Company Overview - The Timken Company is a global technology leader in engineered bearings and industrial motion, with a focus on designing next-generation products for diverse industries [3] - The company has been operational for over 125 years, leveraging specialized expertise to innovate and create customer-centric solutions that enhance reliability and efficiency [3] - In 2024, Timken reported sales of $4.6 billion and employs approximately 19,000 people across 45 countries [3] Upcoming Financial Results - Timken will release its 2025 second-quarter financial results on July 30, 2025, prior to the opening of the New York Stock Exchange [1] - A conference call will be held on the same day at 11:00 a.m. Eastern Time to discuss the financial performance with investors and securities analysts [2] - Conference call materials and financial results will be accessible online at the company's investor relations website [1][2]

Company Leadership Change - The Timken Company has appointed Timothy A. Graham as president of Industrial Motion, effective immediately, succeeding Christopher A. Coughlin who is retiring [1][2] - Graham has been with Timken since 2003 and has extensive experience in leading global operations, including his recent role as vice president of operations for Engineered Bearings [2] Strategic Vision - Graham expressed his commitment to driving innovation and delivering exceptional value for customers, aiming to strengthen Timken's position in the Industrial Motion sector [3] - The CEO, Richard G. Kyle, highlighted Graham's operational expertise and global experience as key factors for scaling and accelerating profitable growth in the Industrial Motion business [2] Company Overview - The Timken Company is a global technology leader in engineered bearings and industrial motion, with $4.6 billion in sales in 2024 and approximately 19,000 employees across 45 countries [4]

Company Overview - The Timken Company is a global technology leader in engineered bearings and industrial motion, with a focus on designing next-generation products for diverse industries [2] - The company has over 125 years of experience in innovation and creating customer-centric solutions that enhance reliability and efficiency [2] - In 2024, Timken reported sales of $4.6 billion and employs approximately 19,000 people across 45 countries [2] Upcoming Events - Timken will participate in the KeyBanc Industrials & Basic Materials Conference on May 28, 2025, in Boston, Massachusetts [1] - Philip D. Fracassa, executive vice president and chief financial officer, and Neil Frohnapple, vice president of investor relations, will represent the company at the conference [1] - Materials shared during the conference will be accessible online at the company's investor relations website [1]

Company Overview and Performance - The Timken Company was founded in 1899 and has been NYSE listed since 1922[9] - In 2024, the company reported revenue of $4.6 billion, adjusted EBITDA of $845 million, and adjusted EPS of $5.79[9] - The adjusted EBITDA margin for 2024 was 18.5%, and free cash flow was $306 million[9] - The company's dividend yield as of December 31, 2024, was 1.9%[9] - In Q1 2025, net sales were $1.14 billion, a decrease of 4.2% compared to Q1 2024[64, 65] - Adjusted EBITDA for Q1 2025 was $208 million, with a margin of 18.2%, down 250 bps from Q1 2024[64, 66] - Adjusted EPS for Q1 2025 was $1.40 per diluted share[64, 67] Business Segments and Strategy - The company operates through two segments: Engineered Bearings (66% of sales) and Industrial Motion (34% of sales)[15] - 56% of sales are from the Americas, 24% from Europe, Mid-East, Africa (EMEA), and 20% from Asia-Pacific in 2024[11] - The company targets organic growth of 4-5% CAGR and inorganic growth of 2-3% CAGR, aiming for a total growth CAGR of 6-8%[102] - The company aims for adjusted EPS CAGR of >10% and adjusted EBITDA margins of +200 bps versus the 2017-2021 period[102] Capital Allocation - The company targets capital expenditures of 3.5-4.0% of sales over the cycle[80] - The company has repurchased approximately 31 million shares for $1.55 billion since 2013, reducing basic shares outstanding by approximately 25%[101] - The company's long-term leverage target is 1.5-2.5x net debt-to-adjusted EBITDA[74, 102]

Core Points - The Timken Company has approved a 3 percent increase in its quarterly cash dividend, raising it to 35 cents per share, payable on May 23, 2025 [1] - The company has achieved 12 consecutive years of annual dividend increases, reflecting the board's confidence in its long-term earnings and cash flow growth [2] - Timken has maintained a dividend payment every quarter since its NYSE listing in 1922, marking 412 consecutive quarters of dividends, one of the longest streaks among NYSE-listed companies [2] Company Overview - The Timken Company is a global technology leader in engineered bearings and industrial motion, with a focus on next-generation products for diverse industries [3] - In 2024, Timken reported sales of $4.6 billion and employs approximately 19,000 people across 45 countries [3]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for The Timken Company for the quarter ended March 31, 2025, including income, comprehensive income, balance sheets, and cash flows, with detailed notes on accounting policies and specific financial items [Consolidated Statements of Income](index=3&type=section&id=Consolidated%20Statements%20of%20Income) For Q1 2025, net sales decreased to $1,140.3 million, resulting in net income attributable to the company of $78.3 million, or $1.11 per diluted share Consolidated Income Statement Highlights (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $1,140.3 | $1,190.3 | -4.2% | | Operating Income | $144.0 | $184.6 | -22.0% | | Net Income Attributable to The Timken Company | $78.3 | $103.5 | -24.3% | | Diluted Earnings Per Share | $1.11 | $1.46 | -24.0% | [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets increased to $6,570.4 million, with total equity rising to $3,089.0 million, driven by net income and favorable foreign currency translation adjustments Balance Sheet Summary | Metric (in millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $2,616.8 | $2,516.9 | | Total Assets | $6,570.4 | $6,411.0 | | Total Current Liabilities | $831.7 | $820.5 | | Long-term Debt | $2,105.4 | $2,049.7 | | Total Equity | $3,089.0 | $2,984.1 | [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities increased to $58.6 million in Q1 2025, while net cash used in investing and financing activities also increased, resulting in a slight overall increase in cash and cash equivalents Cash Flow Summary (Three Months Ended March 31) | Activity (in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $58.6 | $49.3 | | Net Cash Used in Investing Activities | $(32.5) | $(24.5) | | Net Cash Used in Financing Activities | $(30.6) | $(15.0) | | Effect of exchange rate changes on cash | $7.4 | $(6.8) | | **Increase in Cash, Cash Equivalents and Restricted Cash** | **$2.9** | **$3.0** | [Notes to the Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies, revenue recognition, segment performance, income taxes, debt, and contingencies, highlighting revenue disaggregation, segment adjusted EBITDA, a lower effective tax rate, and restructuring charges - Revenue is disaggregated by segment, geography, and sales channel, with Engineered Bearings contributing **$760.7 million** and Industrial Motion **$379.6 million** to net sales in Q1 2025[17](index=17&type=chunk) - The effective tax rate for Q1 2025 was **22.7%**, lower than 27.9% in Q1 2024, primarily due to favorable discrete items related to the expiration of statutes of limitation in foreign jurisdictions[26](index=26&type=chunk)[27](index=27&type=chunk) - Total impairment and restructuring charges were **$10.9 million** in Q1 2025, up from $2.3 million in Q1 2024, mainly due to **$9.3 million** in severance for the CEO departure[55](index=55&type=chunk)[56](index=56&type=chunk) - The company had total debt of **$2,127.1 million** as of March 31, 2025, and was in full compliance with all debt covenants[121](index=121&type=chunk)[41](index=41&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 financial results, attributing the 4.2% sales decline to lower end-market demand and unfavorable currency rates, detailing segment performance, and outlining a cautious full-year 2025 outlook due to international trade volatility and tariffs [Overview and Outlook](index=28&type=section&id=Overview%20and%20Outlook) Q1 2025 net sales decreased 4.2% to $1,140.3 million, with diluted EPS falling to $1.11, driven by lower demand and unfavorable foreign currency impact, leading to a cautious 2025 outlook anticipating lower revenues and earnings due to international trade volatility and tariffs, despite projected higher operating cash flow Q1 2025 Financial Highlights vs. Q1 2024 | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,140.3M | $1,190.3M | (4.2%) | | Diluted EPS | $1.11 | $1.46 | (24.0%) | - The 2025 outlook anticipates full-year revenues to be down compared to 2024, primarily due to lower demand from international trade volatility, unfavorable currency rates, and the adverse impact of new import tariffs[93](index=93&type=chunk)[94](index=94&type=chunk) - Despite lower earnings expectations, the company projects higher cash from operating activities in 2025, driven by improved working capital, lower capital expenditures (**3.5% of sales**), and lower cash taxes[95](index=95&type=chunk)[129](index=129&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Operating income for Q1 2025 fell 22.0% to $144.0 million, with the operating margin decreasing by 290 basis points to 12.6%, primarily due to lower sales volume, higher manufacturing costs, increased impairment and restructuring charges, and a significantly lower effective tax rate - Q1 2025 net sales decreased by **$50.0 million** year-over-year, driven by lower organic revenue (**$37 million**) and unfavorable currency impact (**$25 million**), partially offset by acquisitions (**$12 million**)[97](index=97&type=chunk) - Impairment and restructuring charges increased by **$8.6 million** year-over-year, primarily due to severance related to the CEO transition[97](index=97&type=chunk)[100](index=100&type=chunk) - Net interest expense decreased to **$24.2 million** from $29.4 million year-over-year, mainly due to lower average debt levels[99](index=99&type=chunk) [Business Segments Analysis](index=33&type=section&id=Business%20Segments%20Analysis) Both Engineered Bearings and Industrial Motion segments reported year-over-year declines in Q1 2025, with Engineered Bearings' net sales falling 5.2% and adjusted EBITDA down 12.2%, while Industrial Motion's net sales decreased 2.1% and adjusted EBITDA fell 18.3% Engineered Bearings Segment Performance (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $760.7M | $802.5M | (5.2%) | | Adjusted EBITDA | $159.2M | $181.4M | (12.2%) | | Adjusted EBITDA Margin | 20.9% | 22.6% | (170) bps | Industrial Motion Segment Performance (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $379.6M | $387.8M | (2.1%) | | Adjusted EBITDA | $67.1M | $82.1M | (18.3%) | | Adjusted EBITDA Margin | 17.7% | 21.2% | (350) bps | [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained a strong liquidity position with $376.1 million in cash and $820.0 million available under credit lines as of March 31, 2025, with net debt increasing slightly to $1,751.0 million, while remaining in full compliance with all debt covenants - As of March 31, 2025, total liquidity included **$376.1 million** in cash and cash equivalents and **$820.0 million** available under committed credit lines[123](index=123&type=chunk) Net Debt Position | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Debt | $2,127.1M | $2,062.7M | | Net Debt | $1,751.0M | $1,689.5M | | Ratio of Net Debt to Capital | 36.2% | 36.1% | - The company was in compliance with its debt covenants, with a net leverage ratio of **2.17 to 1.0** (covenant: <3.5) and an interest coverage ratio of **7.70 to 1.0** (covenant: >3.0)[124](index=124&type=chunk) [Non-GAAP Measures](index=40&type=section&id=Non-GAAP%20Measures) This section reconciles non-GAAP financial measures, including adjusted net income, adjusted EPS, adjusted EBITDA, and free cash flow, showing adjusted EPS of $1.40 and free cash flow of $23.4 million for Q1 2025 Reconciliation of GAAP to Non-GAAP EPS (Q1 2025) | Metric | Amount | | :--- | :--- | | Diluted EPS (GAAP) | $1.11 | | Adjustments (net) | $0.29 | | **Adjusted EPS (Non-GAAP)** | **$1.40** | Free Cash Flow (Q1 2025 vs Q1 2024) | Metric (in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $58.6 | $49.3 | | Capital expenditures | $(35.2) | $(44.1) | | **Free cash flow** | **$23.4** | **$5.2** | - The ratio of Net Debt to trailing twelve months Adjusted EBITDA was **2.2** at March 31, 2025, up slightly from 2.0 at December 31, 2024[146](index=146&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) There have been no material changes in the company's reported market risk since the disclosures made in its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes in reported market risk since the company's Annual Report on Form 10-K for the year ended December 31, 2024[152](index=152&type=chunk) [Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report[153](index=153&type=chunk) - There were no changes in the Company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, the internal controls[153](index=153&type=chunk) [PART II. OTHER INFORMATION](index=47&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions in the ordinary course of business, with management believing that their ultimate disposition as of March 31, 2025, will not have a material adverse effect on the company's financial position or results of operations - In the opinion of management, the ultimate disposition of open legal proceedings as of March 31, 2025 will not have a material adverse effect on the Company's consolidated financial position or annual results of operations[155](index=155&type=chunk) [Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - There have been no material changes to the risk factors included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[156](index=156&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2025, the company purchased 411,541 common shares at an average price of $79.17 per share, with 296,061 shares purchased under the publicly announced share repurchase plan, leaving 1,842,929 shares available for purchase under the plan expiring in February 2026 Issuer Purchases of Common Shares (Q1 2025) | Period | Total Shares Purchased | Average Price Paid | Shares Purchased Under Plan | | :--- | :--- | :--- | :--- | | Jan 2025 | — | — | — | | Feb 2025 | 238,210 | $81.87 | 122,730 | | Mar 2025 | 173,331 | $75.47 | 173,331 | | **Total** | **411,541** | **$79.17** | **296,061** | - As of March 31, 2025, the company may still purchase up to **1,842,929 shares** under its share purchase plan, which is effective until February 28, 2026[159](index=159&type=chunk) [Other Information](index=48&type=section&id=Item%205.%20Other%20Information) During the first quarter of 2025, no director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the fiscal quarter ended March 31, 2025[160](index=160&type=chunk) [Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the CEO separation agreement, various stock unit agreements, and certifications by the CEO and CFO as required by the Sarbanes-Oxley Act - Key exhibits filed include the Separation Agreement with former CEO Tarak B. Mehta, various equity agreements with interim CEO Richard G. Kyle, and Sarbanes-Oxley Section 302 and 906 certifications[162](index=162&type=chunk)

The Timken Company (TKR) Q1 2025 Earnings Call April 30, 2025 11:00 AM ET Company Participants Neil Frohnapple - Vice President - IRRichard Kyle - Interim President & CEOPhilip Fracassa - EVP and CFOStefan Diaz - Vice President, Equity ResearchChristopher Dankert - SVP - Equity Research Conference Call Participants Bryan Blair - Managing Director & Senior Research AnalystKyle Menges - Vice President - Equity Research AnalystMichael Shlisky - Managing Director & Senior Equity Research Analyst Operator Good m ...

Financial Data and Key Metrics Changes - The company reported first quarter revenue of $1.14 billion, down 4.2% from the previous year, with adjusted EBITDA margins at 18.2% and adjusted earnings per share at $1.4, both lower than the prior year due to lower volumes and higher manufacturing costs [5][14][20] - Free cash flow increased compared to the prior year, ending the quarter with a solid balance sheet [6][7] Business Line Data and Key Metrics Changes - Engineered Bearings sales were $761 million, down 5.2% year-over-year, with organic sales down 2.8% due to lower demand in Europe and The Americas, partially offset by growth in Asia [22] - Industrial Motion sales were $380 million, down around 2% from last year, with organic sales declining 3.8% as lower demand was partially offset by higher pricing [24] Market Data and Key Metrics Changes - In Asia Pacific, sales increased by 10%, driven by growth in renewable energy demand, while The Americas saw a decline of about 4% and EMEA experienced an 11% drop due to industrial softness in Western Europe [16][17] Company Strategy and Development Direction - The company is focused on maintaining margins and generating strong cash flow during a soft industrial market, with a commitment to deliver $75 million in cost savings in 2025 [10][30] - A strategic review of the automotive OE business is underway, targeting more than half of this segment to improve margins by 2026 and 2027 [13][55] Management's Comments on Operating Environment and Future Outlook - Management noted that industrial market conditions are expected to remain challenging throughout the year, with a cautious view on market demand due to trade-related economic uncertainty [7][29] - The company is confident in its ability to mitigate the impact of tariffs and expects to fully offset the cost impact on a run rate basis by the end of the year [9][33] Other Important Information - The company is actively passing tariff costs into the market through repricing and expects a net direct impact from tariffs of around $25 million this year [9][32] - The CEO transition is ongoing, with a focus on maintaining strategic priorities and financial aspirations during this period [10][81] Q&A Session Summary Question: Guidance update on pricing and volume assumptions - Management indicated that pricing is expected to improve slightly due to tariffs, with a cautious outlook on volume changes, particularly in Industrial Motion [38] Question: Renewable energy trends, particularly in China - Management expressed positive surprise regarding renewable energy demand in Q1, expecting mid-single-digit growth for the full year [40][41] Question: Customer demand pull forward due to tariffs - Management stated there was no significant evidence of customers pulling forward demand in anticipation of tariffs [47][48] Question: Actions in the automotive OE business - The focus is on light vehicles and OEM, with plans to exit a significant portion of the automotive OE business to improve margins [50][55] Question: Pricing relative to competitors and supply chain positioning - Management noted that competitors are also raising prices, and the company's U.S. footprint is seen as advantageous in the current tariff environment [60][61] Question: Impact of tariffs on future earnings - Management confirmed that by the end of the year, the net impact of tariffs should be zero for 2026, with a year-over-year benefit expected [76] Question: Manufacturing footprint and facility status - The Fort Scott facility is not fully closed, and improvements in margins are expected as the company continues to manage its manufacturing footprint [87]

Financial Data and Key Metrics Changes - The company reported first quarter sales of over $1,100,000,000, with organic revenue down approximately 3% year-over-year [6][17] - Adjusted EBITDA margins were 18.2%, and adjusted earnings per share were $1.4, both lower than the previous year due to reduced volumes and higher manufacturing costs [7][17] - Free cash flow increased compared to the prior year, contributing to a solid balance sheet [9] Business Line Data and Key Metrics Changes - Engineered Bearings sales were $761,000,000, down 5.2% from last year, with organic sales down 2.8% due to lower demand in Europe and The Americas [25][26] - Industrial Motion sales were $380,000,000, down around 2%, with organic sales declining 3.8% as lower demand was partially offset by higher pricing [28][29] Market Data and Key Metrics Changes - In Asia Pacific, sales increased by 10%, driven by growth in renewable energy demand, particularly in China [19] - The Americas saw a decline of about 4%, with significant drops in the auto truck and off-highway sectors [19] - EMEA experienced an 11% decrease due to ongoing industrial softness in Western Europe [20] Company Strategy and Development Direction - The company is focused on maintaining profitable growth and operational excellence while navigating a challenging industrial market [12][14] - A comprehensive review of the automotive OE business is underway, targeting a significant portion of this segment to enhance margins by 2026 and 2027 [15][61] - The company aims to deliver $75,000,000 in cost savings for 2025 to offset inflation in labor and other input costs [34] Management's Comments on Operating Environment and Future Outlook - Management noted that industrial market conditions are expected to remain challenging throughout the year, with no significant changes in demand observed [9][10] - The company is actively monitoring the tariff situation and plans to pass costs into the market through repricing [10][11] - There is confidence in the ability to mitigate the impact of tariffs and recover margins over time [11][38] Other Important Information - The company is committed to generating strong cash flow and enhancing profitability through disciplined capital allocation [14][15] - The transition in leadership is not expected to alter the strategic direction, with continuity in the management team [86][88] Q&A Session Summary Question: Guidance update regarding pricing and volume assumptions - Management indicated that pricing is expected to improve slightly due to tariffs, while volume is anticipated to decline, particularly in Industrial Motion [44][45] Question: Trends in renewable energy demand, especially in China - Management expressed positive surprise regarding renewable energy demand in Q1, expecting mid-single-digit growth for the full year [47][48] Question: Impact of tariffs on customer demand - Management stated there was no significant evidence of customers pulling forward demand due to tariffs [54][55] Question: Actions in the automotive OE business - The focus is on light vehicles and OEMs, with plans to exit a significant portion of the automotive OE business to improve margins [57][61] Question: Pricing strategies relative to competitors - Management noted that competitors are also raising prices, and the company is positioned to pass through costs effectively [66][68] Question: Future pricing expectations for raw materials - Management indicated that higher pricing for raw materials is likely to persist into 2026 due to limited capacity in the U.S. market [96][98]

Group 1 - Timken reported revenue of $1.14 billion for the quarter ended March 2025, a decrease of 4.2% year-over-year, with EPS at $1.40 compared to $1.77 in the same quarter last year [1] - The revenue exceeded the Zacks Consensus Estimate of $1.12 billion by 1.61%, while the EPS fell short of the consensus estimate of $1.43 by 2.10% [1] - Timken's stock has returned -5.1% over the past month, underperforming the Zacks S&P 500 composite's -0.2% change, and currently holds a Zacks Rank 5 (Strong Sell) [3] Group 2 - Net Sales for Industrial Motion were reported at $379.60 million, slightly above the average estimate of $370.77 million, representing a year-over-year decline of 2.1% [4] - Net Sales for Engineered Bearings reached $760.70 million, exceeding the estimated $749.02 million, but reflecting a 5.2% decrease compared to the previous year [4] - Adjusted EBITDA for Industrial Motion was $67.10 million, below the average estimate of $71.37 million, while Engineered Bearings reported an Adjusted EBITDA of $159.20 million, surpassing the estimate of $155.62 million [4]