The Timken Co.
05/06/2026 | Press release | Distributed by Public on 05/06/2026 13:41
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in millions, except per share data)
OVERVIEW
Introduction:
The Timken Company designs and manufactures a growing portfolio of engineered bearings and industrial motion products, and related services. With more than a century of knowledge and innovation, the Company continuously improves the reliability and efficiency of global machinery and equipment to move the world forward. The Company's growing product and services portfolio features many strong industrial brands, such as Timken®, GGB®, Philadelphia Gear®, Cone Drive®, Rollon®, Nadella®, Diamond®, Drives®, Groeneveld®, BEKA®, Bijur Delimon®, Des-Case®, Lovejoy® and Lagersmit®. Timken employs approximately 19,000 people globally in 44 countries. The Company operates under two reportable segments: (1) Engineered Bearings and (2) Industrial Motion. The following further describes these business segments:
•Timken's Engineered Bearings segment features a broad range of product designs serving OEMs and end-users worldwide. Timken is a leading authority on tapered roller bearings and leverages its position by applying engineering know-how and technology across its entire bearing portfolio, which includes tapered, spherical and cylindrical roller bearings; plain bearings, metal-polymer bearings and rod end bearings; thrust and specialty ball bearings; and housed or mounted bearings. The Engineered Bearings portfolio features the Timken®, GGB® and Fafnir® brands and serves customers across global industries, including wind energy, agriculture, construction, food and beverage, metals and mining, automotive and truck, aerospace, rail and more.
•Timken's Industrial Motion segment includes a diverse and growing portfolio of engineered products, including industrial drives, precision drives, automatic lubrication systems, linear motion products and systems, chains, belts, couplings, filtration systems, seals, and industrial clutches and brakes that keep systems running efficiently. Industrial Motion also includes industrial services, which return equipment and components to like-new condition. The Industrial Motion portfolio features many strong brands, including Philadelphia Gear®, Cone Drive®, Spinea®, Rollon®, Nadella®, Groeneveld®, BEKA®, Bijur Delimon®, Des-Case®, Diamond®, Drives®, Timken® Belts, Lovejoy®, PT Tech®, Lagersmit® and CGI®. Industrial Motion products are used across a broad range of industries, including automation, solar energy, construction, agriculture and turf, passenger rail, marine, aerospace, packaging and logistics, medical and more.
Timken creates value by understanding customer needs and applying its know-how to serve a broad range of customers in attractive markets and industries across the globe. The Company's business strengths include its product technology, end-market diversity, geographic reach and aftermarket mix. Timken collaborates with OEMs to improve equipment efficiency with its engineered products and captures subsequent equipment replacement cycles by selling largely through independent channels in the aftermarket. Timken focuses its international efforts and footprint in regions of the world where strong macroeconomic factors such as urbanization, infrastructure development, industrialization and sustainability create demand for its products and services.
The Company's strategy has three primary elements:
Profitable Growth. The Company intends to expand into new and existing markets by leveraging its collective knowledge of materials science, friction management and power transmission to create value for Timken customers. Using a customer-centric and highly collaborative technical selling approach, the Company places particular emphasis on creating unique solutions for challenging and/or demanding applications. The Company intends to grow in attractive market sectors around the world, emphasizing those spaces that are highly fragmented, demand high service and value the reliability and efficiency offered by Timken products. The Company also targets applications that offer significant aftermarket demand, thereby providing product and services revenue throughout the equipment's lifetime.
Operational Excellence. The Company embraces a continuous improvement culture that is charged with increasing efficiency, lowering costs, reducing waste, increasing cash flow, driving organizational advancement and agility, and building greater brand equity to fuel growth. This requires the Company's ongoing commitment to attract, retain and develop the best talent across the world.
Capital Deployment to Drive Shareholder Value. The Company is focused on providing the highest returns for shareholders through its capital allocation framework, which includes: (1) investing in the core business through capital expenditures, research and development and initiatives to drive profitable organic growth; (2) pursuing strategic acquisitions to broaden its portfolio and capabilities across diverse markets, with a focus on engineered bearings, industrial motion products and related services; (3) returning capital to shareholders through dividends and share repurchases; and (4) maintaining a strong balance sheet and sufficient liquidity. As part of this framework, the Company may also restructure, reposition or divest underperforming product lines or assets.
The following items highlight some of the Company's more significant strategic accomplishments during the three months ended March 31, 2026:
•On March 18, 2026, the Company acquired the assets and related businesses of Bijur Delimon, a leading global designer and manufacturer of automated lubrication systems. Founded in 1872, Bijur Delimon operates manufacturing locations in the United States, Europe and Asia Pacific. The acquisition of Bijur Delimon expands the Company's position in automated lubrication systems.
•The Company paid its 415th consecutive quarterly dividend in the first quarter. The Company also repurchased 0.3 million common shares during the three months ended March 31, 2026.
Overview:
|
Three Months Ended March 31, |
||||||||||||||
| 2026 | 2025 | $ Change | % Change | |||||||||||
| Net sales | $ | 1,231.3 | $ | 1,140.3 | $ | 91.0 | 8.0 | % | ||||||
| Net income | 105.9 | 91.4 | 14.5 | 15.9 | % | |||||||||
| Net income attributable to noncontrolling interest | 7.7 | 13.1 | (5.4) | (41.2 | %) | |||||||||
| Net income attributable to The Timken Company | $ | 98.2 | $ | 78.3 | $ | 19.9 | 25.4 | % | ||||||
| Diluted earnings per share | $ | 1.40 | $ | 1.11 | $ | 0.29 | 26.1 | % | ||||||
| Average number of shares - diluted | 70,204,689 | 70,513,937 | - | (0.4 | %) | |||||||||
Net sales increased for the three months ended March 31, 2026 compared with the three months ended March 31, 2025. The increase was primarily driven by the favorable impact of foreign currency, favorable pricing, and higher end-market demand in the Industrial Motion segment.
Net income increased for the three months ended March 31, 2026 compared with the three months ended March 31, 2025 primarily due to favorable price/mix, higher volume and the favorable impact of foreign currency exchange rates, partially offset by the incremental tariff costs, higher manufacturing costs, and higher tax expense.
Outlook:
The Company expects 2026 full-year revenues to be up approximately 5% compared to 2025, primarily driven by higher demand across both segments, favorable pricing, the benefit of acquisitions, and the favorable impact of foreign currency rate changes. The Company's earnings are expected to be up in 2026 compared with 2025, primarily due to the impact of higher organic sales volume, favorable price/mix, and favorable material, partially offset by incremental tariff costs and higher manufacturing costs.
The Company expects to generate approximately $530 million of cash from operating activities in 2026 compared to $554.3 million in 2025, driven by higher working capital to support increased demand and higher cash taxes, partially offset by higher net income. The Company expects capital expenditures in 2026 to be approximately 3.4% of sales.
Throughout 2025 and the first quarter of 2026, the United States government has announced the imposition of additional import tariffs on all countries. The Company has been taking steps to mitigate the increased costs from incremental tariffs through pricing, surcharges and other actions. Timken also continues to monitor the impact that tariffs could have on global economic demand.
On February 20, 2026, the United States Supreme Court issued a decision invalidating the broad-based tariffs imposed under the International Emergency Economic Powers Act (IEEPA). On March 4, 2026, the U.S. Court of International Trade ordered the U.S. Customs and Border Protection ("CBP") to process refunds of the IEEPA tariffs, although the Court immediately suspended the order while the CBP determines a refund process. The IEEPA tariffs remain subject to ongoing litigation between the United States government and other parties. In response to the U.S. Supreme Court ruling mentioned above, the United States government announced plans to implement new tariffs under alternative statutory authority. The full impact of the U.S. Supreme Court's ruling and the United States government's response, including the timing and extent of any refunds and the impact of the new tariffs, remain uncertain.
THE STATEMENT OF INCOME
Operating Income:
|
Three Months Ended March 31, |
||||||||||||||
| 2026 | 2025 | $ Change | Change | |||||||||||
| Net sales | $ | 1,231.3 | $ | 1,140.3 | $ | 91.0 | 8.0% | |||||||
| Cost of products sold | 837.3 | 781.6 | 55.7 | 7.1% | ||||||||||
| Selling, general and administrative expenses | 201.2 | 184.8 | 16.4 | 8.9% | ||||||||||
| Amortization of intangible assets | 20.6 | 19.0 | 1.6 | 8.4% | ||||||||||
| Impairment and restructuring charges | 3.6 | 10.9 | (7.3) | (67.0%) | ||||||||||
| Operating income | $ | 168.6 | $ | 144.0 | $ | 24.6 | 17.1% | |||||||
| Operating income % to net sales | 13.7 | % | 12.6 | % | 110 | bps | ||||||||
Net sales increased for the three months ended March 31, 2026 compared with the three months ended March 31, 2025. The increase was driven by the favorable impact of higher organic revenue of $49 million and foreign currency exchange rate changes of $39 million.
Operating income increased for the three months ended March 31, 2026 compared with the three months ended March 31, 2025, due to favorable price/mix, higher volume, and the favorable impact of foreign currency exchange rate changes, partially offset by incremental tariff costs and higher manufacturing costs.
•Cost of products sold increased for the three months ended March 31, 2026 compared with the three months ended March 31, 2025, due to unfavorable foreign currency exchange rate changes of $28 million, incremental tariff costs of $20 million, and the impact of higher manufacturing costs of $12 million, partially offset by lower material and logistics costs of $6 million.
•Selling, general and administrative ("SG&A") expenses increased for the three months ended March 31, 2026 compared with the three months ended March 31, 2025, primarily due to the unfavorable impact from foreign currency exchange rates, higher employee compensation, and higher discretionary spending.
•Impairment and restructuring charges were lower for the three months ended March 31, 2026 compared with the three months ended March 31, 2025, primarily due to severance and other costs related to the CEO transition during the three months ended March 31, 2025.
Interest Income and Expense:
|
Three Months Ended March 31, |
||||||||||||||
| 2026 | 2025 | $ Change | % Change | |||||||||||
| Interest expense | $ | (24.3) | $ | (26.5) | $ | 2.2 | (8.3 | %) | ||||||
| Interest income | 1.7 | 2.3 | (0.6) | (26.1 | %) | |||||||||
| Interest expense, net | $ | (22.6) | $ | (24.2) | $ | 1.6 | (6.6 | %) | ||||||
The decrease in interest expense for the three months ended March 31, 2026 compared with the three months ended March 31, 2025 was primarily due to lower interest rates and lower average debt levels.
Income Tax Expense:
|
Three Months Ended March 31, |
||||||||||||||
| 2026 | 2025 | $ Change | Change | |||||||||||
| Provision for income taxes | $ | 37.0 | $ | 26.9 | $ | 10.1 | 37.5 | % | ||||||
| Effective tax rate | 25.9 | % | 22.7 | % | 320 | bps | ||||||||
Income tax expense increased $10.1 million for the three months ended March 31, 2026 compared with the three months ended March 31, 2025 primarily due to higher pre-tax earnings and lower net favorable impact of discrete items in comparison to the year ago period. The favorable discrete items in the prior period primarily related to the reversal of accruals for uncertain tax positions to account for the expiration of statutes of limitation in jurisdictions outside the United States. This was partially offset by the mix of earnings in non-U.S. jurisdictions with relatively higher tax rates and the impact of beneficial provisions effective in 2026 from the OBBBA.
Refer to Note 6 - Income Taxes in the Notes to the Consolidated Financial Statements for more information on the computation of the income tax expense in interim periods.
BUSINESS SEGMENTS
The Company's reportable segments are product-based business groups that serve customers in diverse industrial markets. The primary measurement used by management to measure the financial performance of each segment is adjusted EBITDA. Refer to Note 4 - Segment Information in the Notes to the Consolidated Financial Statements for the reconciliation of adjusted EBITDA by segment to consolidated income before income taxes.
The presentation of segment results below includes a reconciliation of the changes in net sales for each segment reported in accordance with U.S. GAAP to net sales adjusted to remove the effects of the acquisition completed in 2026 and foreign currency exchange rate changes. The effects of acquisitions and foreign currency exchange rate changes on net sales are removed to allow investors and the Company to meaningfully evaluate the percentage change in net sales on a comparable basis from period to period.
The following item highlights the Company's acquisition completed in 2026:
•The Company acquired Bijur Delimon during the first quarter of 2026. Results for Bijur Delimon are reported in the Industrial Motion segment.
Engineered Bearings Segment:
|
Three Months Ended March 31, |
||||||||||||||
| 2026 | 2025 | $ Change | Change | |||||||||||
| Net sales | $ | 806.2 | $ | 760.7 | $ | 45.5 | 6.0 | % | ||||||
| Cost of products sold | (562.2) | (523.3) | (38.9) | 7.4 | % | |||||||||
| Selling, general and administrative expenses | (110.7) | (102.5) | (8.2) | 8.0 | % | |||||||||
| Other segment items | 0.7 | 0.7 | - | - | % | |||||||||
| Depreciation and amortization | 25.0 | 23.6 | 1.4 | 5.9 | % | |||||||||
| Adjusted EBITDA | $ | 159.0 | $ | 159.2 | $ | (0.2) | (0.1 | %) | ||||||
| Adjusted EBITDA margin | 19.7 | % | 20.9 | % | (120) | bps | ||||||||
|
Three Months Ended March 31, |
||||||||||||||
| 2026 | 2025 | $ Change | % Change | |||||||||||
| Net sales | $ | 806.2 | $ | 760.7 | $ | 45.5 | 6.0 | % | ||||||
| Less: Currency | 22.9 | - | 22.9 | NM | ||||||||||
| Net sales, excluding the impact of currency | $ | 783.3 | $ | 760.7 | $ | 22.6 | 3.0 | % | ||||||
The Engineered Bearings segment's net sales, excluding the effects of foreign currency exchange rate changes, increased $22.6 million or 3.0% in the three months ended March 31, 2026 compared with the three months ended March 31, 2025. The increase was primarily driven by higher pricing. Adjusted EBITDA for the Engineered Bearings segment decreased slightly for the three months ended March 31, 2026 by $0.2 million or 0.1% compared with the three months ended March 31, 2025, due to the unfavorable impact of tariffs and higher operating costs, offset by favorable price/mix.
•Cost of products sold increased for the three months ended March 31, 2026 compared with the three months ended March 31, 2025 due to unfavorable foreign currency exchange rate changes of $17 million, incremental tariff costs of $16 million, and higher operating costs of $12 million, partially offset by lower material and logistics costs of $5 million.
•SG&A expenses increased for the three months ended March 31, 2026 compared with the three months ended March 31, 2025 primarily due to higher compensation expense and the unfavorable impact of foreign currency exchange rates.
Industrial Motion Segment:
|
Three Months Ended March 31, |
||||||||||||||
| 2026 | 2025 | $ Change | Change | |||||||||||
| Net sales | $ | 425.1 | $ | 379.6 | $ | 45.5 | 12.0 | % | ||||||
| Cost of products sold | (273.9) | (256.6) | (17.3) | 6.7 | % | |||||||||
| Selling, general and administrative expenses | (72.6) | (68.0) | (4.6) | 6.8 | % | |||||||||
| Other segment items | (0.1) | - | (0.1) | NM | ||||||||||
| Depreciation and amortization | 12.8 | 12.1 | 0.7 | 5.8 | % | |||||||||
| Adjusted EBITDA | $ | 91.3 | $ | 67.1 | $ | 24.2 | 36.1 | % | ||||||
| Adjusted EBITDA margin | 21.5 | % | 17.7 | % | 380 | bps | ||||||||
|
Three Months Ended March 31, |
||||||||||||||
| 2026 | 2025 | $ Change | % Change | |||||||||||
| Net sales | $ | 425.1 | $ | 379.6 | $ | 45.5 | 12.0 | % | ||||||
| Less: Acquisitions | 3.1 | - | 3.1 | NM | ||||||||||
| Currency | 15.7 | - | 15.7 | NM | ||||||||||
|
Net sales, excluding the impact of acquisitions and currency |
$ | 406.3 | $ | 379.6 | $ | 26.7 | 7.0 | % | ||||||
The Industrial Motion segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, increased $26.7 million or 7.0% in the three months ended March 31, 2026 compared with the three months ended March 31, 2025. The increase reflects higher demand across most sectors and higher pricing. Adjusted EBITDA increased $24.2 million or 36.1% for the three months ended March 31, 2026 compared with the three months ended March 31, 2025. Favorable price/mix and higher volume were partially offset by incremental tariff costs.
•Cost of products sold increased for the three months ended March 31, 2026 compared with the three months ended March 31, 2025 due to the unfavorable foreign currency exchange rate changes of $12 million and incremental tariff costs.
•SG&A expenses increased for the three months ended March 31, 2026 compared with the three months ended March 31, 2025 primarily due to the unfavorable impact of foreign currency exchange rates.
Unallocated Corporate
|
Three Months Ended March 31, |
||||||||||||||
| 2026 | 2025 | $ Change | Change | |||||||||||
| Unallocated corporate expense | $ | (19.3) | $ | (18.2) | $ | (1.1) | 6.0 | % | ||||||
| Unallocated corporate expense % to net sales | (1.6 | %) | (1.6 | %) | - | bps | ||||||||
Unallocated corporate expense increased for the three months ended March 31, 2026 compared with the three months ended March 31, 2025 primarily due to higher discretionary spending.
CASH FLOW
|
Three Months Ended March 31, |
|||||||||||
| 2026 | 2025 | $ Change | |||||||||
| Net cash provided by operating activities | $ | 39.3 | $ | 58.6 | $ | (19.3) | |||||
| Net cash used in investing activities | (157.0) | (32.5) | (124.5) | ||||||||
| Net cash provided by (used in) financing activities | 102.1 | (30.6) | 132.7 | ||||||||
| Effect of exchange rate changes on cash | (4.3) | 7.4 | (11.7) | ||||||||
|
(Decrease) increase in cash and cash equivalents and restricted cash |
$ | (19.9) | $ | 2.9 | $ | (22.8) | |||||
Operating Activities:
The decrease in net cash provided by operating activities for the first three months of 2026 compared with the first three months of 2025 was primarily due to the unfavorable impact of working capital items of $61.4 million, partially offset by an increase in net income of $14.5 million, lower pension contributions of $13.0 million and the favorable impact of income taxes on cash of $12.5 million. Refer to the tables below for additional detail of the impact of each line item on net cash provided by operating activities.
The following table displays the impact of working capital items on cash during the first three months of 2026 and 2025:
|
Three Months Ended March 31, |
|||||||||||
| 2026 | 2025 | $ Change | |||||||||
| Cash (used in) provided by: | |||||||||||
| Accounts receivable | $ | (112.8) | $ | (70.8) | $ | (42.0) | |||||
| Unbilled receivables | (18.2) | (18.2) | - | ||||||||
| Inventories | (12.5) | 15.3 | (27.8) | ||||||||
| Trade accounts payable | 31.1 | 20.2 | 10.9 | ||||||||
| Other accrued expenses | (18.5) | (16.0) | (2.5) | ||||||||
| Cash used in working capital items | $ | (130.9) | $ | (69.5) | $ | (61.4) | |||||
The following table displays the impact of income taxes on cash during the first three months of 2026 and 2025:
|
Three Months Ended March 31, |
|||||||||||
| 2026 | 2025 | $ Change | |||||||||
| Accrued income tax expense | $ | 37.0 | $ | 26.9 | $ | 10.1 | |||||
| Income tax payments | (20.8) | (23.4) | 2.6 | ||||||||
| Other items | (0.2) | - | (0.2) | ||||||||
| Change in income taxes | $ | 16.0 | $ | 3.5 | $ | 12.5 | |||||
Investing Activities:
The increase in net cash used in investing activities for the first three months of 2026 compared with the first three months of 2025 was due to an increase in cash used for acquisitions of $124.3 million.
Financing Activities:
The change in net cash provided by (used in) financing activities for the first three months of 2026 compared with the first three months of 2025 was due to the favorable change in net debt borrowings/payments of $134.9 million, partially offset by an increase in the purchase of treasury shares of $4.9 million.
LIQUIDITY AND CAPITAL RESOURCES
Reconciliation of total debt to net debt and the ratio of net debt to capital:
Net Debt:
|
March 31, 2026 |
December 31, 2025 |
|||||||
| Short-term debt, including current portion of long-term debt | $ | 42.9 | $ | 38.9 | ||||
| Long-term debt | 2,027.2 | 1,883.1 | ||||||
| Total debt | $ | 2,070.1 | $ | 1,922.0 | ||||
| Less: Cash and cash equivalents | 344.7 | 364.4 | ||||||
| Net debt | $ | 1,725.4 | $ | 1,557.6 | ||||
Ratio of Net Debt to Capital:
|
March 31, 2026 |
December 31, 2025 |
|||||||
| Net debt | $ | 1,725.4 | $ | 1,557.6 | ||||
| Total equity | 3,367.9 | 3,345.7 | ||||||
| Net debt plus total equity (capital) | $ | 5,093.3 | $ | 4,903.3 | ||||
| Ratio of net debt to capital | 33.9 | % | 31.8 | % | ||||
The Company presents net debt because it believes net debt is more representative of the Company's financial position than total debt due to the amount of cash and cash equivalents held by the Company and the ability to utilize such cash and cash equivalents to reduce debt if needed.
At March 31, 2026, the Company had strong liquidity with $344.7 million of cash and cash equivalents on the Consolidated Balance Sheet, as well as $670.3 million available under committed credit lines. Of the $344.7 million of cash and cash equivalents, $320.2 million resided in jurisdictions outside the United States. Repatriation of non-U.S. cash could be subject to taxes, and some portion may be subject to governmental restrictions. Part of the Company's strategy is to grow in attractive market sectors, many of which are outside the United States. This strategy includes making investments in facilities, equipment and potential new acquisitions. The Company plans to fund these investments, as well as meet working capital requirements, with cash and cash equivalents and unused lines of credit within the geographic location of these investments where feasible.
On December 5, 2022, the Company entered into the Credit Agreement, which is comprised of a $750 million Senior Credit Facility and a $400 million 2027 Term Loan that each mature on December 5, 2027. The interest rates under the Credit Agreement are based on SOFR for U.S. dollar borrowings. At March 31, 2026, the Company had $79.7 million of outstanding borrowings under the Senior Credit Facility. The Credit Agreement has two defined financial covenants: a consolidated net leverage ratio and a consolidated interest coverage ratio. The maximum consolidated net leverage ratio permitted under the Senior Credit Facility is 3.5 to 1.0. As of March 31, 2026, the Company's consolidated net leverage ratio was 2.15 to 1.0. The minimum consolidated interest coverage ratio permitted under the Senior Credit Facility is 3.0 to 1.0. As of March 31, 2026, the Company's consolidated interest coverage ratio was 8.18 to 1.0.
The interest rate under the Senior Credit Facility is variable with a spread based on the Company's debt rating. The average rate on outstanding U.S. dollar borrowings was 4.78% and the average rate on outstanding Euro borrowings was 2.94% as of March 31, 2026. In addition, the Company pays a facility fee based on the applicable rate, which is variable with a spread based on the Company's debt rating, multiplied by the aggregate commitments of all of the lenders under the Senior Credit Facility. As of March 31, 2026, the Company carried investment-grade credit ratings with both Moody's (Baa2) and S&P Global (BBB-).
The Company has a $100 million Accounts Receivable Facility, which matures on November 30, 2028. The Accounts Receivable Facility is subject to certain borrowing base limitations and is secured by certain domestic trade accounts receivable of the Company. As of March 31, 2026, the Company had $100 million of outstanding borrowings under the Accounts Receivable Facility, which reduced the availability to zero.
Other sources of liquidity include uncommitted short-term lines of credit for certain of the Company's foreign subsidiaries, which currently provide for borrowings of up to $250.5 million. At March 31, 2026, the Company had borrowings outstanding of $28.8 million and bank guarantees of $5.8 million, which reduced the aggregate availability under these facilities to $215.9 million.
At March 31, 2026, the Company was in full compliance with all applicable covenants on its outstanding debt.
The Company expects to generate approximately $530 million of cash from operating activities in 2026 compared to $554.3 million in 2025, driven by higher working capital to support increased demand and higher cash taxes, partially offset by higher net income. The Company expects capital expenditures in 2026 to be approximately 3.4% of sales.
Financing Obligations and Other Commitments:
During the first three months of 2026, the Company made cash contributions and payments of $10.4 million to its global defined benefit pension plans and $0.4 million to its other postretirement benefit plans. In 2026, the Company expects to make contributions to its global defined benefit pension plans of approximately $32 million and to make payments of approximately $3 million to its other postretirement benefit plans. Excluding actuarial gains and losses, the Company expects lower pension and other postretirement benefits expense in 2026 compared to 2025 primarily due to higher expected returns on pension plan assets and lower interest expense.
The Company does not have any off-balance sheet arrangements with unconsolidated entities or other persons.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's financial statements are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The Company reviews its critical accounting policies throughout the year. The Company has concluded that there have been no significant changes to its critical accounting policies or estimates, as described in its Annual Report on Form 10-K for the year ended December 31, 2025, during the three months ended March 31, 2026.
OTHER MATTERS
Foreign Currency:
Assets and liabilities of subsidiaries are translated at the rate of exchange in effect on the balance sheet date; income and expenses are translated at the average rates of exchange prevailing during the reporting period. Related translation adjustments are reflected as a separate component of accumulated other comprehensive loss. Foreign currency gains and losses resulting from transactions, and the related hedging activity, are included in the Consolidated Statements of Income.
For the three months ended March 31, 2026, the Company recorded negative foreign currency translation adjustments of $21.9 million that decreased shareholders' equity, compared with positive foreign currency translation adjustments of $66.5 million that increased shareholders' equity for the three months ended March 31, 2025. The foreign currency translation adjustments for the three months ended March 31, 2026 were impacted by the weakening of the U.S. dollar relative to other foreign currencies, including the Euro and the Indian Rupee, partially offset by strengthening against the Chinese Yuan.
Foreign currency exchange gains and losses, net of hedging activity, resulting from transactions included in the Company's operating results for the three months ended March 31, 2026 totaled $3.3 million of net losses, compared with $1.1 million of net gains during the three months ended March 31, 2025.
CEO Transition:
On March 31, 2025, Timken announced that the Company and Tarak B. Mehta, the former President and CEO, had mutually agreed that Mr. Mehta would depart from the Company, including resigning as a member of the Company's Board, effective immediately. The Company also announced that the Board had appointed Richard G. Kyle as the interim President and CEO of the Company. During the three months ended March 31, 2025, the Company recorded severance of $9.3 million, plus related taxes, for Mr. Mehta's settlement arrangement and release of claims for his termination without cause. $7.3 million of this amount was paid in 2025 and 2026, with the remaining amount to be paid in 2027.
NON-GAAP MEASURES
Supplemental Non-GAAP Measures:
In addition to results reported in accordance with U.S. GAAP, the Company provides information on non-GAAP financial measures. These non-GAAP financial measures include adjusted net income, adjusted earnings per share, adjusted EBITDA and adjusted EBITDA margins, ratio of net debt to adjusted EBITDA (for the trailing 12 months), net debt, ratio of net debt to capital, free cash flow and return on invested capital. This information is intended to supplement GAAP financial measures and is not intended to replace GAAP financial measures. Net debt and the ratio of net debt to capital is disclosed in the "Liquidity and Capital Resources" section of Management's Discussion and Analysis of Financial Condition and Results of Operations.
Adjusted Net Income and Adjusted EBITDA:
Adjusted net income and adjusted earnings per share represent net income attributable to The Timken Company and diluted earnings per share, respectively, adjusted for the amortization of intangible assets related to acquisitions, impairment, restructuring and reorganization charges, acquisition costs, including transaction costs and the amortization of the inventory step-up, property losses and recoveries, actuarial gains and losses associated with the remeasurement of the Company's defined benefit pension and other postretirement benefit plans, gains and losses on the sale of real estate, gains and losses on divestitures, the income tax impact of these adjustments, as well as other discrete income tax items, and other items from time to time that are not part of the Company's core operations. Management believes adjusted net income and adjusted earnings per share are useful to investors as they are representative of the Company's core operations and are used in the management of the business.
Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, adjusted for items that are not part of the Company's core operations. These items include impairment, restructuring and reorganization charges, acquisition costs, including transaction costs and the amortization of the inventory step-up, property losses and recoveries, actuarial gains and losses associated with the remeasurement of the Company's defined benefit pension and other postretirement benefit plans, gains and losses on the sale of real estate, gains and losses on divestitures, and other items from time to time that are not part of the Company's core operations. Management believes adjusted EBITDA is useful to investors as it is representative of the Company's core operations and is used in the management of the business, including decisions concerning the allocation of resources and assessment of performance.
Reconciliation of net income attributable to The Timken Company to adjusted net income, adjusted EBITDA and adjusted EBITDA Margin:
|
Three Months Ended March 31, |
||||||||
| 2026 | 2025 | |||||||
| Net Sales | $ | 1,231.3 | $ | 1,140.3 | ||||
| Net Income Attributable to The Timken Company | 98.2 | 78.3 | ||||||
|
Net Income Attributable to The Timken Company as a Percentage of Sales |
8.0 | % | 6.9 | % | ||||
| Adjustments: | ||||||||
| Acquisition intangible amortization | 20.6 | 19.0 | ||||||
|
Impairment, restructuring and reorganization charges (1)
|
4.9 | 3.2 | ||||||
|
Acquisition-related charges (2)
|
1.8 | - | ||||||
|
Gain on sale of certain assets (3)
|
- | (1.2) | ||||||
|
CEO transition expenses (4)
|
- | 8.6 | ||||||
| Noncontrolling interest of above adjustments | (0.1) | 3.8 | ||||||
|
Provision for income taxes (7)
|
(8.1) | (13.1) | ||||||
| Adjusted Net Income | $ | 117.3 | $ | 98.6 | ||||
| Net income attributable to noncontrolling interest | 7.7 | 13.1 | ||||||
| Provision for income taxes (as reported) | 37.0 | 26.9 | ||||||
| Interest expense | 24.3 | 26.5 | ||||||
| Interest income | (1.7) | (2.3) | ||||||
|
Depreciation and amortization expense (5)
|
58.8 | 55.0 | ||||||
| Less: Acquisition intangible amortization | 20.6 | 19.0 | ||||||
|
Less: Noncontrolling interest (6)
|
(0.1) | 3.8 | ||||||
|
Less: Provision for income taxes (7)
|
(8.1) | (13.1) | ||||||
| Adjusted EBITDA | $ | 231.0 | $ | 208.1 | ||||
| Adjusted EBITDA Margin (% of net sales) | 18.8 | % | 18.2 | % | ||||
(1) Impairment, restructuring and reorganization charges (including items recorded in cost of products sold) relate to: (i) plant closures; (ii) the rationalization of certain plants; (iii) severance related to cost reduction initiatives; and (iv) impairment of assets. The Company re-assesses its operating footprint and cost structure periodically, 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) Acquisition-related charges represent deal-related expenses associated with completed transactions and any resulting inventory step-up impact.
(3) Represents the net gain resulting from the sale of certain assets.
(4) On March 31, 2025, the Company announced that Tarak B. Mehta, President and CEO of the Company would be departing from the Company, effective immediately, and Richard G. Kyle would be serving as interim President and CEO. CEO transition expenses primarily related to the cost of the settlement agreement with Mr. Mehta in connection with his departure, net of stock compensation expense for stock awards forfeited.
(5) Depreciation and amortization shown excludes depreciation recognized in reorganization charges, if any.
(6) Represents the noncontrolling interest impact of the adjustments listed above, as well as the reversal of uncertain tax positions related to TIL.
(7) Provision for income taxes includes the net tax impact on pre-tax adjustments (listed above), the impact of discrete tax items recorded during the respective periods as well as other adjustments to reflect the use of one overall effective tax rate on adjusted pre-tax income in interim periods.
Diluted earnings and adjusted earnings per share in the table below are based on net income attributable to The Timken Company and adjusted net income, respectively, in the table above.
|
Three Months Ended March 31, |
||||||||
| 2026 | 2025 | |||||||
| Diluted earnings per share (EPS) | $ | 1.40 | $ | 1.11 | ||||
| Adjusted EPS | $ | 1.67 | $ | 1.40 | ||||
| Diluted Shares | 70,204,689 | 70,513,937 | ||||||
Free Cash Flow:
Free cash flow represents net cash provided by operating activities less capital expenditures. Management believes free cash flow is useful to investors because it is a meaningful indicator of cash generated from operating activities available for the execution of its business strategy.
Reconciliation of net cash provided by operating activities to free cash flow:
|
Three Months Ended March 31, |
||||||||
| 2026 | 2025 | |||||||
| Net cash provided by operating activities | $ | 39.3 | $ | 58.6 | ||||
| Capital expenditures | (38.8) | (35.2) | ||||||
| Free cash flow | $ | 0.5 | $ | 23.4 | ||||
Ratio of Net Debt to Adjusted EBITDA:
The ratio of net debt to adjusted EBITDA for the trailing twelve months represents total debt less cash and cash equivalents divided by adjusted EBITDA for the trailing twelve months. The Company presents net debt to adjusted EBITDA because it believes it is more representative of the Company's financial position as it is reflective of the Company's ability to cover its net debt obligations with results from its core operations. Net income for the trailing twelve months ended March 31, 2026 and December 31, 2025 was $331.8 million and $317.3 million, respectively. Net debt to adjusted EBITDA for the trailing twelve months was 2.1 and 2.0 at March 31, 2026 and December 31, 2025, respectively.
Reconciliation of Net income to Adjusted EBITDA for the trailing twelve months:
| Twelve Months Ended | ||||||||
|
March 31, 2026 |
December 31, 2025 |
|||||||
| Net income | $ | 331.8 | $ | 317.3 | ||||
| Provision for income taxes | 108.8 | 98.7 | ||||||
| Interest expense | 108.1 | 110.3 | ||||||
| Interest income | (9.7) | (10.3) | ||||||
| Depreciation and amortization | 233.9 | 230.1 | ||||||
| Consolidated EBITDA | 772.9 | 746.1 | ||||||
| Adjustments: | ||||||||
|
Impairment, restructuring and reorganization charges (1)
|
$ | 22.4 | $ | 20.7 | ||||
|
Corporate pension and other postretirement benefit related expense (2)
|
10.8 | 10.8 | ||||||
|
Acquisition-related charges (3)
|
1.8 | - | ||||||
|
Gain on sale of certain assets (4)
|
(1.4) | (2.6) | ||||||
|
CEO transition expenses (5)
|
12.2 | 20.8 | ||||||
| Total adjustments | 45.8 | 49.7 | ||||||
| Adjusted EBITDA | $ | 818.7 | $ | 795.8 | ||||
| Net Debt | $ | 1,725.4 | $ | 1,557.6 | ||||
| Ratio of Net Debt to Adjusted EBITDA | 2.1 | 2.0 | ||||||
(1) Impairment, restructuring and reorganization charges (including items recorded in cost of products sold) relate to: (i) plant closures; (ii) the rationalization of certain plants; (iii) severance related to cost reduction initiatives; and (iv) impairment of assets. The Company re-assesses its operating footprint and cost structure periodically, 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) Corporate pension and other postretirement benefit related expense represents actuarial losses that resulted from the remeasurement of plan assets and obligations as a result of changes in assumptions or experience. The Company recognizes actuarial losses in connection with the annual remeasurement in the fourth quarter, or if specific events trigger a remeasurement.
(3) Acquisition-related charges represent deal-related expenses associated with completed transactions and any resulting inventory step-up impact.
(4) Represents the net gain resulting from the sale of certain assets.
(5) On August 22, 2025, the Company announced the appointment of Lucian Boldea as President and CEO, effective September 1, 2025, and that Richard G. Kyle would retire from the role of interim President and CEO. On March 31, 2025, the Company announced that Tarak B. Mehta, President and CEO of the Company would be departing from the Company, effective immediately, and Mr. Kyle would be serving as interim President and CEO. CEO transition expenses for the twelve months ended December 31, 2025, primarily relate to the cost of the settlement agreement with Mr. Mehta in connection with his departure, net of the impact for stock awards forfeited, the acceleration of certain stock compensation awards issued to Mr. Kyle, and other one-time costs associated with the transition in 2025.
FORWARD-LOOKING STATEMENTS
Certain statements set forth in this Form 10-Q and in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 that are not historical in nature (including the Company's forecasts, beliefs and expectations) are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, Management's Discussion and Analysis contains numerous forward-looking statements. Forward-looking statements generally will be accompanied by words such as "anticipate," "believe," "could," "estimate," "expect," "forecast," "outlook," "intend," "may," "possible," "potential," "predict," "project" or other similar words, phrases or expressions. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-Q. The Company cautions readers that actual results may differ materially from those expressed or implied in forward-looking statements made by or on behalf of the Company due to a variety of factors, such as:
•deterioration in world economic conditions, or in economic conditions in any of the geographic regions in which the Company or its customers or suppliers conduct business, including adverse effects from a global economic slowdown or recession, pandemics, epidemics or other public health concerns, terrorism, or hostilities. This includes: political risks associated with the potential instability of governments and legal systems in countries in which the Company or its customers or suppliers conduct business, changes in currency valuations, additional costs, taxes and restrictions related to repatriation of cash in international jurisdictions, strained geopolitical relations between countries in which we have significant operations, and recent world events that have increased macroeconomic risks posed by international trade disputes, tariffs and sanctions;
•negative impacts to the Company's business, results of operations, financial position or liquidity, disruption to the Company's supply chains, and negative impacts to operations;
•the effects of fluctuations in customer demand on sales, product mix and prices in the industries in which the Company operates. This includes: the ability of the Company to respond to rapid changes in customer demand, disruptions to the Company's supply chain, the effects of customer or supplier bankruptcies or liquidations, the impact of changes in industrial business cycles, the ability of the Company to effectively adjust the prices for its products in response to changing dynamics, the effects of distributor inventory corrections reflecting de-stocking of the supply chain, changes in customer preferences due to emergent technologies, evolving regulatory landscapes or other factors, and whether conditions of fair trade continue in the Company's markets;
•competitive factors, including changes in market penetration, increasing price competition by existing or new foreign and domestic competitors, the introduction of new products or services by existing and new competitors, competition for skilled labor and new technology, such as artificial intelligence, that may impact the way the Company's products are produced, sold or distributed;
•changes in operating costs. This includes: the effect of changes in the Company's manufacturing processes; changes in costs associated with varying levels of operations and manufacturing capacity; availability and cost of raw materials, energy and fuel; changes in tariff rates and other costs associated with tariffs; disruptions to the Company's supply chain and logistical issues associated with port closures or delays or increased costs; changes in the expected costs associated with product warranty claims especially in industry segments with potential high claim values; changes in the global regulatory landscape (including with respect to climate change or other environmental regulations); changes resulting from inventory management and cost reduction initiatives; the effects of unplanned plant shutdowns; costs associated with inclement weather events; the effects of government-imposed restrictions, commercial requirements and Company goals associated with climate change and emissions or other sustainability initiatives; and changes in the cost of labor and benefits;
•the success of the Company's operating plans, announced programs, initiatives and capital investments; the ability to integrate acquired companies and to address material issues both identified and not uncovered during the Company's due diligence review; and the ability of acquired companies to achieve satisfactory operating results, including results being accretive to earnings, realization of synergies and expected cash flow generation;
•the Company's ability to maintain appropriate relations with unions or works councils that represent Company employees in certain locations in order to avoid disruptions of business;
•the continued attraction, retention and development of management, other key employees, and other skilled personnel, the successful development and execution of succession plans and management of other human capital matters;
•unanticipated litigation, claims, investigations, remediation or assessments. This includes: claims, investigations or problems related to intellectual property, product liability or warranty, foreign export, sanctions and trade laws, government procurement regulations, competition and anti-bribery laws, climate change, PTFE, PFAS, other environmental or health and safety issues, data privacy, cybersecurity and taxes;
•the rapidly evolving global regulatory landscape and the corresponding heightened operational complexity and compliance risks;
•changes in worldwide financial and capital markets, including fluctuations in interest rates, impacting the availability of financing on satisfactory terms as a result of financial stress affecting the banking system or otherwise, which affect the Company's cost of funds and/or ability to raise capital, as well as customer demand and the ability of customers to obtain financing to purchase the Company's products or equipment that contain the Company's products;
•the Company's ability to satisfy its obligations and comply with covenants under its debt agreements, maintain favorable credit ratings and its ability to renew or refinance borrowings on favorable terms;
•the impact on the Company's pension obligations and assets due to changes in interest rates, investment performance and other tactics designed to reduce risk; and
•those items identified under Item 1A. "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 or this Form 10-Q.
Additional risks relating to the Company's business, the industries in which the Company operates, or the Company's common shares may be described from time to time in the Company's filings with the U.S. Securities and Exchange Commission ("SEC"). All of these risk factors are difficult to predict, are subject to material uncertainties that may affect actual results and may be beyond the Company's control.
Readers are cautioned that it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results and that the above list should not be considered to be a complete list. Except as required by the federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
The Timken Co. published this content on May 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 06, 2026 at 19:41 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]