Timken Reports Fourth-Quarter and Full-Year 2021 Results

The Timken Company (NYSE: TKR; www.timken.com) designs a growing portfolio of engineered bearings and power transmission products.

- Sales of $1.01 billion in the fourth quarter, up 13 percent from last year

- Fourth-quarter earnings per diluted share of $0.82 on a GAAP basis, with adjusted EPS of $0.78

- Record full-year 2021 earnings per diluted share of $4.79 on a GAAP basis and record adjusted EPS of $4.72

- Company expects strong revenue and earnings growth in 2022; provides initial estimate for 2022 GAAP earnings per diluted share of $4.85-5.25, with adjusted EPS of $5.00-5.40

The Timken Company (NYSE: TKR; www.timken.com), a global industrial leader in engineered bearings and power transmission products, today reported fourth-quarter 2021 sales of $1.01 billion, up 13 percent from the same period a year ago, and over 10 percent higher than the previous record fourth quarter. The increase was primarily driven by strong organic growth across most end-market sectors led by industrial distribution and off-highway, and the impact of higher pricing.

Timken posted net income of $62.9 million or $0.82 per diluted share in the fourth quarter, versus net income of $53.1 million or $0.69 per diluted share for the same period a year ago. The increase in GAAP net income was primarily driven by the impact of higher volume, positive price/mix and the net favorable impact of special items (detailed in the attached tables), partially offset by significantly higher operating costs, as compared to the year-ago period.

Excluding special items, adjusted net income in the fourth quarter was $59.6 million or $0.78 per diluted share, versus adjusted net income of $65.0 million or $0.84 per diluted share for the same period in 2020.

Net cash from operations for the fourth quarter was $102.8 million, and free cash flow was $58.1 million. During the quarter, Timken returned $59.1 million of cash to shareholders with the payment of its 398th consecutive quarterly dividend and the repurchase of 500 thousand shares of company stock.

"Timken delivered record 2021 revenue and earnings per share despite widespread supply chain issues and rapid inflation, particularly in materials and logistics," said Richard G. Kyle, Timken president and chief executive officer. "We posted strong revenue growth in the fourth quarter as we responded well to the robust demand, but unfavorable price-cost continued to impact our profitability. Our pricing and cost mitigation efforts are progressing, and we will achieve a step-up in price realization in 2022."

2021 Full-Year Results and Highlights

For 2021, sales were $4.1 billion, up 17.6 percent compared with 2020. The increase was primarily driven by organic growth across most end-market sectors and the favorable impact of currency.

Net income was $369.1 million or a record $4.79 per diluted share for the year, compared with net income of $284.5 million or $3.72 per diluted share a year ago. The year-over-year increase reflects the impact of higher volume, favorable currency, positive price/mix, and the net favorable impact of special items (detailed in the attached tables), partially offset by significantly higher operating costs.

Excluding special items, adjusted net income was $363.4 million or a record $4.72 per diluted share in 2021. This compares with adjusted net income of $313.1 million or adjusted earnings of $4.10 per diluted share in 2020.

Net cash from operations for the full year was $387.3 million, and free cash flow was $239.0 million. Timken ended the fourth quarter with a strong balance sheet; financial leverage as measured by net debt to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was 1.7 times as of December 31, 2021 compared to 1.9 times at the end of 2020.

During the year, Timken continued to invest in operational excellence initiatives and grow its presence in attractive market sectors. The company made additional capital investments in the renewable energy and marine sectors, expanded its linear motion portfolio with the acquisition of Intelligent Machine Solutions (iMS) and continued to improve its global manufacturing footprint. Additionally, Timken paid dividends totaling $1.19 per share in 2021, which represents its eighth consecutive year of higher annual dividends, and repurchased 1.25 million shares of company stock. Between dividends and share repurchases, the company returned a total of $185.2 million of cash to shareholders in 2021.

Fourth-Quarter 2021 Segment Results

Process Industries sales of $527.6 million increased 15.2 percent from the same period a year ago. The increase was driven primarily by organic growth across most sectors led by distribution and general industrial.

EBITDA for the quarter was $104.4 million or 19.8 percent of sales, compared with EBITDA of $99.9 million or 21.8 percent of sales for the same period a year ago. The increase in EBITDA was driven primarily by the favorable impact of higher volume and price/mix, partially offset by significantly higher operating costs.

Excluding special items (detailed in the attached tables), adjusted EBITDA in the quarter was $105.3 million or 20.0 percent of sales, compared with $102.4 million or 22.4 percent of sales in the fourth quarter last year.

Mobile Industries sales of $479.7 million increased 10.6 percent compared with the same period a year ago. The increase was driven by higher shipments in most end-market sectors, with off-highway posting the strongest gains, and the impact of higher pricing.

EBITDA for the quarter was $40.0 million or 8.3 percent of sales, compared with EBITDA of $54.6 million or 12.6 percent of sales for the same period a year ago. The decline in EBITDA reflects the impact of significantly higher operating costs, partially offset by the favorable impact of higher volume and positive price/mix.

Excluding special items (detailed in the attached tables), adjusted EBITDA in the quarter was $41.3 million or 8.6 percent of sales, compared with $53.9 million or 12.4 percent of sales in the fourth quarter last year.

2022 Outlook

Timken is currently planning for 2022 revenue to be up approximately 10 percent in total versus 2021. The company is setting an initial outlook for earnings per diluted share in the range of $4.85 to $5.25 for the full year on a GAAP basis. Excluding special items (detailed in the attached tables), the company estimates that 2022 adjusted earnings per diluted share will be in the range of $5.00 to $5.40.

"We anticipate strong revenue and earnings growth in 2022, driven by continued robust industrial demand, price realization and our outgrowth initiatives," said Kyle. "The operating environment remains dynamic, with a higher degree of uncertainty than normal. We're planning for the supply chain challenges and inflationary pressures we experienced in the second half of 2021 to largely persist through 2022; however, we expect our pricing and efficiency improvements to have a much greater impact on results. Timken is well-positioned to deliver record revenue and earnings again in 2022, and we remain focused on serving customers, driving our profitable growth strategy and advancing as a global industrial leader."

Conference Call Information

Timken will host a conference call today at 11 a.m. Eastern Time to review its financial results. Presentation materials will be available online in advance of the call for interested investors and securities analysts.

Conference Call:

Thursday, February 3, 2022

11:00 a.m. Eastern Time

Live Dial-In: 888-204-4368

Or +1 313-209-4906

(Call in 10 minutes prior to be included.)

Conference ID: Timken's 4Q Earnings Call

Or Click to Join: https://tmkn.biz/3HQYtpj

Conference Call Replay:

Replay Dial-In available through

February 17, 2022:

888-203-1112 or 719-457-0820

Replay Passcode: 7571016

Live Webcast:

http://investors.timken.com