The Timken Company (NYSE: TKR; www.timken.com), a world leader in engineered bearings and power transmission products,today reported second-quarter 2019 sales of $1 billion, up 10.3 percent from the same period a year ago. The increase was primarily driven by the benefit of acquisitions and organic growth in the Process Industries segment, partially offset by unfavorable foreign currency translation.
In the second quarter, Timken posted net income of $92.5 million or $1.20 per diluted share, versus net income of $91 million or $1.16 per diluted share for the same period a year ago. The year-over-year increase was primarily driven by favorable price/mix and the benefit of acquisitions, offset partially by higher interest expense. The current period also included higher expenses related to restructuring, acquisitions and a legal accrual, while the prior period included a pension remeasurement gain.
Excluding special items (detailed in the attached tables), adjusted net income in the second quarter of 2019 was $97.9 million or $1.27 per diluted share, a record for the second quarter, versus adjusted net income of $87.2 million or $1.11 per diluted share for the same period in 2018.
Cash from operations for the quarter was $157.6 million, and free cash flow was $134.6 million. During the quarter, the company returned $36.6 million of capital to shareholders with the payment of its 388th consecutive quarterly dividend and the repurchase of approximately 320 thousand shares.
“We posted strong performance in the second quarter with double-digit revenue growth, higher earnings and operating margins and excellent cash generation compared to a year ago,” said Richard G. Kyle, Timken president and chief executive officer. “Our recent acquisitions are performing well and contributing to our strong results. We continue to win in the market place with our differentiated products, engineering innovation and industry-leading customer service. And we remain focused on executing our strategy and profitably growing our enterprise.”
Second-Quarter 2019 Segment Results
Mobile Industries sales of $493.7 million increased 0.9 percent compared with the same period a year ago. The increase was driven primarily by the benefit of acquisitions net of divestitures, organic growth in the aerospace sector and higher shipments in automotive, mostly offset by lower shipments in off-highway and heavy truck, and unfavorable currency.
Earnings before interest and taxes (EBIT) in the quarter were $59.1 million or 12 percent of sales, compared with EBIT of $54.5 million or 11.1 percent of sales for the same period a year ago. The increase in EBIT reflects the benefit of acquisitions net of divestitures and lower logistics costs, partially offset by lower volume.
Excluding special items (detailed in the attached tables), adjusted EBIT in the quarter was $59.7 million or 12.1 percent of sales, compared with $54.9 million or 11.2 percent of sales in the second quarter last year.
Process Industries reported sales of $506.3 million, up 21.4 percent from the same period a year ago. The increase was driven primarily by the benefit of acquisitions and organic growth in the wind energy, heavy industries and marine sectors, partially offset by unfavorable currency.
EBIT for the quarter was $103 million or 20.3 percent of sales, compared with EBIT of $90.6 million or 21.7 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 tariff costs and selling, general and administrative expenses. The current period also included acquisition-related charges.
Excluding special items (detailed in the attached tables), adjusted EBIT in the quarter was $107 million or 21.1 percent of sales, compared with $90.8 million or 21.8 percent of sales in the second quarter last year.
2019 Outlook
The company now expects 2019 revenue to be up approximately 7 to 9 percent in total versus 2018. This includes expected organic growth of 1½ to 3½ percent plus the benefit of acquisitions, partially offset by unfavorable foreign currency translation.
“While our organic growth rates have eased, the demand environment overall for Timken products and services supports our outlook for continued growth in the second half,” said Kyle. “Softness in some markets like off-highway is being offset by our outgrowth efforts and strength in other markets like wind, solar and aerospace. We are lowering our full-year outlook for both revenue and earnings to reflect a more cautious view. However, for the year, we expect to deliver solid revenue growth, record earnings per share and strong cash flow. We are confident in our ability to profitably grow the company, as we continue to demonstrate with our 2019 results.”
Timken now anticipates strong 2019 earnings per diluted share in the range of $4.55 to $4.75 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 $4.80 to $5.00.
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, July 31, 2019 |
| 11:00 a.m. Eastern Time | |
| Live Dial-In: 800-239-9838 | |
| or 323-794-2551 | |
| (Call in 10 minutes prior to be included.) | |
| Conference ID: Timken’s 2Q Earnings Call | |
| Conference Call Replay: | Replay Dial-In available through |
| August 14, 2019: | |
| 888-203-1112 or 719-457-0820 | |
| Replay Passcode: 7993365 | |
| Live Webcast: | http://investors.timken.com |
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