0 | % | 18.0 | % | 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 income (expense) primarily 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. 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. | ||||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||
(Dollars in millions) | (Unaudited) | ||||||||||
June 30, | December 31, | ||||||||||
ASSETS | |||||||||||
Cash and cash equivalents | $ | 344.3 | $ | 331.6 | |||||||
Restricted cash | 8.0 | 9.1 | |||||||||
Accounts receivable, net | 811.9 | 699.6 | |||||||||
Unbilled receivables | 121.8 | 103.9 | |||||||||
Inventories, net | 1,251.7 | 1,191.3 | |||||||||
Other current assets | 173.1 | 168.5 | |||||||||
Total Current Assets | 2,710.8 | 2,504.0 | |||||||||
Property, plant and equipment, net | 1,255.5 | 1,207.4 | |||||||||
Operating lease assets | 111.9 | 101.4 | |||||||||
Goodwill and other intangible assets | 2,074.5 | 1,863.6 | |||||||||
Other assets | 98.6 | 96.0 | |||||||||
Total Assets | $ | 6,251.3 | $ | 5,772.4 | |||||||
LIABILITIES | |||||||||||
Accounts payable | $ | 392.2 | $ | 403.9 | |||||||
Short-term debt, including current portion of long-term debt | 53.2 | 49.0 | |||||||||
Income taxes | 77.8 | 51.3 | |||||||||
Accrued expenses | 499.2 | 508.2 | |||||||||
Total Current Liabilities | 1,022.4 | 1,012.4 | |||||||||
Long-term debt | 2,046.5 | 1,914.2 | |||||||||
Accrued pension benefits | 161.3 | 160.3 | |||||||||
Accrued postretirement benefits | 31.5 | 31.4 | |||||||||
Long-term operating lease liabilities | 70.3 | 65.2 | |||||||||
Other non-current liabilities | 269.3 | 236.0 | |||||||||
Total Liabilities | 3,601.3 | 3,419.5 | |||||||||
