- Reports adjusted earnings of $0.46 per diluted share (EPS) in the quarter on sales of $684 million
- Generated free cash flow in the quarter of $23 million
- Repurchased 1.2 million shares
- Reaffirms full-year 2016 adjusted EPS outlook
NORTH CANTON, Ohio, April 27, 2016 /PRNewswire/ -- The Timken Company (NYSE: TKR; www.timken.com), a global leader in bearings, today reported sales of $684 million for the first quarter of 2016, approximately 5 percent lower than the same period a year ago. Excluding the impact of currency, sales were down 2.5 percent, primarily due to market weakness across most sectors partially offset by growth in automotive and the net benefit of acquisitions and divestitures.
In the first quarter, Timken posted net income of $63.0 million or $0.78 per diluted share, versus net loss of $135.2 million or $1.54 per basic share a year ago. Net income in the quarter included certain unusual items including pre-tax income of $47.7 million related to the U.S. Continued Dumping and Subsidy Offset Act (reference Table I).
Adjusted net income was $36.9 million or $0.46 per diluted share. This compares with adjusted net income of $44.2 million or $0.50 per diluted share for the same period in 2015. The year-over-year change in adjusted net income reflects lower volume, unfavorable price/mix and currency, partially offset by the impact of lower raw material and operating costs as well as lower SG&A expenses. Earnings per share also benefited from share buybacks.
Free cash flow for the quarter was $22.9 million, compared with net cash used of $2.7 million in the prior-year period. The increase in free cash flow was primarily driven by improvements in working capital. In addition, the company returned $55.7 million in capital to shareholders in the first quarter, through the repurchase of 1.2 million shares and the payment of its 375th consecutive quarterly dividend.
"During the quarter, we executed well and delivered first-quarter results in line with our expectations even though market conditions globally remain weak, particularly in commodity-related sectors," said Richard G. Kyle, Timken president and chief executive officer. "Looking ahead, we expect continued challenging market conditions in 2016. However, we are reaffirming our full-year earnings outlook, confident in our ability to win new business and deliver on our cost-reduction initiatives."
First-Quarter Segment Results
Mobile Industries reported first-quarter sales of $383.2 million, approximately 2 percent lower than the same period a year ago. Excluding the impact of currency, sales were roughly flat compared with the prior year, as growth in automotive and the net benefit of acquisitions and divestitures offset market-related declines in off‑highway, rail and aerospace.
Earnings before interest and taxes (EBIT) for the first quarter were $30.2 million or 7.9 percent of sales, compared with EBIT of $35.4 million or 9 percent of sales for the same period a year ago. Adjusted EBIT was $35.9 million or 9.4 percent of sales, compared with $36.4 million or 9.3 percent of sales in the first quarter last year. The slight decline in adjusted EBIT reflects the impact of unfavorable price/mix and lower volume, partially offset by lower raw material and operating costs, and lower SG&A expenses.
Process Industries sales of $300.8 million for the first quarter declined approximately 9 percent from the same period a year ago. Excluding the impact of currency, sales were down roughly 6 percent, driven by weaker demand in the heavy industries sector and the industrial aftermarket, partially offset by the benefit of acquisitions.
EBIT for the quarter was $32.6 million or 10.8 percent of sales, compared with EBIT of $45.2 million or 13.7 percent of sales for the same period a year ago. Adjusted EBIT was $36.2 million or 12 percent of sales, compared with $50.8 million or 15.4 percent of sales in the first quarter last year. The decrease in adjusted EBIT was driven by the impact of lower volume and currency, partially offset by lower SG&A expenses and raw material costs.
2016 Outlook
The company expects 2016 revenue to be down approximately 5 percent from 2015, including 2 percent from currency declines.
Within its segments, the company estimates full-year 2016:
Mobile Industries' sales to be down approximately 6 percent. Excluding the impact of currency, sales are expected to be down around 4 percent, reflecting lower demand in rail, off-highway and aerospace, offset partially by growth in automotive and the net benefit of acquisitions and divestitures.
Process Industries' sales to be down approximately 4 percent. Excluding the impact of currency, sales are expected to be down around 2 percent, driven by declines in the heavy industries sector and the industrial aftermarket, partially offset by organic growth in wind energy and the benefit of acquisitions.
Timken anticipates 2016 earnings per diluted share to range from $1.65 to $1.75 for the full year on a GAAP basis. Excluding unusual items, the company expects 2016 adjusted earnings per diluted share to be $1.90 to $2.00.
Conference Call Information
Timken will host a conference call today at 10:00 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 27, 2016
10:00 a.m. Eastern Time
Live Dial-In: 800-500-0920 or 719-457-2731
(Call in 10 minutes prior to be included.)
Conference ID: Timken's 1Q Earnings Call
Live Webcast: www.timken.com/investors
Conference Call Replay:
Replay Dial-In available through May 11, 2016:
888-203-1112 or 719-457-0820
Replay Passcode: 6334899
About The Timken Company
The Timken Company (NYSE: TKR; www.timken.com) engineers, manufactures and markets bearings, gear drives, belts, chain 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®, Carlisle®, Drives® and Interlube™. Known for its quality products and collaborative technical sales model, Timken posted $2.9 billion in sales in 2015. 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 2016; 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 the company's last-in, first-out accounting; 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, 2015, 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:
234.262.3514
mediarelations@timken.com
Investor Relations:
Shelly Chadwick, Vice President – Treasury & Investor Relations
234.262.3223
shelly.chadwick@timken.com
