- Sales of $1.08 billion in the fourth quarter, up 7 percent in total and 10 percent organically from last year
- Fourth-quarter EPS of $1.32; adjusted EPS of $1.22
- Record full-year 2022 EPS of $5.48; record adjusted EPS of $6.02
- Starting in 2023, adjusted EPS will be revised to exclude acquisition intangible amortization expense
- Company provides initial estimate for 2023 EPS of $5.80–$6.40, with adjusted EPS of $6.50–$7.10
The Timken Company, a global leader in engineered bearings and industrial motion products, reported fourth-quarter 2022 sales of $1.08 billion, up 7.4 percent from the same period a year ago. The increase was driven by strong organic growth across most end-market sectors, and the favorable impact of acquisitions (net of divestitures), partially offset by unfavorable foreign currency translation. Organically, fourth-quarter sales were up 10.2 percent versus the prior year, with volume and pricing both contributing meaningfully.
Timken posted net income in the fourth quarter of $97.2 million or $1.32 per diluted share. This compares to net income of $62.9 million or $0.82 per diluted share for the same period a year ago. The year-on-year increase in net income primarily reflects the impact of positive price/mix and higher volume, partially offset by higher manufacturing and SG&A costs, and higher interest expense.
Excluding special items, adjusted net income in the fourth quarter was $89.6 million or $1.22 per diluted share, a record for the fourth quarter. This compares to adjusted net income of $59.6 million or $0.78 per diluted share for the same period in 2021.
Net cash from operations for the fourth quarter was $241.5 million, and free cash flow was $185.6 million. During the quarter, the company returned $40.8 million of cash to shareholders through dividends and the repurchase of 250 thousand shares of company stock. Also, among recent developments, Timken acquired the assets of American Roller Bearing Co., which will enhance the company’s strong market position in engineered bearings. In addition, Timken announced an agreement to acquire Nadella Group, which will expand the company’s linear motion portfolio in attractive market sectors. In total, these two businesses generated revenue of approximately $140 million in 2022.
“We delivered excellent results in the fourth quarter, driven by strong execution and improved price-cost performance,” said Richard G. Kyle, Timken president and chief executive officer. “In 2022, Timken continued to grow its position as a diversified industrial leader and delivered record revenue and earnings per share with solid operating margin expansion. We have the right strategy, the right team and the right portfolio in place to continue our positive momentum heading into 2023.”
2022 Full-Year Results and Highlights
For 2022, sales were $4.5 billion, up 8.8 percent compared with 2021. The increase was primarily driven by organic growth across most end-market sectors, as well as the impact of higher pricing and acquisitions, partially offset by unfavorable foreign currency translation. Organically, 2022 sales were up 11.6 percent versus 2021.
Net income was $407.4 million or a record $5.48 per diluted share for the year, compared with net income of $369.1 million or $4.79 per diluted share a year ago. The year-over-year increase primarily reflects positive price/mix and the impact of higher volume, partially offset by higher operating costs and interest expense, a higher tax rate, and the net unfavorable impact of impairment charges and other special items (detailed in the attached tables).
Excluding special items, adjusted net income was $447.8 million or a record $6.02 per diluted share in 2022. This compares with adjusted net income of $363.4 million or adjusted earnings of $4.72 per diluted share in 2021.
Net cash from operations for the full year was $463.8 million, and free cash flow was $285.4 million. Timken ended the year with a strong balance sheet; net debt to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was 1.9 times as of December 31, 2022.
Among other highlights in 2022, the company:
- Bolstered its engineered bearings portfolio with the acquisition of GGB Bearings, a global supplier of highly engineered and customized plain bearings and a leader in metal polymer bearings;
- Expanded its robotics and automation offering in attractive end market sectors with the acquisition of Spinea, a technology leader in highly engineered cycloidal reduction gears and actuators;
- Repurchased 3.25 million shares, or over 4 percent of outstanding shares, and increased its quarterly dividend. In 2022, the company achieved 100 years of paying quarterly dividends and marked its ninth consecutive year of higher annual dividends. In total, Timken returned $303 million to shareholders during the year through dividends and share repurchases; and
- Was named one of America’s Most Responsible Companies for the third straight year by Newsweek magazine and Statista Inc. This recognition is a testament to Timken’s strong core values and commitment to corporate social responsibility.
Fourth-Quarter 2022 Segment Results
Process Industries sales of $586.4 million increased 11.1 percent from the same period a year ago. The increase was driven by organic growth across all sectors led by distribution, heavy industries and general industrial, and the favorable impact of acquisitions (net), partially offset by unfavorable foreign currency translation.
EBITDA for the quarter was $137.1 million or 23.4 percent of sales, compared with EBITDA of $104.4 million or 19.8 percent of sales for the same period a year ago. The increase in EBITDA was driven primarily by the impact of positive price/mix and higher volume, partially offset by higher manufacturing and SG&A costs and the unfavorable impact of currency.
Excluding special items (detailed in the attached tables), adjusted EBITDA in the quarter was $142.9 million or 24.4 percent of sales, compared with $105.3 million or 20.0 percent of sales in the fourth quarter last year.
Mobile Industries sales of $495.6 million increased 3.3 percent compared with the same period a year ago. The increase was driven by organic growth across most sectors led by off-highway and rail, partially offset by unfavorable foreign currency translation.
EBITDA for the quarter was $52.9 million or 10.7 percent of sales, compared with EBITDA of $40.0 million or 8.3 percent of sales for the same period a year ago. The increase in EBITDA was driven primarily by positive price/mix, partially offset by higher manufacturing and SG&A costs.
Excluding special items (detailed in the attached tables), adjusted EBITDA in the quarter was $56.2 million or 11.3 percent of sales, compared with $41.3 million or 8.6 percent of sales in the fourth quarter last year.
2023 Outlook
Going forward, Timken is revising its adjusted earnings and adjusted earnings per share calculations to exclude acquisition intangible amortization expense. Amortization expense has grown in recent years driven by acquisitions, and the company believes this change will better reflect its core operating earnings and improve comparability versus peers.
Timken is setting an initial outlook for 2023 earnings per diluted share in the range of $5.80 to $6.40. Excluding acquisition intangible amortization expense and other special items, the company estimates that 2023 adjusted earnings per diluted share will be in the range of $6.50 to $7.10. The company expects 2023 revenue to be up approximately 6 percent in total at the midpoint from 2022.
“We are planning for 2023 to be another year of growth for The Timken Company,” said Kyle. “We expect to benefit from favorable price-cost, organic outgrowth initiatives, improving operational execution and the impact of our recent acquisitions. While uncertainty remains elevated, we continue to see healthy demand and the year is already off to a strong start.”
Kyle continued, “We are projecting a sizeable step-up in operating cash flow this year and we will continue to create value through our disciplined approach to capital allocation. Our team is excited about the opportunities in front of us and confident in our strategy to drive profitable growth and strong shareholder returns over time.”
