Timken(US:TKR)2026-02-13 21:44Financial Performance - Timken reported net sales of $4.58 billion in 2025, a slight increase of 0.2% compared to $4.57 billion in 2024[131]. - Net income for 2025 was $317.3 million, down 15.5% from $375.3 million in 2024, with diluted earnings per share decreasing to $4.11 from $4.99[131]. - Adjusted net income for 2025 was $374.5 million, compared to $409.4 million in 2024 and $508.1 million in 2023, reflecting a decrease in profitability[201]. - Adjusted EBITDA for 2025 was $795.8 million, down from $844.8 million in 2024, reflecting a decline of approximately 5.8%[206]. - The return on invested capital for 2025 was 9.8%, down from 11.0% in 2024, reflecting a decrease in profitability[210]. - Diluted earnings per share (EPS) for 2025 were $4.11, down from $4.99 in 2024 and $5.47 in 2023, indicating a decline in earnings per share[203]. - Adjusted EPS for 2025 was $5.33, compared to $5.79 in 2024 and $7.05 in 2023, reflecting a downward trend in adjusted earnings[203]. Segment Performance - The Engineered Bearings segment contributed significantly to sales, leveraging strong positions in various industries including wind energy and automotive[128]. - Engineered Bearings segment net sales decreased by $16.2 million or 0.5% in 2025, primarily due to lower demand in the Americas and Europe[148]. - Adjusted EBITDA for the Engineered Bearings segment decreased by $36.5 million or 6.0% in 2025, primarily due to incremental tariff costs[149]. - Industrial Motion segment net sales increased by $25.0 million or 1.6% in 2025, driven by acquisitions and favorable currency impacts[150]. - Adjusted EBITDA for the Industrial Motion segment decreased by $9.1 million or 3.0% in 2025, primarily due to lower volume and incremental tariff costs[151]. Cash Flow and Debt Management - Net cash provided by operating activities increased by $78.6 million to $554.3 million in 2025, driven by favorable working capital items[154]. - The Company aims to generate approximately $515 million in cash from operating activities in 2026, down from $554.3 million in 2025[133]. - The Company reduced total debt by $141 million and net debt by $132 million in 2025, strengthening its balance sheet[130]. - Net debt decreased to $1,557.6 million in 2025 from $1,689.5 million in 2024, with a net debt to capital ratio of 31.8%[160]. - The ratio of net debt to adjusted EBITDA for the trailing twelve months was 2.0 as of December 31, 2025, consistent with the ratio for December 31, 2024[205]. Capital Expenditures and Investments - Capital expenditures for 2025 were $148.2 million, down from $170.0 million in 2024, suggesting a potential shift in investment strategy[204]. - The Company plans capital expenditures in 2026 to be approximately 3.5% of sales[167]. Tax and Pension Obligations - Timken's effective tax rate for 2025 was 23.7%, a decrease from 24.1% in 2024, influenced by foreign jurisdiction earnings[141]. - The company recorded a net periodic benefit cost of $25.2 million for defined benefit pension plans in 2025, an increase from $12.2 million in 2024[192]. - The company expects net periodic benefit cost to decrease to approximately $12 million in 2026, compared to $25.2 million in 2025[193]. - The company anticipates contributing approximately $32 million to its defined benefit pension plans in 2026, down from $36.8 million in 2025[194]. Other Financial Metrics - Free cash flow for 2025 was $406.1 million, an increase from $305.7 million in 2024, indicating improved cash generation capabilities[204]. - The company recognized foreign currency exchange losses of $14.0 million in 2025, compared to $9.3 million in 2024[212]. - The company recorded a positive non-cash foreign currency translation adjustment of $215.6 million in 2025, compared to a negative adjustment of $156.4 million in 2024[212]. Dividends and Shareholder Returns - Timken's quarterly dividend was increased by 3% in Q2 2025, marking twelve consecutive years of higher annual dividends[130]. - A quarterly cash dividend of $0.35 per common share was declared on February 13, 2026, marking the 415th consecutive quarterly dividend[216]. Miscellaneous - The Company faced incremental tariff costs of $65 million in 2025, impacting overall profitability[138]. - Impairment and restructuring charges rose to $25.3 million in 2025, primarily due to CEO transition costs and facility closures[138]. - CEO transition expenses in 2025 amounted to $20.8 million, reflecting costs associated with leadership changes within the company[201]. - CEO transition expenses for 2025 included severance of $9.3 million related to the departure of former CEO Tarak B. Mehta[214]. - The company had outstanding letters of credit totaling $86.3 million as of December 31, 2025, with most expiring within 12 months[171]. - A 1% increase in global short-term interest rates would lead to an annual increase in interest expense of $1.3 million, impacting income from continuing operations by the same amount[221]. - As of December 31, 2025, the company had $371.8 million in foreign currency hedges in place, which would provide a benefit of $22.7 million from a uniform 10% weakening of the U.S. dollar against all currencies[222]. - The company manages commodity price risks primarily through supplier pricing agreements to stabilize purchase prices for raw materials, particularly steel and natural gas[223].