Timken Reports Third-Quarter 2024 Results
Sales of $1.13 billion, down 1.4 percent from last year
Third-quarter earnings per share of $1.16; adjusted EPS of $1.23
Cash from operations of $123 million and free cash flow of $88 million
Updates full-year 2024 outlook; now expects EPS of $4.65-$4.75, with adjusted EPS of $5.55-$5.65
NORTH CANTON, Ohio, Nov. 5, 2024 /PRNewswire/ -- The Timken Company (NYSE:TKR, www.timken.com)), a global technology leader in engineered bearings and industrial motion, today reported third-quarter 2024 sales of $1.13 billion, down 1.4 percent from the same period a year ago. The decrease was driven primarily by lower end-market demand in Europe and China, partially offset by the benefit of acquisitions. Organically, sales were down 2.9 percent from last year.
Timken posted net income in the third quarter of $81.8 million or $1.16 per diluted share. This compares to net income of $87.9 million or $1.23 per diluted share for the same period a year ago. The company's net income margin in the quarter was 7.3 percent, compared to 7.7 percent in the third quarter of last year.
Excluding special items (detailed in the attached tables), adjusted net income in the third quarter was $87.0 million or $1.23 per diluted share. This compares to adjusted net income of $111.2 million or $1.55 per diluted share for the same period in 2023. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the quarter was $190.0 million or 16.9 percent of sales, compared with $215.8 million or 18.9 percent of sales in the third quarter of last year.
Net cash provided from operating activities in the quarter was $123.2 million, and free cash flow was $88.2 million. During the quarter, Timken completed the acquisition of CGI, Inc., a manufacturer of precision drive systems for medical robotics and other automation sectors. As of the end of the third quarter, the company's net debt-to-adjusted EBITDA ratio was 2.1 times, with no significant debt maturities until 2027.
"It is an honor to be part of the talented Timken team as we work to accelerate profitable growth and customer-centric innovation," said Tarak Mehta, president and chief executive officer. "Looking at the quarter, profitability fell short of our expectations, and we are taking further steps to improve operating margins. In the current market environment, we remain committed to improving reliability and efficiency for our customers and generating strong earnings and cash flow for our shareholders."
Third-Quarter 2024 Segment Results
Engineered Bearings sales of $740.7 million decreased 4.5 percent from the same period a year ago. The decrease was driven primarily by lower end-market demand in Europe and China. Among market sectors, renewable energy saw the most significant organic decline in the quarter, driven by continued weakness in China. The off-highway, auto/truck and general & heavy industrial sectors were also lower, while industrial distribution, aerospace and rail shipments were higher compared to the same period a year ago.
EBITDA for the quarter was $150.0 million or 20.3 percent of sales, compared with EBITDA of $148.2 million or 19.1 percent of sales for the same period a year ago. The current quarter includes a gain related to the sale of a recently closed facility.
Excluding special items, adjusted EBITDA in the quarter was $138.4 million or 18.7 percent of sales, compared with $156.7 million or 20.2 percent of sales in the third quarter of last year. The decrease in adjusted EBITDA was driven primarily by the impact of lower volume and higher logistics and manufacturing costs, partially offset by favorable price/mix.
Industrial Motion sales of $386.1 million increased 5.2 percent compared with the same period a year ago. The increase was driven primarily by the benefit of acquisitions, partially offset by modestly lower end-market demand. Organically, the automatic lubrication systems platform posted the largest decline, while drive systems revenue was notably up.
EBITDA for the quarter was $70.9 million or 18.4 percent of sales, compared with EBITDA of $70.3 million or 19.2 percent of sales for the same period a year ago.
Excluding special items, adjusted EBITDA in the quarter was $74.2 million or 19.2 percent of sales, compared with $75.2 million or 20.5 percent of sales in the third quarter of last year. The modest decrease in adjusted EBITDA was driven primarily by the impact of lower volume and higher operating costs, partially offset by the benefit of acquisitions.
2024 Outlook
Timken is reducing its full-year 2024 outlook, with earnings per diluted share now forecasted to be in the range of $4.65 to $4.75 and adjusted earnings per diluted share in the range of $5.55 to $5.65. The company now expects revenue to be down approximately 4 percent in total from 2023.
"The second half of this year has been more challenging than expected, and we are taking appropriate actions to strengthen the company for 2025 and beyond," said Mehta. "Our team is focused on reducing costs near-term while advancing the company for the long-term. Timken remains well-positioned to capitalize on an industrial market recovery when it occurs and to benefit from continuing secular growth trends. As Timken celebrates its 125th anniversary, we are more confident than ever about the future of the company and excited by the opportunities that lie ahead."
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:
Tuesday, November 5, 2024
11:00 a.m. Eastern Time
Live Dial-In: 833-470-1428
Or 404-975-4839
Access Code: 612523
(Call in 10 minutes prior to be included.)
Conference Call Replay:
Replay Dial-In available through
November 19, 2024:
866-813-9403 or 929-458-6194
Replay Access Code: 368646
Live Webcast:
http://investors.timken.com
Register in advance:
https://tmkn.biz/3BxRhk2
About The Timken Company
The Timken Company (NYSE:TKR, www.timken.com), a global technology leader in engineered bearings and industrial motion, designs a growing portfolio of next-generation products for diverse industries. For 125 years, Timken has used its specialized expertise to innovate and create customer-centric solutions that increase reliability and efficiency. Timken posted $4.8 billion in sales in 2023 and employs more than 19,000 people globally, operating from 45 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 "2024 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 2024; fluctuations in customer 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, 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; strained geopolitical relations between countries in which we have significant operations; 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 wages, 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 high 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; the company's ability to effectively adjust prices for its products in response to changing dynamics; 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 sustainability initiatives; unanticipated litigation, claims, investigations remediation, or assessments; changes in the global regulatory landscape; restrictions on the use of, or claims or remediation associated with, per- and polyfluoroalkyl substances; 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, other key employees, and skilled personnel; negative impacts to the company's operations or financial position as a result of pandemics, epidemics, or other public health concerns 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, 2023, 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
Investor Relations:Neil
The Timken Company
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except share data) (Unaudited)
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
2024
2023
2024
2023
Net sales
$
1,126.8
$
1,142.7
$
3,499.4
$
3,677.8
Cost of products sold
782.4
787.1
2,383.8
2,500.0
Selling, general & administrative expenses
189.7
179.6
564.5
551.3
Amortization of intangible assets
19.7
17.5
58.7
48.3
Impairment and restructuring charges
2.5
8.9
8.1
40.3
Gain on sale of real estate
(13.8)
—
(13.8)
—
Operating Income
146.3
149.6
498.1
537.9
Non-service pension and other postretirement expense
(0.9)
(0.9)
(2.9)
(0.8)
Other (expense) income, net
(6.3)
0.4
(6.0)
5.8
Interest expense, net
(26.9)
(24.9)
(85.8)
(73.9)
Income Before Income Taxes
112.2
124.2
403.4
469.0
Provision for income taxes
24.6
33.3
103.2
122.9
Net Income
87.6
90.9
300.2
346.1
Less: Net income attributable to noncontrolling interest
5.8
3.0
18.7
10.7
Net Income Attributable to The Timken Company
$
81.8
$
87.9
$
281.5
$
335.4
Net Income per Common Share Attributable to The Timken Company Common Shareholders
Basic Earnings per share
$
1.17
$
1.24
$
4.01
$
4.68
Diluted Earnings per share
$
1.16
$
1.23
$
3.98
$
4.63
Average Shares Outstanding
70,120,860
70,878,673
70,246,103
71,740,846
Average Shares Outstanding - assuming dilution
70,663,741
71,535,609
70,793,086
72,456,849
BUSINESS SEGMENTS
(Unaudited)
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
(Dollars in millions)
2024
2023
2024
2023
Engineered Bearings
Net sales
$
740.7
$
775.6
$
2,326.6
$
2,533.5
Earnings before interest, taxes, depreciation and amortization (EBITDA) (1)
$
150.0
$
148.2
$
492.0
$
538.7
EBITDA Margin (1)
20.3
%
19.1
%
21.1
%
21.3
%
Industrial Motion
Net sales
$
386.1
$
367.1
$
1,172.8
$
1,144.3
Earnings before interest, taxes, depreciation and amortization (EBITDA) (1)
$
70.9
$
70.3
$
223.8
$
199.4
EBITDA Margin (1)
18.4
%
19.2
%
19.1
%
17.4
%
Unallocated corporate expense
$
(25.7)
$
(17.0)
$
(61.0)
$
(47.9)
Corporate pension and other postretirement benefit related income (expense)(2)
—
(0.2)
—
1.7
Consolidated
Net sales
$
1,126.8
$
1,142.7
$
3,499.4
$
3,677.8
Earnings before interest, taxes, depreciation and amortization (EBITDA) (1)
$
195.2
$
201.3
$
654.8
$
691.9
EBITDA Margin (1)
17.3
%
17.6
%
18.7
%
18.8
%
(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)
September 30,2024
December 31,2023
ASSETS
Cash and cash equivalents
$
412.7
$
418.9
Restricted cash
0.7
0.4
Accounts receivable, net
762.0
671.7
Unbilled receivables
162.6
144.5
Inventories, net
1,255.3
1,229.1
Other current assets
138.6
170.3
Total Current Assets
2,731.9
2,634.9
Property, plant and equipment, net
1,314.8
1,311.9
Operating lease assets
119.7
119.7
Goodwill and other intangible assets
2,525.0
2,401.0
Other assets
76.0
74.2
Total Assets
$
6,767.4
$
6,541.7
LIABILITIES
Accounts payable
$
344.6
$
367.2
Short-term debt, including current portion of long-term debt
49.7
605.6
Income taxes
30.8
19.9
Accrued expenses
485.2
478.6
Total Current Liabilities
910.3
1,471.3
Long-term debt
2,189.2
1,790.3
Accrued pension benefits
160.9
172.3
Accrued postretirement benefits
30.3
30.2
Long-term operating lease liabilities
75.5
78.7
Other non-current liabilities
310.5
296.5
Total Liabilities
3,676.7
3,839.3
EQUITY
The Timken Company shareholders' equity
2,933.3
2,582.4
Noncontrolling interest
157.4
120.0
Total Equity
3,090.7
2,702.4
Total Liabilities and Equity
$
6,767.4
$
6,541.7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
(Dollars in millions)
2024
2023
2024
2023
Cash Provided by (Used in)
OPERATING ACTIVITIES
