The Timken Company, a world leader in engineered bearings and power transmission products, has reported first-quarter 2019 sales of $979.7 million, up 10.9% from the same period a year ago. The increase was primarily driven by organic growth in the Process Industries segment and the benefit of acquisitions, partially offset by unfavorable foreign currency translation.
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, 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," says 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; and
- 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% 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% of sales, compared with EBIT of $51.1 million or 10.5% 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, adjusted EBIT in the quarter was $66 million or 13.2% of sales, compared with $51.8 million or 10.6% of sales in the first quarter last year.
Process Industries reported sales of $479.7 million, up 21.6% from the same period a year ago. Acquisitions added revenue of $52.4 million in the quarter, or 13.3%. Excluding acquisitions, revenue was up 8.3% 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% of sales, compared with EBIT of $81.6 million or 20.7% 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, adjusted EBIT in the quarter was $109.8 million or 22.9% of sales, compared with $81.6 million or 20.7% of sales in the first quarter last year.
The company expects 2019 revenue to be up approximately 8-10% in total versus 2018. This includes expected organic growth of 3-5% 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," says 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, the company expects record 2019 adjusted earnings per diluted share ranging from $5.15-$5.35.