Industry News
- Reports fourth-quarter sales of $778 million, up 19 percent from last year
- Generated fourth-quarter earnings per diluted share of $0.37 on a GAAP basis, with adjusted earnings per diluted share of $0.68
- Expects strong growth in 2018 with GAAP earnings per diluted share of $3.05 to $3.15 and adjusted earnings per diluted share of $3.20 to $3.30
The Timken Company Logo. (PRNewsFoto/The Timken Company) (PRNewsFoto/) (PRNewsFoto/)
In the fourth quarter, Timken posted net income of $29.2 million or $0.37 per diluted share, versus a net loss of $(6.9) million or $(0.09) per basic share for the same period a year ago. The change year-over-year reflects improved performance across the business, as well as lower pension-related and impairment and restructuring charges, partially offset by lower CDSOA income1 and higher income tax expense. The higher income tax expense was driven by one-time charges of $35.3 million recorded as a result of the enactment of the Tax Cuts and Jobs Act of 2017, partially offset by discrete and other tax benefits recorded during the period.
Excluding special items (detailed in the attached tables), adjusted net income in the fourth quarter of 2017 was $53.9 million or $0.68 per diluted share, up from $40.2 million or $0.51 per diluted share for the same period in 2016. The improvement reflects higher volume, favorable manufacturing performance and the benefit of acquisitions, partially offset by unfavorable price/mix and higher operating costs.
"Our strong fourth-quarter results capped an excellent 2017 for The Timken Company," said Richard G. Kyle, Timken president and chief executive officer. "We posted solid revenue growth each quarter, responded well to our customers' increased demand for Timken products and services and delivered significantly improved financial results. We advanced our strategy across all fronts, and we move into 2018 a stronger company well prepared to capitalize on the expected continued growth in our end markets."
1 Represents funds received by the company under the U.S. Continued Dumping and Subsidy Offset Act (CDSOA).
2017 Full-Year Results
For 2017, sales were $3 billion, up 12.5 percent compared with 2016. The increase was driven by organic growth across most end-market sectors led by off-highway, industrial distribution and heavy truck, and the benefit of acquisitions and currency, partially offset by lower demand in the rail sector.
Net income was $203.4 million or $2.58 per diluted share for the year, compared with net income of$140.8 million or $1.78 per diluted share a year ago. The change year-over-year reflects improved performance across the business, as well as lower pension-related and impairment and restructuring charges, and a lower income tax rate driven primarily by net discrete and other tax benefits recorded during the year, partially offset by lower CDSOA income1.
Excluding special items (detailed in the attached tables), adjusted net income was $207.5 million or$2.63 per diluted share in 2017. This compares with $169 million or $2.13 per diluted share in 2016. The improvement in adjusted net income reflects higher volume, favorable manufacturing performance and the benefit of acquisitions and currency, partially offset by unfavorable price/mix and higher operating costs.
Among significant accomplishments during the year, the company expanded its mechanical power transmission portfolio and geographic reach. The additions of Torsion Control Products, Groeneveld Lubrication Solutions and PT Tech advanced the company's position in industrial couplings and lubrication systems, and introduced industrial clutches and brakes to the Timken portfolio. The company also furthered its leadership position in engineered bearings, opening a state-of-the-art manufacturing plant in Romania and entering into a definitive agreement to acquire ABC Bearings inIndia. Additionally, the company increased its quarterly dividend in May and repurchased nearly one million shares of stock, returning a total of $127 million to shareholders during the year.
Fourth-Quarter 2017 Segment Results
Mobile Industries reported sales of $425.8 million, up 24.4 percent compared with the same period a year ago. Acquisitions added revenue of $42.7 million in the quarter, or 12.5 percent. Excluding acquisitions, revenue was up 11.9 percent, driven primarily by increased demand in the off-highway, heavy truck and automotive sectors, and favorable currency.
Earnings before interest and taxes (EBIT) in the quarter were $32 million or 7.5 percent of sales, compared with a loss of $(8.2) million or (2.4) percent of sales for the same period a year ago. The increase in EBIT reflects the impact of higher volume, favorable manufacturing performance and the benefit of acquisitions, partially offset by unfavorable price/mix and higher logistics, material and SG&A costs. The current period also reflects lower pension-related and impairment and restructuring charges.
Excluding special items (detailed in the attached tables), adjusted EBIT in the quarter was $41.4 million or 9.7 percent of sales, compared with $28.8 million or 8.4 percent of sales in the fourth quarter last year.
Process Industries sales of $352.2 million increased 12.7 percent from the same period a year ago, driven primarily by strong demand in the industrial distribution and general industrial sectors, increased military marine revenue and favorable currency.
EBIT for the quarter was $55.6 million or 15.8 percent of sales, compared with EBIT of $25.8 million or 8.3 percent of sales for the same period a year ago. The increase in EBIT was driven by higher volume, favorable manufacturing performance and lower pension-related charges, partially offset by unfavorable price/mix and higher logistics and SG&A costs.
Excluding special items (detailed in the attached tables), adjusted EBIT in the quarter was $56.5 million or 16 percent of sales, compared with $47.1 million or 15.1 percent of sales in the fourth quarter last year.
2018 Outlook
The company expects 2018 revenue to be up approximately 9 to 10 percent in total versus 2017. This includes expected organic growth of 5 to 6 percent plus the benefit of acquisitions made during 2017 and favorable currency. Within its segments, the company estimates for full-year 2018:
Mobile Industries sales to be up approximately 9 to 11 percent, driven primarily by organic growth in the off-highway and heavy truck sectors, as well as the benefit of acquisitions and favorable currency.
Process Industries sales to be up approximately 8 to 10 percent, reflecting growth in the industrial distribution, services and general industrial sectors, and favorable currency.
"We enter 2018 with broad strength across our end markets," said Kyle. "We will continue to focus on serving our customers, developing innovative product solutions, operating with excellence and building a stronger Timken Company. We expect our execution combined with robust markets will result in another year of strong revenue and earnings growth with margin expansion."
Timken anticipates 2018 earnings per diluted share to range from $3.05 to $3.15 for the full year on a GAAP basis. Excluding special items (detailed in the attached tables), the company expects 2018 adjusted earnings per diluted share to range from $3.20 to $3.30.
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:
Wednesday, Feb. 7, 2018
11 a.m. Eastern Time
Live Dial-In: 800-289-0438 or 323-794-2423
(Call in 10 minutes prior to be included.)
Conference ID: Timken's 4Q Earnings Call
Conference Call Replay:
Replay Dial-In available through Feb. 21, 2018:
888-203-1112 or 719-457-0820
Replay Passcode: 5181556
