- Posted sales of $980 million, up 11 percent from last year
- Delivered strong earnings per diluted share of $1.19 on a GAAP basis, with record adjusted earnings per diluted share of $1.35
- Generated seasonally strong cash from operations of $52 million and free cash flow of $36 million
- Raises earnings outlook; now expects 2019 GAAP earnings per diluted share of $4.95 to $5.15 and adjusted earnings per diluted share of $5.15 to $5.35
In the first quarter, Timken posted net income of $91.9 million or $1.19 per diluted share, versus net income of $80.2 million or $1.02 per diluted share for the same period a year ago. The year-over-year increase was driven by higher volume, favorable price/mix, improved manufacturing performance, lower selling, general and administrative (SG&A) costs, and the benefit of acquisitions, partially offset by higher material costs. The current period also included higher interest expense, as well as higher income tax expense driven by discrete tax adjustments in the current quarter.
Excluding special items (detailed in the attached tables), adjusted net income in the first quarter of 2019 was $104.2 million or a record $1.35 per diluted share, versus adjusted net income of $80 million or $1.01 per diluted share for the same period in 2018. Cash from operations for the quarter was $52.3 million, and free cash flow was $36.1 million.
“We had an excellent start to the year, achieving strong revenue growth, margin expansion and record adjusted earnings per share in the first quarter,” said Richard G. Kyle, Timken president and chief executive officer. “We continue to deliver profitable growth as a result of our focused strategy, strong operating performance and diverse market and product mix. Our recent acquisition of Diamond Chain further enhances our power transmission portfolio, which now accounts for roughly one-third of company revenues. Whether through innovation from within or acquisition, we are profitably growing Timken’s industrial leadership position to create shareholder value that endures.”
Among recent developments, the company:
- Earned recognition for the ninth time as one of the World’s Most Ethical Companies by Ethisphere, a global leader in defining and advancing the standards of ethical business practices that fuel corporate character, marketplace trust and business success;
- Returned $30 million of capital to shareholders during the quarter with the payment of its 387th consecutive quarterly dividend and the repurchase of approximately 210 thousand shares;
- Completed the acquisition of Diamond Chain, a leading supplier of high-performance roller chains for industrial markets, and an excellent strategic fit with Timken’s existing Drives chain business.
First-Quarter 2019 Segment Results
Mobile Industries sales of $500 million increased 2.4 percent compared with the same period a year ago, driven primarily by organic growth in the aerospace sector and the benefit of acquisitions net of divestitures, partially offset by unfavorable currency.
Earnings before interest and taxes (EBIT) in the quarter were $61.4 million or 12.3 percent of sales, compared with EBIT of $51.1 million or 10.5 percent of sales for the same period a year ago. The increase in EBIT reflects favorable price/mix, improved manufacturing performance, lower logistics and SG&A costs, and the benefit of acquisitions net of divestitures, partially offset by higher material costs. The current period also includes a $6 million charge for damage resulting from a flood that occurred during the quarter at one of our U.S. warehouses.
Excluding special items (detailed in the attached tables), adjusted EBIT in the quarter was $66 million or 13.2 percent of sales, compared with $51.8 million or 10.6 percent of sales in the first quarter last year.
Process Industries reported sales of $479.7 million, up 21.6 percent from the same period a year ago. Acquisitions added revenue of $52.4 million in the quarter, or 13.3 percent. Excluding acquisitions, revenue was up 8.3 percent with broad organic growth across most sectors led by wind energy, industrial distribution and heavy industries, partially offset by unfavorable currency.
EBIT for the quarter was $106.2 million or 22.1 percent of sales, compared with EBIT of $81.6 million or 20.7 percent of sales for the same period a year ago. The increase in EBIT was driven by higher volume, favorable price/mix and the benefit of acquisitions, partially offset by higher material costs. The current period also included acquisition-related charges.
Excluding special items (detailed in the attached tables), adjusted EBIT in the quarter was $109.8 million or 22.9 percent of sales, compared with $81.6 million or 20.7 percent of sales in the first quarter last year.
The company expects 2019 revenue to be up approximately 8 to 10 percent in total versus 2018. This includes expected organic growth of 3 to 5 percent plus the benefit of acquisitions including the recently completed Diamond Chain acquisition, partially offset by unfavorable foreign currency translation.
“We continue to see growing demand across many industrial sectors,” said Kyle. “We expect to deliver solid revenue growth, expanded margins, record earnings and strong cash flow in 2019, further demonstrating the improvements in the company’s market position and earnings power. We remain focused on winning with customers, driving operational excellence and investing for growth, all of which will generate significant value for shareholders over time.”
Timken now anticipates increased 2019 earnings per diluted share in the range of $4.95 to $5.15 for the full year on a GAAP basis. Excluding special items (detailed in the attached tables), the company expects record 2019 adjusted earnings per diluted share ranging from $5.15 to $5.35.
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.
Wednesday, May 1, 2019
11:00 a.m. Eastern Time
Live Dial-In: 800-263-0877 or 323-794-2094
(Call in 10 minutes prior to be included.)
Conference ID: Timken’s 1Q Earnings Call
Conference Call Replay:
Replay Dial-In available through
May 15, 2019:
888-203-1112 or 719-457-0820
Replay Passcode: 2572866
About The Timken Company
The Timken Company 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 $3.6 billion in sales in 2018 and employs more than 18,000 people globally, operating from 35 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 “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 2019; 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 material and energy costs; the impact of changes to the company’s accounting methods; 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; 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.