Timken(US:TKR)2025-10-29 20:45Financial Performance - Net sales for Q3 2025 increased to $1,157.1 million, a 2.7% increase from $1,126.8 million in Q3 2024, driven by favorable pricing and acquisitions[96]. - Net income for Q3 2025 decreased to $74.3 million, down 15.2% from $87.6 million in Q3 2024, primarily due to incremental tariff costs and a prior gain on real estate sale[96][97]. - For the nine months ended September 30, 2025, net sales decreased to $3,470.8 million, a decline of 0.8% compared to $3,499.4 million in the same period of 2024[96]. - The company expects full-year 2025 revenues to decline approximately 0.75% compared to 2024, primarily due to lower demand across both segments[99]. - Operating income for Q3 2025 was $139.4 million, a decrease of 4.7% from $146.3 million in Q3 2024, impacted by tariff costs and prior gains[101]. - Adjusted EBITDA for the nine months ended September 30, 2025, was $618.0 million, with an adjusted EBITDA margin of 17.8%[147]. - Net income for the trailing twelve months ended September 30, 2025, was $326.5 million, down from $375.3 million for the same period ending December 31, 2024[151]. - Adjusted EBITDA for the trailing twelve months was $796.2 million, a decrease from $844.8 million for the same period ending December 31, 2024[152]. Costs and Expenses - Incremental tariff costs for Q3 2025 amounted to $20 million, contributing to the increase in cost of products sold[102]. - Interest expense for Q3 2025 decreased to $27.3 million, down 9.9% from $30.3 million in Q3 2024, due to lower average debt levels[103]. - Income tax expense increased by $8.6 million or 35.0% for the three months ended September 30, 2025, primarily due to the impact of withholding taxes on dividend distributions[106]. - SG&A expenses decreased for the three months ended September 30, 2025, primarily due to lower bad debt expense and professional services expenses[105]. - Cost of products sold for the Engineered Bearings segment increased by $17 million due to incremental tariff costs for the three months ended September 30, 2025[115]. - The cost of products sold increased by $20 million for the nine months ended September 30, 2025, primarily due to acquisitions and higher manufacturing costs[118]. - Unallocated corporate expenses decreased by 24.8% to $17.0 million for the three months ended September 30, 2025, compared to $22.6 million in 2024[119]. Segment Performance - For the three months ended September 30, 2025, net sales for the Engineered Bearings segment increased by $25.1 million or 3.4% compared to the same period in 2024, driven by higher pricing and renewable energy demand[114]. - Adjusted EBITDA for the Engineered Bearings segment increased by $5.8 million or 4.2% for the three months ended September 30, 2025, due to favorable pricing and lower material and logistics costs[115]. - The Engineered Bearings segment's net sales, excluding the effects of foreign currency exchange rate changes, decreased by $8.4 million or 0.4% for the nine months ended September 30, 2025 compared to the same period in 2024[115]. - The Industrial Motion segment's net sales for the three months ended September 30, 2025, were $391.3 million, a 1.3% increase from $386.1 million in the same period of 2024[117]. - Adjusted EBITDA for the three months ended September 30, 2025, was $74.5 million, reflecting a slight increase of 0.4% compared to $74.2 million in 2024[117]. - For the nine months ended September 30, 2025, net sales decreased by $51.5 million or 4.4%, totaling $1,121.3 million when excluding acquisitions and currency impacts[118]. - Adjusted EBITDA for the nine months ended September 30, 2025, decreased by $21.8 million or 9.2%, totaling $214.2 million compared to $236.0 million in 2024[118]. Cash Flow and Debt - Net cash provided by operating activities increased by $73.9 million to $371.0 million for the nine months ended September 30, 2025, compared to $297.1 million in 2024[121]. - The Company had $449.1 million in cash and cash equivalents as of September 30, 2025, with $850.0 million available under committed credit lines[128]. - The ratio of net debt to capital improved to 33.5% as of September 30, 2025, down from 36.1% at the end of 2024[127]. - The Company maintained a consolidated interest coverage ratio of 7.76 to 1.0 as of September 30, 2025, well above the minimum requirement of 3.0 to 1.0[129]. - The Company issued €600 million 2034 Notes with a 4.13% interest rate, maturing on May 23, 2034, to redeem $350 million 2024 Notes and repay other debts[133]. - The ratio of net debt to adjusted EBITDA increased to 2.1 as of September 30, 2025, compared to 2.0 as of December 31, 2024[151]. - Total net debt as of September 30, 2025, was $1,663.7 million, slightly down from $1,689.5 million as of December 31, 2024[152]. Strategic Focus and Outlook - The company is focusing on profitable growth by expanding into new markets and leveraging its expertise in materials science and friction management[92]. - The company anticipates that tariffs and related macroeconomic effects will adversely impact operating income in 2025[98]. - The company anticipates potential impacts from global economic conditions, including supply chain disruptions and changes in customer demand[153]. - The company is focused on maintaining favorable credit ratings and satisfying obligations under its debt agreements[156]. - There have been no material changes in reported market risk since the last annual report[157]. Other Notable Items - The Company acquired CGI, Inc. during the third quarter of 2024, and results for CGI are reported in the Industrial Motion segment[113]. - The Company made cash contributions of $33.7 million to global defined benefit pension plans during the first nine months of 2025, expecting to contribute approximately $36 million in 2025[135]. - For the nine months ended September 30, 2025, the Company recorded positive foreign currency translation adjustments of $199.7 million, compared to negative adjustments of $0.2 million in the same period of 2024[140]. - Free cash flow for the three months ended September 30, 2025, was $163.8 million, up from $88.2 million in the same period of 2024[150]. - Diluted earnings per share for the three months ended September 30, 2025, were $0.99, down from $1.16 in 2024, while adjusted EPS increased to $1.37 from $1.23[149]. - The Company recorded severance costs of $9.3 million related to the CEO transition during the three months ended March 31, 2025[143]. - The company does not have any off-balance sheet arrangements with unconsolidated entities[136]. - Impairment, restructuring, and reorganization charges amounted to $18.2 million for the trailing twelve months ended September 30, 2025[152]. - CEO transition expenses for the twelve months ended September 30, 2025, were primarily related to the settlement agreement with the former CEO, totaling $19.5 million[152].