0000098362-17-000041.txt : 20170424 0000098362-17-000041.hdr.sgml : 20170424 20170424170848 ACCESSION NUMBER: 0000098362-17-000041 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20170424 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20170424 DATE AS OF CHANGE: 20170424 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIMKEN CO CENTRAL INDEX KEY: 0000098362 STANDARD INDUSTRIAL CLASSIFICATION: BALL & ROLLER BEARINGS [3562] IRS NUMBER: 340577130 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01169 FILM NUMBER: 17778891 BUSINESS ADDRESS: STREET 1: 4500 MT. PLEASANT ST. NW CITY: NORTH CANTON STATE: OH ZIP: 44720-5450 BUSINESS PHONE: (234) 262-3000 MAIL ADDRESS: STREET 1: 4500 MT. PLEASANT ST. NW CITY: NORTH CANTON STATE: OH ZIP: 44720-5450 FORMER COMPANY: FORMER CONFORMED NAME: TIMKEN ROLLER BEARING CO DATE OF NAME CHANGE: 19710304 8-K 1 tkrq120178-kxmtm.htm 8-K Document


SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
April 24, 2017
THE TIMKEN COMPANY
(Exact Name of Registrant as Specified in its Charter)

Ohio
(State or Other Jurisdiction of Incorporation)

1-1169
 
34-0577130
(Commission File Number)
 
(I.R.S. Employer Identification No.)
4500 Mt. Pleasant St. NW, North Canton, Ohio 44720-5450

(Address of Principal Executive Offices) (Zip Code)
(234) 262-3000
(Registrant's Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions.
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in as
defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the
Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use
the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. o




Item 2.02     Results of Operations and Financial Condition.
The Timken Company (the “Company”) has implemented changes to its accounting principles for recognizing actuarial gains and losses and returns on plan assets for the Company's defined benefit pension and other postretirement benefit plans effective January 1, 2017.

Prior to 2017, the Company amortized, as a component of pension and other postretirement expense, unrecognized actuarial gains and losses (included within accumulated other comprehensive income (loss)) over the average remaining service period of active plan participants, or average remaining life expectancy of inactive plan participants when all or almost all of individual plan participants are inactive. The Company also historically calculated the market-related value of plan assets based on a five-year market adjustment. Under the new principles, actuarial gains and losses will be immediately recognized through net periodic benefit cost, upon the annual remeasurement in the fourth quarter, or on an interim basis if specific events trigger a remeasurement. In addition, the Company has changed its accounting policy for measuring the market-related value of plan assets from a calculated amount (based on a five-year smoothing of asset returns) to fair value.
 
Attached as Exhibit 99.1 to this Current Report on Form 8-K is certain unaudited 2016 financial information (quarterly and annual) presented as if the Company had reported its financial results for the respective periods applying the new accounting principle.

This information shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01    Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.
 
Description
99.1
 
The Timken Company 2016 financial information (quarterly and annual)


      

    





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
THE TIMKEN COMPANY
 
 
 
 
 
 
By:
 /s/ William R. Burkhart
 
 
 
William R. Burkhart
 
 
 
Executive Vice President, General Counsel
and Secretary
Date:
 
April 24, 2017
 






EXHIBIT INDEX
Exhibit No.
 
Description
99.1
 
The Timken Company 2016 financial information (quarterly and annual)



 EX-99.1 2 tkrq12017mtmexhibit991.htm EXHIBIT 99.1 Exhibit
TIMKEN


The Timken Company
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Impact of Pension and OPEB Accounting Principle Change on Condensed Consolidated Statement of Income
(Dollars in millions) (Unaudited)
Three Months Ended
March 31, 2016
 
Three Months Ended
June 30, 2016
 
Three Months Ended
September 30, 2016
 
Three Months Ended
December 31, 2016
 
Twelve Months Ended
December 31, 2016
 
As Originally Reported
Effect of Change(1)
Revised Results
 
As Originally Reported
Effect of Change(2)
Revised Results
 
As Originally Reported
Effect of Change(2)
Revised Results
 
As Originally Reported
Effect of Change(3)
Revised Results
 
As Originally Reported
Effect of Change(3)
Revised Results
Net sales
$
684.0

$
—

$
684.0

 
$
673.6

$
—

$
673.6

 
$
657.4

$
—

$
657.4

 
$
654.8

$
—

$
654.8

 
$
2,669.8

$
—

$
2,669.8

Cost of products sold
503.1

(2.2
)
500.9

 
491.3

(2.2
)
489.1

 
489.9

(2.2
)
487.7

 
490.7

32.9

523.6

 
1,975.0

26.3

2,001.3

  Gross Profit
180.9

2.2

183.1

 
182.3

2.2

184.5

 
167.5

2.2

169.7

 
164.1

(32.9
)
131.2

 
694.8

(26.3
)
668.5

Selling, general & administrative expenses (SG&A)
118.3

(2.2
)
116.1

 
110.2

(2.2
)
108.0

 
109.5

(2.3
)
107.2

 
112.0

27.4

139.4

 
450.0

20.7

470.7

Impairment and restructuring charges
10.5

—

10.5

 
2.9

—

2.9

 
5.3

—

5.3

 
3.0

—

3.0

 
21.7

—

21.7

Pension settlement charges
1.2

—

1.2

 
0.4

(0.4
)
—

 
10.3

(10.2
)
0.1

 
16.2

(15.9
)
0.3

 
28.1

(26.5
)
1.6

  Operating Income (Loss)
50.9

4.4

55.3

 
68.8

4.8

73.6

 
42.4

14.7

57.1

 
32.9

(44.4
)
(11.5
)
 
195.0

(20.5
)
174.5

Continued Dumping and Subsidy Offset Act income (expense), net (4)
47.7

—

47.7

 
6.1

—

6.1

 
(0.2
)
—

(0.2
)
 
6.0

—

6.0

 
59.6

—

59.6

Other (expense) income, net
—

—

—

 
(1.7
)
—

(1.7
)
 
(0.1
)
—

(0.1
)
 
0.9

—

0.9

 
(0.9
)
—

(0.9
)
  Earnings (Loss) Before Interest
  and Taxes (EBIT) (5)
98.6

4.4

103.0

 
73.2

4.8

78.0

 
42.1

14.7

56.8

 
39.8

(44.4
)
(4.6
)
 
253.7

(20.5
)
233.2

Interest expense, net
(8.1
)
—

(8.1
)
 
(8.3
)
—

(8.3
)
 
(7.6
)
—

(7.6
)
 
(7.6
)
—

(7.6
)
 
(31.6
)
—

(31.6
)
  Income (Loss) Before Income
  Taxes
90.5

4.4

94.9

 
64.9

4.8

69.7

 
34.5

14.7

49.2

 
32.2

(44.4
)
(12.2
)
 
222.1

(20.5
)
201.6

Provision (benefit) for income taxes
27.6

1.5

29.1

 
20.0

1.5

21.5

 
13.5

1.7

15.2

 
8.1

(13.4
)
(5.3
)
 
69.2

(8.7
)
60.5

  Net Income (Loss)
62.9

2.9

65.8

 
44.9

3.3

48.2

 
21.0

13.0

34.0

 
24.1

(31.0
)
(6.9
)
 
152.9

(11.8
)
141.1

Less: Net Income (Loss) Attributable to Noncontrolling Interest
(0.1
)
—

(0.1
)
 
—

—

—

 
0.4

—

0.4

 
—

—

—

 
0.3

—

0.3

  Net Income (Loss) Attributable to
  The Timken Company
$
63.0

$
2.9

$
65.9

 
$
44.9

$
3.3

$
48.2

 
$
20.6

$
13.0

$
33.6

 
$
24.1

$
(31.0
)
$
(6.9
)
 
$
152.6

$
(11.8
)
$
140.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income (Loss) per Common Share Attributable to The Timken Company Common Shareholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Basic Earnings (Loss) Per Share
$
0.79

$
0.04

$
0.83

 
$
0.57

$
0.04

$
0.61

 
$
0.26

$
0.17

$
0.43

 
$
0.31

$
(0.40
)
$
(0.09
)
 
$
1.94

$
(0.15
)
$
1.79

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Diluted Earnings (Loss) Per Share
$
0.78

$
0.04

$
0.82

 
$
0.57

$
0.04

$
0.61

 
$
0.26

$
0.17

$
0.43

 
$
0.31

$
(0.40
)
$
(0.09
)
 
$
1.92

$
(0.14
)
$
1.78

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Shares Outstanding
79,769,761

 
79,769,761

 
78,671,509

 
78,671,509

 
79,935,783

 
79,935,783

 
77,599,869

 
77,599,869

 
78,516,029

 
78,516,029

Average Shares Outstanding - assuming dilution
80,437,533

 
80,437,533

 
79,312,774

 
79,312,774

 
78,617,476

 
78,617,476

 
78,482,319

 
78,482,319

 
79,234,324

 
79,234,324

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) The effect of the change reflects adjustments to eliminate amortization of actuarial gains and losses.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) The effect of the change reflects adjustments to eliminate amortization of actuarial gains and losses and the elimination of the portion previously recognized as pension settlement charges.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(3) The effect of the change reflects adjustments to eliminate amortization of actuarial gains and losses, the elimination of the portion previously recognized as pension settlement charges and the recognition of mark to market remeasurement losses in the fourth quarter.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(4) U.S. Continued Dumping and Subsidy Offset Act ("CDSOA") income (expense), net, represents the amount of funds received by the Company from monies collected by U.S. Customs and Border Protection ("U.S. Customs") on entries of merchandise subject to anti-dumping orders that entered the U.S. prior to October 1, 2007.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(5) EBIT is a non-GAAP measure defined as operating income plus other income (expense). EBIT is an important financial measure used in the management of the business, including decisions concerning the allocation of resources and assessment of performance. Management believes that reporting EBIT is useful to investors as this measure is representative of the Company's core operations.
 


TIMKEN


BUSINESS SEGMENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
Three Months Ended
March 31, 2016
 
Three Months Ended
June 30, 2016
 
Three Months Ended
September 30, 2016
 
Three Months Ended
December 31, 2016
 
Twelve Months Ended
December 31, 2016
(Dollars in millions)
As Originally Reported
Effect of Change(1)
Revised Results
 
As Originally Reported
Effect of Change(2)
Revised Results
 
As Originally Reported
Effect of Change(2)
Revised Results
 
As Originally Reported
Effect of Change(3)
Revised Results
 
As Originally Reported
Effect of Change(3)
Revised Results
Mobile Industries
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales to external customers
383.2

—

383.2

 
367.8

—

367.8

 
353.1

—

353.1

 
342.3

—

342.3

 
1,446.4

—

1,446.4

Earnings (loss) before interest and taxes (EBIT) (4)
30.2

1.8

32.0

 
35.3

2.1

37.4

 
24.1

1.8

25.9

 
19.2

(27.4
)
(8.2
)
 
108.8

(21.7
)
87.1

EBIT Margin (4)
7.9
%
—

8.4
%
 
9.6
%
—

10.2
%
 
6.8
%
—

7.3
%
 
5.6
%
—

(2.4
)%
 
7.5
%
—

6.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Process Industries
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales to external customers
300.8

—

300.8

 
305.8

—

305.8

 
304.3

—

304.3

 
312.5

—

312.5

 
1,223.4

—

1,223.4

Earnings before interest and taxes (EBIT) (4)
32.6

1.2

33.8

 
46.7

1.2

47.9

 
40.7

1.3

42.0

 
43.2

(17.4
)
25.8

 
163.2

(13.7
)
149.5

EBIT Margin (4)
10.8
%
—

11.2
%
 
15.3
%
—

15.7
%
 
13.4
%
—

13.8
%
 
13.8
%
—

8.3
 %
 
13.3
%
—

12.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate expense
(10.7
)
1.4

(9.3
)
 
(14.5
)
1.1

(13.4
)
 
(12.2
)
1.4

(10.8
)
 
(12.4
)
(15.5
)
(27.9
)
 
(49.8
)
(11.6
)
(61.4
)
Pension settlement charges(5)
(1.2
)
—

(1.2
)
 
(0.4
)
0.4

—

 
(10.3
)
10.2

(0.1
)
 
(16.2
)
15.9

(0.3
)
 
(28.1
)
26.5

(1.6
)
CDSOA income (expense), net(6)
47.7

—

47.7

 
6.1

—

6.1

 
(0.2
)
—

(0.2
)
 
6.0

—

6.0

 
59.6

—

59.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales to external customers
684.0

—

684.0

 
673.6

—

673.6

 
657.4

—

657.4

 
654.8

—

654.8

 
2,669.8

—

2,669.8

Earnings (loss) before interest and taxes (EBIT) (4)
98.6

4.4

103.0

 
73.2

4.8

78.0

 
42.1

14.7

56.8

 
39.8

(44.4
)
(4.6
)
 
253.7

(20.5
)
233.2

EBIT Margin (4)
14.4
%
0.7
%
15.1
%
 
10.9
%
0.7
%
11.6
%
 
6.4
%
2.2
%
8.6
%
 
6.1
%
(6.8
)%
(0.7
)%
 
9.5
%
(0.8
)%
8.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) The effect of the change reflects adjustments to eliminate amortization of actuarial gains and losses.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) The effect of the change reflects adjustments to eliminate amortization of actuarial gains and losses and the elimination of the portion previously recognized as pension settlement charges.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(3) The effect of the change reflects adjustments to eliminate amortization of actuarial gains and losses, the elimination of the portion previously recognized as pension settlement charges and the recognition of mark to market remeasurement losses in the fourth quarter.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(4) EBIT is a non-GAAP measure defined as operating income plus other income (expense). EBIT Margin is a non-GAAP measure defined as EBIT as a percentage of net sales. EBIT and EBIT Margin are important financial measures used in the management of the business, including decisions concerning the allocation of resources and assessment of performance.  Management believes that reporting EBIT and EBIT Margin is useful to investors as these measures are representative of the Company's core operations of the segments and Company, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(5) Pension settlement charges in 2016 primarily related to lump sum distributions to new retirees, the purchase of a group annuity contract from The Canada Life Assurance Company ("Canada Life"), and lump-sum distributions to deferred vested participants.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(6) CDSOA income represents the amount of funds received by the Company from monies collected by U.S. Customs on entries of merchandise subject to anti-dumping orders that entered the U.S. prior to October 1, 2007.


TIMKEN


Reconciliation to Net Income Attributable to The Timken Company, After Adjustments, to GAAP Net Income Attributable to The Timken Company and Adjusted Earnings Per Share to GAAP Earnings Per Share:
 
The following reconciliation is provided as additional relevant information about the Company's performance deemed useful to investors.  Management believes that non-GAAP measures of adjusted net income and adjusted diluted earnings per share are important financial measures used in the management of the business, including decisions concerning the allocation of resources and assessment of performance. Management believes that reporting adjusted net income and adjusted diluted earnings per share is useful to investors as these measures are representative of the Company's core operations. 

(Dollars in millions) (Unaudited)
Three Months Ended
March 31, 2016
 
Three Months Ended
June 30, 2016
 
Three Months Ended
September 30, 2016
 
Three Months Ended
December 31, 2016
 
Twelve Months Ended
December 31, 2016
 
As Originally Reported
EPS
Revised Results
EPS
 
As Originally Reported
EPS
Revised Results
EPS
 
As Originally Reported
EPS
Revised Results
EPS
 
As Originally Reported
EPS
Revised Results
EPS
 
As Originally Reported
EPS
Revised Results
EPS
Net Income (Loss) Attributable to The Timken Company
$
63.0

$
0.78

$
65.9

$
0.82

 
$
44.9

$
0.57

$
48.2

$
0.61

 
$
20.6

$
0.26

$
33.6

$
0.43

 
$
24.1

$
0.31

$
(6.9
)
$
(0.09
)
 
$
152.6

$
1.92

$
140.8

$
1.78

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments:(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Pension settlement charges(2)
$
1.2

 
$
1.2

 
 
$
0.4

 
$
—

 
 
$
10.3

 
$
0.1

 
 
$
16.2

 
$
0.3

 
 
$
28.1

 
$
1.6

 
  Impairment and restructuring charges(3)
10.7

 
10.7

 
 
3.4

 
3.4

 
 
7.3

 
7.3

 
 
6.6

 
6.6

 
 
28.0

 
28.0

 
  Acquisition related charges(4)
—

 
—

 
 
0.8

 
0.8

 
 
2.5

 
2.5

 
 
0.9

 
0.9

 
 
4.2

 
4.2

 
  CDSOA income (expense), net(5)
(47.7
)
 
(47.7
)
 
 
(6.1
)
 
(6.1
)
 
 
0.2

 
0.2

 
 
(6.0
)
 
(6.0
)
 
 
(59.6
)
 
(59.6
)
 
  Health care plan modification costs(6)
—

 
—

 
 
—

 
—

 
 
—

 
—

 
 
2.9

 
2.9

 
 
2.9

 
2.9

 
  (Gain) loss on dissolution/divestment of subsidiary
(1.4
)
 
(1.4
)
 
 
—

 
—

 
 
0.9

 
0.9

 
 
—

 
—

 
 
(0.5
)
 
(0.5
)
 
   Mark-to-market remeasurement losses(7)
—

 
—

 
 
—

 
—

 
 
—

 
—

 
 
—

 
65.4

 
 
—

 
65.4

 
  Provision (benefit) for income taxes(8)
11.1

 
11.2

 
 
0.3

 
0.5

 
 
(2.9
)
 
(2.5
)
 
 
(8.0
)
 
(23.0
)
 
 
0.5

 
(13.8
)
 
       Total Adjustments:
(26.1
)
(0.32
)
(26.0
)
(0.32
)
 
(1.2
)
(0.02
)
(1.4
)
(0.02
)
 
18.3

0.23

8.5

0.10

 
12.6

0.16

47.1

0.60

 
3.6

0.05

28.2

0.35

Adjusted Net Income from The Timken Company
$
36.9

$
0.46

$
39.9

$
0.50

 
$
43.7

$
0.55

$
46.8

$
0.59

 
$
38.9

$
0.49

$
42.1

$
0.53

 
$
36.7

$
0.47

$
40.2

$
0.51

 
$
156.2

$
1.97

$
169.0

$
2.13

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Adjustments are pre-tax, with net tax provision (benefit) listed separately.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Pension settlement charges in 2016 primarily related to lump sum distributions to new retirees, the purchase of a group annuity contract from Canada Life, and lump-sum distributions to deferred vested participants.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(3) Impairment and restructuring charges, including items recorded in cost of products sold, related to plant closures, the rationalization of certain plants and severance related to cost reduction initiatives. The Company re-assesses its operating footprint and makes adjustments as needed that result in restructuring charges.  However, management believes these actions are not representative of the Company’s core operations. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(4) Acquisition related charges in 2016 related to the acquisition of Lovejoy, Inc. ("Lovejoy") and EDT Corp. ("EDT"), including one-time transaction costs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(5) CDSOA income represents the amount of funds received by the Company from monies collected by U.S. Customs on entries of merchandise subject to anti-dumping orders that entered the U.S. prior to October 1, 2007.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(6) Health care plan modification costs represent one-time charges associated with a redesign in medical insurance options available for active associates. In connection with the redesign, the Company elected to pay certain unused reimbursement account balances to associates impacted by the change in available options.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(7) Mark-to-market remeasurement losses represent actuarial losses that resulted from the remeasurement of pension plan assets and obligations as a result of changes in assumptions. The Company recognizes actuarial (gains) and losses through earnings in connection with the annual remeasurement in the fourth quarter, or on an interim basis if specific events trigger a remeasurement.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(8) Provision (benefit) for income taxes includes the net tax impact on pre-tax adjustments, the impact of discrete tax items recorded during the respective periods, as well as adjustments to reflect the use of one overall effective tax rate on adjusted pre-tax income in interim periods.


TIMKEN


Reconciliation of EBIT Margin, After Adjustments, to Net Income as a Percentage of Sales and EBIT, After Adjustments, to Net Income:
The following reconciliation is provided as additional relevant information about the Company's performance deemed useful to investors.  Management believes consolidated earnings (loss) before interest and taxes (EBIT) is a non-GAAP measure that is useful to investors as it is representative of the Company's performance and that it is appropriate to compare GAAP net income (loss) to consolidated EBIT. Management also believes that non-GAAP measures of adjusted EBIT and adjusted EBIT margin are useful to investors as they are representative of the Company's core operations and are used in the management of the business, including decisions concerning the allocation of resources and assessment of performance.

(Dollars in millions) (Unaudited)
Three Months Ended
March 31, 2016
 
Three Months Ended
June 30, 2016
 
Three Months Ended
September 30, 2016
 
Three Months Ended
December 31, 2016
 
Twelve Months Ended
December 31, 2016
 
As Originally Reported
% of Net Sales
Revised Results
% of Net Sales
 
As Originally Reported
% of Net Sales
Revised Results
% of Net Sales
 
As Originally Reported
% of Net Sales
Revised Results
% of Net Sales
 
As Originally Reported
% of Net Sales
Revised Results
% of Net Sales
 
As Originally Reported
% of Net Sales
Revised Results
% of Net Sales
Net Income (Loss)
$
62.9

9.2
 %
$
65.8

9.6
 %
 
$
44.9

6.7
 %
$
48.2

7.2
 %
 
$
21.0

3.2
 %
$
34.0

5.2
 %
 
$
24.1

3.7
 %
$
(6.9
)
(1.1
)%
 
$
152.9

5.7
 %
$
141.1

5.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision (benefit) for income taxes
27.6

4.0
 %
29.1

4.2
 %
 
20.0

3.0
 %
21.5

3.2
 %
 
13.5

2.1
 %
15.2

2.3
 %
 
8.1

1.2
 %
(5.3
)
(0.8
)%
 
69.2

2.6
 %
60.5

2.3
 %
Interest expense
8.4

1.2
 %
8.4

1.2
 %
 
8.7

1.3
 %
8.7

1.3
 %
 
8.0

1.2
 %
8.0

1.2
 %
 
8.4

1.3
 %
8.4

1.3
 %
 
33.5

1.3
 %
33.5

1.2
 %
Interest income
(0.3
)
—
 %
(0.3
)
—
 %
 
(0.4
)
—
 %
(0.4
)
(0.1
)%
 
(0.4
)
(0.1
)%
(0.4
)
(0.1
)%
 
(0.8
)
(0.1
)%
(0.8
)
(0.1
)%
 
(1.9
)
(0.1
)%
(1.9
)
(0.1
)%
Consolidated EBIT
$
98.6

14.4
 %
$
103.0

15.0
 %
 
$
73.2

10.9
 %
$
78.0

11.6
 %
 
$
42.1

6.4
 %
$
56.8

8.6
 %
 
$
39.8

6.1
 %
$
(4.6
)
(0.7
)%
 
$
253.7

9.5
 %
$
233.2

8.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Pension settlement
  charges(1)
$
1.2

0.2
 %
$
1.2

0.2
 %
 
$
0.4

—
 %
$
—

—
 %
 
$
10.3

1.6
 %
$
0.1

—
 %
 
$
16.2

2.5
 %
$
0.3

—
 %
 
$
28.1

1.0
 %
$
1.6

0.1
 %
  Impairment and
  restructuring charges(2)
10.7

1.6
 %
10.7

1.6
 %
 
3.4

0.5
 %
3.4

0.5
 %
 
7.3

1.1
 %
7.3

1.1
 %
 
6.6

1.0
 %
6.6

1.0
 %
 
28.0

1.0
 %
28.0

1.0
 %
  CDSOA income
  (expense), net(3)
(47.7
)
(7.0
)%
(47.7
)
(7.0
)%
 
(6.1
)
(0.9
)%
(6.1
)
(0.9
)%
 
0.2

—
 %
0.2

—
 %
 
(6.0
)
(0.9
)%
(6.0
)
(0.9
)%
 
(59.6
)
(2.2
)%
(59.6
)
(2.2
)%
  Health care plan
  modification costs(4)
—

—
 %
—

—
 %
 
—

—
 %
—

—
 %
 
—

—
 %
—

—
 %
 
2.9

0.4
 %
2.9

0.4
 %
 
2.9

0.1
 %
2.9

0.1
 %
  Acquisition related
  costs(5)
—

—
 %
—

—
 %
 
0.8

0.1
 %
0.8

0.1
 %
 
2.5

0.4
 %
2.5

0.4
 %
 
0.9

0.1
 %
0.9

0.1
 %
 
4.2

0.2
 %
4.2

0.2
 %
  (Gain) loss on
  dissolution/divestment
  of subsidiary
(1.4
)
(0.2
)%
(1.4
)
(0.2
)%
 
—

—
 %
—

—
 %
 
0.9

0.1
 %
0.9

0.1
 %
 
—

—
 %
—

—
 %
 
(0.5
)
—
 %
(0.5
)
—
 %
  Mark-to-market remeasurement losses(6)
—

—
 %
—

—
 %
 
—

—
 %
—

—
 %
 
—

—
 %
—

—
 %
 
—

—
 %
65.4

10.0
 %
 
—

—
 %
65.4

2.4
 %
       Total Adjustments
(37.2
)
(5.4
)%
(37.2
)
(5.4
)%
 
(1.5
)
(0.3
)%
(1.9
)
(0.3
)%
 
21.2

3.2
 %
11.0

1.7
 %
 
20.6

3.1
 %
70.1

10.7
 %
 
3.1

0.1
 %
42.0

1.6
 %
Adjusted EBIT
$
61.4

9.0
 %
$
65.8

9.6
 %
 
$
71.7

10.6
 %
$
76.1

11.3
 %
 
$
63.3

9.6
 %
$
67.8

10.3
 %
 
$
60.4

9.2
 %
$
65.5

10.0
 %
 
$
256.8

9.6
 %
$
275.2

10.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Pension settlement charges in 2016 primarily related to lump sum distributions to new retirees, the purchase of a group annuity contract from Canada Life, and lump-sum distributions to deferred vested participants.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Impairment and restructuring charges, including rationalization costs recorded in cost of products sold, related to plant closures, the rationalization of certain plants and severance related to cost reduction initiatives. The Company re-assesses its operating footprint and makes adjustments as needed that result in restructuring charges.  However, management believes that these actions are not representative of the Company’s core operations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(3) CDSOA income represents the amount of funds received by the Company from monies collected by U.S. Customs on entries of merchandise subject to anti-dumping orders that entered the U.S. prior to October 1, 2007.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(4) Health care plan modification costs represent one-time charges associated with a redesign in medical insurance options available for active associates. In connection with the redesign, the Company elected to pay certain unused reimbursement account balances to associates impacted by the change in available options.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(5) Acquisition related charges in 2016 related to the acquisition of Lovejoy and EDT, including one-time transaction costs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(6) Mark-to-market remeasurement losses represent actuarial losses that resulted from the remeasurement of pension plan assets and obligations as a result of changes in assumptions. The Company recognizes actuarial (gains) and losses through earnings in connection with the annual remeasurement in the fourth quarter, or on an interim basis if specific events trigger a remeasurement.


TIMKEN


Reconciliation of EBIT Margin, After Adjustments, to Net Income as a Percentage of Sales and EBIT, After Adjustments, to Net Income:
(Unaudited)
The following reconciliation is provided as additional relevant information about the Company's Mobile Industries and Process Industries segment performance deemed useful to investors. Management believes that non-GAAP measures of adjusted EBIT and adjusted EBIT margin for the segments are useful to investors as they are representative of each segment's core operations and are used in the management of the business, including decisions concerning the allocation of resources and assessment of performance.

Mobile Industries
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Dollars in millions)
Three Months Ended
March 31, 2016
 
Three Months Ended
June 30, 2016
 
Three Months Ended
September 30, 2016
 
Three Months Ended
December 31, 2016
 
Twelve Months Ended
December 31, 2016
 
As Originally Reported
% of Net Sales
Revised Results
% of Net Sales
 
As Originally Reported
% of Net Sales
Revised Results
% of Net Sales
 
As Originally Reported
% of Net Sales
Revised Results
% of Net Sales
 
As Originally Reported
% of Net Sales
Revised Results
% of Net Sales
 
As Originally Reported
% of Net Sales
Revised Results
% of Net Sales
EBIT
$
30.2

7.9
 %
$
32.0

8.4
 %
 
$
35.3

9.6
%
$
37.4

10.2
%
 
$
24.1

6.8
%
$
25.9

7.3
%
 
$
19.2

5.6
%
$
(8.2
)
(2.4
)%
 
$
108.8

7.5
 %
$
87.1

6.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Impairment and
  restructuring charges(1)
7.1

1.9
 %
7.1

1.8
 %
 
2.3

0.6
%
2.3

0.6
%
 
6.5

1.8
%
6.5

1.8
%
 
5.6

1.6
%
5.6

1.6
 %
 
21.5

1.5
 %
21.5

1.5
 %
  Gain on
  dissolution/divestment
  of subsidiary
(1.4
)
(0.4
)%
(1.4
)
(0.4
)%
 
—

—
%
—

—
%
 
—

—
%
—

—
%
 
—

—
%
—

—
 %
 
(1.4
)
(0.1
)%
(1.4
)
(0.1
)%
  Health care plan
  modification costs(2)
—

—
 %
—

—
 %
 
—

—
%
—

—
%
 
—

—
%
—

—
%
 
1.7

0.5
%
1.7

0.5
 %
 
1.7

0.1
 %
1.7

0.1
 %
  Mark-to-market
  remeasurement losses(4)
—

—
 %
—

—
 %
 
—

—
%
—

—
%
 
—

—
%
—

—
%
 
—

—
%
29.7

8.7
 %
 
—

—
 %
29.7

2.1
 %
Adjusted EBIT
$
35.9

9.4
 %
$
37.7

9.8
 %
 
$
37.6

10.2
%
$
39.7

10.8
%
 
$
30.6

8.7
%
$
32.4

9.2
%
 
$
26.5

7.7
%
$
28.8

8.4
 %
 
$
130.6

9.0
 %
$
138.6

9.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Process Industries
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Dollars in millions)
Three Months Ended
March 31, 2016
 
Three Months Ended
June 30, 2016
 
Three Months Ended
September 30, 2016
 
Three Months Ended
December 31, 2016
 
Twelve Months Ended
December 31, 2016
 
As Originally Reported
% of Net Sales
Revised Results
% of Net Sales
 
As Originally Reported
% of Net Sales
Revised Results
% of Net Sales
 
As Originally Reported
% of Net Sales
Revised Results
% of Net Sales
 
As Originally Reported
% of Net Sales
Revised Results
% of Net Sales
 
As Originally Reported
% of Net Sales
Revised Results
% of Net Sales
EBIT
$
32.6

10.8
 %
$
33.8

11.2
 %
 
$
46.7

15.3
%
$
47.9

15.7
%
 
$
40.7

13.4
%
$
42.0

13.8
%
 
$
43.2

13.8
%
$
25.8

8.3
 %
 
$
163.2

13.3
 %
$
149.5

12.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Impairment and
  restructuring charges(1)
3.6

1.2
 %
3.6

1.2
 %
 
1.0

0.3
%
1.0

0.3
%
 
0.9

0.3
%
0.9

0.3
%
 
1.2

0.4
%
1.2

0.4
 %
 
6.7

0.5
 %
6.7

0.5
 %
  Loss on
  dissolution/divestment
  of subsidiary
—

—
 %
—

—
 %
 
—

—
%
—

—
%
 
0.9

0.3
%
0.9

0.3
%
 
—

—
%
—

—
 %
 
0.9

0.1
 %
0.9

0.1
 %
  Health care plan
  modification costs(2)
—

—
 %
—

—
 %
 
—

—
%
—

—
%
 
—

—
%
—

—
%
 
0.7

0.2
%
0.7

0.2
 %
 
0.7

0.1
 %
0.7

0.1
 %
  Acquisition related
  costs(3)
—

—
 %
—

—
 %
 
—

—
%
—

—
%
 
1.7

0.5
%
1.7

0.6
%
 
0.7

0.2
%
0.7

0.2
 %
 
2.4

0.2
 %
2.4

0.2
 %
  Mark-to-market
  remeasurement losses(4)
—

—
 %
—

—
 %
 
—

—
%
—

—
%
 
—

—
%
—

—
%
 
—

—
%
18.7

6.0
 %
 
—

—
 %
18.7

1.5
 %
Adjusted EBIT
$
36.2

12.0
 %
$
37.4

12.4
 %
 
$
47.7

15.6
%
$
48.9

16.0
%
 
$
44.2

14.5
%
$
45.5

15.0
%
 
$
45.8

14.6
%
$
47.1

15.1
 %
 
$
173.9

14.2
 %
$
178.9

14.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Impairment and restructuring charges, including rationalization costs recorded in cost of products sold, related to plant closures, the rationalization of certain plants and severance related to cost reduction initiatives. The Company re-assesses its operating footprint and makes adjustments as needed that result in restructuring charges.  However, management believes these actions are not representative of the Company’s core operations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Health care plan modification costs represent one-time charges associated with a redesign in medical insurance options available for active associates. In connection with the redesign, the Company elected to pay certain unused reimbursement account balances to associates impacted by the change in available options.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(3) Acquisition related charges in 2016 related to the acquisition of Lovejoy and EDT, including one-time transaction costs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(4) Mark-to-market remeasurement losses represent actuarial losses that resulted from the remeasurement of pension plan assets and obligations as a result of changes in assumptions. The Company recognizes actuarial (gains) and losses through earnings in connection with the annual remeasurement in the fourth quarter, or on an interim basis if specific events trigger a remeasurement.