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Date: 2015-05-07

Timken maintaining search for acquisitions

Timken Co. will continue to examine potential acquisitions, company executives told stock analysts Thursday during a conference call.

The company has been making acquisitions since 2007, and stepped up activity in 2011 when it used that route to expand its power transmission business. Timken bought Revolvo, a U.K. operation, in December and was rumored in October to be among bidders for Emerson Electric Co.’s power transmission business.

Rich Kyle, president and chief executive officer, told analysts the company will continue to actively pursue acquisitions.

Timken’s management is “focused on it. We’re looking at a lot of things,” Kyle said, but added that the company has nothing to announce.

The topic of acquisitions came up as Kyle and Phil Fracassa, executive vice president and chief financial officer, reviewed Timken’s first quarter results.

At first blush, the numbers don’t look good, with Timken posting a loss of $135.2 million, or $1.54 per share, compared with net income of $60 million, or 64 cents per share, last year.

But the loss is due primarily to a non-cash charge of $215 million for the first quarter. The charge is related to Timken’s decision to purchase a group annuity contract from Prudential and transfer $575 million of retiree pension obligations.

Restructuring charges and currency exchange issues also contributed to the poor numbers.

Timken reported adjusted net income from continuing operations was $44.2 million, or 50 cents per share, comparable to the $47 million, or 50 cents per share, posted in the same period a year ago.

First quarter sales slipped 2 percent to $722.5 million, compared with $736.8 million last year.

Kyle said the company saw 3 percent sales growth before currency exchanges, even though the year began with softer than expected sales.

The process industries business saw 9 percent sales growth, excluding currency, finishing at $329.5 million, Kyle said. Mobile industries posted sales of $393 million, a 7 percent drop from last year.

Wind energy and military marine segments in process industries and rail in mobile industries led with improved sales, while the North American, Asian and European markets also posted gains. Declines in aerospace, agriculture and the automotive aftermarket hurt mobile industries sales, and the Latin America market lagged.

Despite the first quarter challenges, Timken remains confident over the long term, Kyle told analysts.

Timken adjusted its outlook for the coming year. It expects revenue will be down 4 percent compared to 2014, with currency exchange issues responsible for the decline.

Earnings per diluted share are expected to range from 60 cents to 70 cents. That includes $1.75 of the non-cash pension settlement charges and 20 cents per share of impairment and other restructuring charges, partially offset by 25 cents of income associated with discrete tax accrual adjustments. Excluding those items, the 2015 adjusted earnings per diluted share are expected to range from $2.30 to $2.40.
(Timken)


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