The Timken Co. has reported fourth-quarter 2016 sales of $655 million, down 8.3 percent from the same period a year ago. The company said these results reflect weakness across most end-markets and unfavorable currency, partially offset by the benefit of acquisitions.
In the fourth quarter, Timken posted net income of $24.1 million or 31 cents per diluted share, versus a net loss of $(35.7) million or $(44 cents) per basic share for the same period a year ago. The year-over-year improvement in net income was driven by lower pension settlement charges, CDSOA income1 and lower operating costs, partially offset by lower volume and unfavorable price/mix. The year-ago period also included a gain from the divestiture of the aerospace PMA business and higher discrete income tax benefits.
Excluding special items, adjusted net income was $36.7 million or 47 cents per diluted share. This compares with adjusted net income of $49 million or 59 cents per diluted share for the same period in 2015. The decline in adjusted net income reflects lower volume and unfavorable price/mix, partially offset by the benefit of SG&A cost reduction initiatives and lower material costs.
“We performed well in the fourth quarter, giving us a solid finish to the year,” said Richard Kyle, Timken president and CEO. “Despite the difficult market environment, we delivered historically strong earnings and cash flow in 2016, which is evidence of the structural improvements we’ve made to our business. We advanced our strategy on all fronts and continued to position the company for profitable growth and shareholder value creation over the long-term.”
Among the significant accomplishments during the quarter, the company acquired EDT Corp., a manufacturer of polymer housed units and stainless steel ball bearings used widely by the food and beverage industry. The company also returned $38 million in capital to shareholders through the repurchase of roughly 480,000 shares and the payment of its 378th consecutive quarterly dividend. Earlier this month, the Timken board of directors approved a new share repurchase authorization for up to 10 million shares, expiring Feb. 28, 2021. This replaces the prior authorization, which expired Jan. 31, 2017.
2016 Full-Year Results
For 2016, sales were $2.7 billion or 7 percent lower than 2015. The decrease was primarily driven by weaker demand across industrial end-markets and unfavorable currency, partially offset by growth in automotive and the net benefit of acquisitions and divestitures.
Net income was $152.6 million or $1.92 per diluted share for the year, versus a net loss of ($70.8) million or (84 cents) per basic share a year ago. The year-over-year increase in net income was driven by lower pension settlement charges, current year CDSOA income, as well as lower operating costs, partially offset by lower volume, unfavorable price/mix and currency. The year-ago period also included a gain from the divestiture of the aerospace PMA business and higher discrete income tax benefits.
Excluding special items, adjusted net income was $156.2 million or $1.97 per diluted share. This compares with $189.1 million or $2.21 per diluted share in 2015. The decline in adjusted net income reflects lower volume and unfavorable price/mix, partially offset by lower material, manufacturing and SG&A costs (including the benefit of cost reduction initiatives). Earnings per share also benefited from the repurchase of approximately 4 percent of the company’s outstanding shares in 2016.
2017 Outlook
The company expects 2017 revenue to be relatively flat compared with 2016. This includes a negative currency impact of roughly 1.5 percent, based on Dec. 31, 2016, exchange rates.
