TKR - Earnings call transcript Q3 2017

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Operator

Good morning. My name is Alan, and I will be your conference operator today.

As a reminder, this call is being recorded. At this time, I would like to welcome everyone to Timken's Third Quarter Earnings Release Conference Call. [Operator Instructions] Thank you. Mr. your begin may you conference sir. Hershiser,

Jason Hershiser

you and earnings at conference Alan, Investor you for We should welcome, our questions, If Hershiser, to everyone, XXXX quarter Relations contact appreciate Company. Timken feel third have our The us call. call, XXX-XXX-XXXX. of today. after to Manager Thanks, joining please This free further Jason is directly me

that remarks out company's our begin the this will materials that website posted we want of point morning, part Before to as the we've on presentation review of we reference I today's results. quarterly

access material President Financial today also are can Phil CEO, download You me call Officer. Company's Timken and this Chief and feature earnings on our the The With Rich the link. webcast Kyle; through Fracassa,

from comments Rich open morning your will we before up opening questions. the Phil We up have and call for both this

Q&A, During participate. to one question and I that your everyone limit opportunity ask a allow questions the you one to an at would follow-up please time to

During today's and hear to related operations. business results, statements future forward-looking financial our plans, call, you may

from filed results which available in projected today's actual on release in timken.com greater materially our we a those factors, SEC, differ may to detail or implied describe in and website. press with variety of the Our report due which the are

written presentation Company, will turn portion expressed We to Today's for interest I like Without over call you would transmission I financial Rich. between equivalent by your of that, we now any information Timken The to recording and the of Timken non-GAAP press use, call With call. or the have in Company. release materials. thank and reconciliations in is included and prohibit its the GAAP The any copyrighted consent,

Richard Kyle

top-line of performance geographies markets taking the quarter morning, Good thanks and from and year. combined with strong our continued broad-based to most with growth us join Jason. end our We and acquisitions year-on-year Thanks, respond market growth. penetration improving across delivered today. continue good organic delivering strength service, the we from about will a quarter revenue initiatives, in well, We third I X% Operationally, from the productivity posted and last contributed very X% XX% saw second the a we time up customer moment. to the our in for speak to over increase when everyone, demand more Acquisitions quarter. also results

Our points basis XXX adjusted from XX% margins quarter up XXXX, margins XX increased per compared in and we expanded points and last quarter. with earnings share our were basis the

improved basis is marginally second be on for about and year. the to expected year-on-year the from price quarter only track XX As points negative full

expect actions We yield raw of in benefit early the price other recovery material XXXX. and price positive to see

margin process margins did fourth for are XX to expansion mobile at mobile fourth We We but margins as margins approximately not a to we see sequential sequential quarter, pleased in remained do improve industries target our quarter. We mobile XXXX. XX% but do expect XX%. XX.X% comp tough to what mobile the to our in hold from level points improvement basis range and margins that a in with typically of expected anticipate expect the and manage below is

XX% move and in low XXXX. to of to cost, We range us XX% our expect price, improvements end the to volume in

and we up to announced our previously On line. of production plant continue level to breadth the ramp close Romanian the mobile front, a plants track product and mobile their on Russian cost and are year-end by

strengthening that will and year. Tech forecasting in each we're Control Shifting by remain current In our basis share up for to are models. focused contributing of per near points, year synergy low the markets, cross increase results benefiting EDT, our all full full growing addition and benefits. of end running Tours XX% the margins range, our place and acquisition and which recent PT ahead improve LoveJoy, from moving earnings We to year, XX% XX we margins For of in cost to selling the about range and now to company on us the expect targeted in XX%. acquisitions reductions

next While we the a We're backlog leadership and a of optimistic us, well off with and teams of as early the integrated business. as but year. heavy pleased quarter rest have and early highway generate working the steps and from organizations the one we're results our good, about long-term we benefiting Interlube Groeneveld integration. we're have sales and are the market from systems behind we With lubrication the good Groeneveld will growing on results truck of value for

in also at a modest the buyback acquisitions Bearings India completing recent to we in pipeline have of back acquisition buyback expect towards our in We continued XXXX. activities in share be With to our fourth scaled ABC and quarter. of the opportunities track level

XXXX XXXX expect next our but early carry As we into provide we for guidance XXXX. momentum we'll year, to do typically our

the We end expect this in next and organic we'll year higher growing our that comps start markets. in good year with will backlog

significantly our will XXXX we year. we'll outlook now year next I'll to will result markets cost our continue XXXX as growth we again we initiatives into the over to early next than Bottom more color stronger go detail to the expect XXXX more the organic provide of start XXXX full turn it next as and We benefit initiatives started to end year. and in to price positive margin in we our Phil on expansion and believe quarter. well line acquisitions a shift full our a drive of also a in plan to reduction year. year as outgrow

Philip Fracassa

good Thanks, everyone. morning, and Rich

performance a the slide. diluted in from Earnings start Timken third over economy at from Revenue the third per up industrial for slide out up adjustments results financial $X.XX in was quarter the were GAAP by the driven share see $XXX on $XX you back in those GAAP quarter a on basis, improving year. adjustments XX. when adjusted last to adjusted $X.XX quarter earnings delivered year. was XX.X% going on million the million the came sales. you basis, I'm XX% of strong or and can XX% were review on For EBIT million the EBIT financial share per back out a $XX last when of you summary

acquisition sales is a the Timken. as completed of across at off-highway. XX, July Turning but led by revenue just take also the for this quarter line. benefit on our includes sales quarter, partially and quarter Tech adding year-on-year by prior let's closer sales the we markets products up to with third mobile some the X%. year, in sales end X% related quarter PT Control Currency Xrd, EDT, the improvement This in well, over industries. added industrial slight of $XX shipments was to acquisition. the a look about Torsion offset Most Groeneveld Sequentially, Acquisitions seasonality demand from organic million top distribution the in X% of from straight almost X% second third the were slide were acquisition performance. Groeneveld around lower and sectors up quarter, the and in reflecting reflecting Organically, and increase were most

the regions Europe increase of you sales delivered can On this currency, with Asia. largest in right-hand performance our that is the excluding region, quarter, side of all solid see outlined coming by growth and in we slide, the

the about of offset was half me in related, and in acquisition half the the driven increase Let other organic was on industrial by automotive. lower touch North In growth distribution each by shipments partially America off-highway region briefly. sectors

half serve. markets in Our strong we of reflect across increases in in then in Brazil. all industrial increase market other and slightly almost by growth end reflects Latin Asia we by sectors. growth off-highway strong the stronger was and the the industrial half organic the the about the were In most demand driven acquisition, mainly in quarter driven of America year-on-year was up the end quarter there Europe, And

from in to $XX XX, driven volume, offset in million logistics the in year. quarter the benefit by favorable increase performance was Turning The and currency up the partially adjusted acquisitions higher costs. slide quarter higher last and $XX material, by was of SG&A EBIT manufacturing million

$X.XX last you posted XXX income was XX and from second see basis EBIT points slide we up from will sequentially per basis, margin our GAAP per $X.XX income million Our share per On quarter net net points in the was adjusted of On or earned adjusted quarter. from up $XX a quarter the we on an for $X.XX or year. basis. XX, a last share that year million XX.X%, basis $XX the the share, diluted up XX%

in the quarter the slightly rate GAAP rate Our year. was adjusted quarter, basis, our was up XX% from on tax tax last XX.X% an in

tax tax of Our U.S. for our the expect rate adjusted include year. XX% corporate reflects Note forecasted from excluding potential impact reform, maintain rate. corporate that or of the rest items earnings in rate any geographic our tax rate the we changes tax mix to does the and special

the sectors, from in automotive. PT industries. XX, slide the third our up acquisition we take off-highway were $XX up truck is This in X.X% heavy let's business revenue offset almost sales XX%. look with Control segment Now growing saw year million also of but mobile a the results Tech. - and mobile demand and last mainly organically at In to - about $XXX by industry were shipments Torsion and includes from quarter turning in lower million sales increase XX% partially products as the were quarter starting quarter,

during the in mining last the off-highway in in markets, construction regions America, a year, sectors, in platforms. had was growth a up while strength by we one in the Looking of quarter all also we major truck bit North our slightly. America more in seasonality led at North reflecting quarter, agriculture caused was where more including automotive, was up closely Heavy the In solid bit lower a year-on-year. by than saw changeover a shipments the

Additionally, the manufacturing impact respect basis attributable costs. benefit flat year. adjusted $XX year. offset EBIT - North sales and adjusted of the and revenue margins, reflects points by in was $XX quarter of Asia acquisitions XX last mobile in down EBIT margin in currency was to in unfavorable higher in industries million and Mobile versus higher to With or quarter partially was of $XX price material third million The the last compared X.X% EBIT and increase or logistics to industries X.X% in of slightly earnings with quarter America. volume, SG&A sales performance was the million in up the growth mix

mix, costs impacted related and by higher negatively ramp price were we and expense. material, incentive As compensation freight

did XX margins the from quarter. sequentially basis improve second However, points

mobile organically, XXXX heavy now led we expect sales are softer for be XX%, to currency Our and up in in sales industry X% improved should revenue off-highway by by year. sectors about the around truck planning demand to offset partially we to favorable for increase be outlook and rail. Acquisition demand the increase around for for is X.X% by slightly

for sales third increased $XXX million year. industry turn to were sales Organically, well quarter industry the wind Process the process on XX.X% Let's from industries energy. in in last reflecting slide XX. up sectors, up as XX.X% was demand increase shipments as

year, and backlog markets, Looking more including improvement distribution incoming a the the medals a up quarter demand rates seen order closely markets with all quarter end the seeing last industries We bit Europe heavy gear regions drives. industrial in year-on-year. growth double-digit slightly several with growth at and and in Asia versus finished sequentially. and saw up across The was industrial general in

in with being the America. shipments in lower higher Asia. and up largest wind the by And coming North was quarter Europe partially Asia is With in energy in increase offset shipments

compared million by in EBIT favorable performance, or driven by higher $XX EBIT quarter, of $XX earnings $XX costs. higher also primarily the million and was logistics SG&A year. to was partially of The last manufacturing offset process For sales increases million, industries XX.X% XX% by material, and of adjusted sales volume was

is led distribution. XXXX industrial expect to across XX%, outlook by Our driven market industries sales increase Acquisition sales currency sectors about slightly favorable end to around planning we're broad for by most be revenue based and should year. process organically increase be around X.X% for up the for now X% to we growth by for

CapEx After million was million will included bringing million to activities $XX year-ago the the total was during of from $XXX year-to-date year-to-date first year. net see cash XX, period that XX the receipts operating of around Turning you of quarter, CDSLA $XX spending to million flow the pre-tax. free nine Note that cash months for $XX million. slide the

cash reflects receipts months tax This capital first about than lower the operating sales levels those down XXXX more higher in last cash CapEx. Despite higher dollars, increased of as flow working the also year. million to Excluding versus was returned $XX of year earnings working capital shareholders versus dividend improved sequentially. allocation working the through capital support which XXX,XXX our of nine improved ago, and offset the increase free payments a standpoint, million percentage of quarterly and in and in the invested improved third shares. same CapEx quarter quarter repurchase $XX and million period in the we a From sales our XXX-consecutive to the the capital $XX payment and

we XX%. During the placement also finished cash Groeneveld, we acquired. roughly net-debt-to that targeted term acquisition bank private of loan. midpoint near the financing $XXX place attractive notes in XX%, of put with permanent We our spend with net at Late million and capital quarter, denominated the range on last XX% to the for euro quarter quarter, of acquisition,

review slide XX. me outlook on let Next, our

expected sales to increase now to be favorable planning we revenue for are We X%. currency around from slightly and organically year. increase up revenue XX% by X.X% XXXX for expect the be should XXXX Acquisitions now about to is about

that in basis. a bottom range of line, to $X.XX estimate diluted be the will GAAP $X.XX the share per we on On earnings

totaling adjusted for about share per up for range $X.XX end. over a the offset of charges. other pension share does expect diluted $XX quarter. up fourth from related, be benefit tax and that $X.XX last income million midpoint by July is which not include $X.XX quarter a until from the acquisition that $X.XX will be XX% include at restructuring, guidance Note earnings will we and remeasurement, XXXX. in we pension to of known, share, recorded $X.XX any XXXX adjustments be just adjustments which the This the not our of from per mark-to-market impact to related Note year, income Excluding per year personally

the flow year adjusted capital to last range finally, XX%, down full low XX% in targeted of XX from we cash the of the driven or $XXX around And up at XXXX an around EBIT increased basis working million outlook net million XXXX, guidance, This of support by to year. generate implies and adjusted level, sales income. free line higher in is deployment, strong to increase, was now of margin Our we'll to closing, points sales In with well Timken, last by approximately corporate advance a as our estimate XX% capital environment, from expected we market July for improve that Despite levels. from we'll XX% is $XX around improving our needed it end the and of quarter year. working a to as forward. And open continue our percentage for to to and end strategy out remain on well and And value positioned remarks. fronts. drive we excellence Organic the formal shareholder operational capital our going questions. continue line that, conclude growth, with Operator? responded

Operator

sir. [Operator Steve question Jefferies. from first And you, we take with Instructions] our would Thank Volkmann,

Stephen Volkmann

guys. good Hi, morning

Richard Kyle

morning, Good Steve.

Stephen Volkmann

if Couple I the mobile on of can. business, questions

I'm curious, the better, but being for of certainly if mobile? growth just fourth some it's what like all, better in of is the again quarter looked curious, I'm of it you mobile I know, First a big right, of looking you're my if, about what's feels a kind driving acceleration math of talked quarter in and kind in fourth

Philip Fracassa

nicely up we we're again to story this flat think, I will certainly fourth would down, down and continued would the trucks, in highway, But, just in fewer to kind quarter, be the really Steve, to of strong versus shipping much be normal a a Phil, up markets the no of the we're relatively question three you see mean, into be very that's rest and fourth, year-on-year third slightly them. really is heavy third. say days in as real of fourth Yes strong fourth, even around have know so factoring sequentially seasonality, implying I mobile. year-on-year reflecting step third I

Stephen Volkmann

can parts up much kind OE following business that, that is on how the So, service Phil, just versus out you into of and tell field? of a

Philip Fracassa

good ship for perfect Yeah, particularly I'd expect I it of it bit service in do terms than service say we mix the fourth we some think parts the have, we in say, new as And third part location have the highway, OE, I in in service little offset, to first visibility, mix. I'd parts have but do demand. probably lake, between what's off a our would quarter versus well the was half, as we but after-market visibility say good more a probably builds. We don't was the OE quarter

Stephen Volkmann

think you done And you answer? to margin, here? up just how margin helpful. guess flattish Is we sales here, it would could that's here, more Or of great, improving there Okay, then is I'll I quarter, said, as the that Thanks. let utilization and be be there? on go sort I'm so, needs the fourth assuming about restructuring in capacity

Richard Kyle

see get margins XXXX. don't restructuring to driver mobile the in No, as I up major our

to half head up, year. improve of second But said continuing I isn't into the mean, see reflection we volume half, as to as First next really going do markets more Phil mobile we as seasonality.

terms As expansion say up expect go be tailwind and rail out for cost taking year pricing in we and I got year, was to also the us year, business of favorable major would I seeing don't we planning shrinking talked about a positive the while the we negative this the look to next next expect at from the that to restructuring and it margin there the from out cetera. a we're carryover was of the a et ramp being mobile not plant and next headwind We've this year. that a year first, headwind it

expansion pieces next So see margin that we driving year. those the big would would the be

Stephen Volkmann

Great. Thank so much. you

Philip Fracassa

are when that's out XXs they see you quarter fourth the quarter to so high applied the looking going are probably fourth want in quarter into in and at substantially singles grown year-on-year. you the thing in mobile organically to looking acquisition about at year-over-year you a of all fourth the belt keep mind for jump an number one Steve, pull are all-in to of I terms looking in in just clarify grown hits when when an mobile in all-in outlook mobile the probably of also

Stephen Volkmann

I you. understood. Thank

Operator

And with from Evercore our we Raso take David next ISI. question will

David Raso

taking working start I'm hi, Yes, thinking how trying and increasing the to bit little capital down about are you a flow, XXXX. trying your growth to interpret cash quantify really to

the the higher us you bit X.X? organic as acceleration total implied are on were help cash you the working some that is quarter The you focus capital can single-digit. 'XX is single-digit think So, with when that mobile mobile quarters a fourth on So high an or decision that's so high they flow, is first about and fourth something starting organically? said that the given acceleration in quarter pretty the kind two growth little of

Richard Kyle

of expectation down in strong capital certainly So up in on is revenue fourth for cash the ready working the but process a and capital strong reduction bring read and give working ready quarter out not to for year exactly intention say mobile definitely the after a a organically. of XXXX for not getting both to our reflection year-on-year to number in what start for the but certainly XXXX on flow not our is

to less So, customers of expecting when holiday we quarter organic lot and to over standpoint shutdowns a us relatively extended are OEM you the look for fourth take and for from our do run a a those maintenance OEM XXXX strong. into little numbers so often mobile who and at

David Raso

to want margins mobile implied and incrementals an next and year XX it's you the like that least make of the words appear about sort are into back trying implying, next expect XX.X when I broader with year mean to north to something figure at incrementals north of way. back low at it on mobile mouth, end what because your not for your said you are does sure comfortable you the I use implied on I be your that range, mobile to XX your margins are I at of employing mobile out implying top-line what and acquisition to revenues just mean year if to and putting incremental of we trying into I'm incremental, bit trying XX% year, end we I'm what I'm mean kind are on I being a little of just next what understand, you of next at XX? implying day you

Richard Kyle

say XX a to positive going volume in us I and would to as I expect wide barely for improvement ready be negative from how to price good just company target my significant mobile margin we all would bps not be, would positive is price step significant to and it need on get put a to where take again and this with we start but a incrementals XX% not to be. in

some Second would what not do be cost know we with mobile again a price well cost as that ready improvement then and improve then volume to and is. certainly expect not mix but to

David Raso

just obviously mean I a rate mobile mean margin at right And margins a comfortable a that to want margin incrementals next because want that XX of make XX% that a range you're organic at sure a X% XX for end XX% people from are with that and mobile plus I very math sort year so plus I acquisition just then two to where you I million for minimum X% a stronger I year? next sure mean so organic line the frame carryover the incrementals I'm is get XX is if on making mean X% the is next below year XX do sure implying I only top and even that way just of just properly? equipment looking you this to are we've this just mobile hand than the XX% make you that's year's

Philip Fracassa

of much to is get you else on still. feel comfortable us. cost incremental margin price saying it versus three be from benefits incremental the Yes, incremental but it or again we've but expect next versus would split exactly add better the ready triangulated year want not to Anything volume and how to

Jeffrey Hershiser

settle but of compensation as us hitting the normalizes David which in normalize to the the price ramp company mobile or hitting incremental year if the but than hurdle be mentioned. mobile revert year the next us to you that Rich the people and No low us in cost incentive in I would year when few logistics better at the on process in in to we things then those touched certainly issues terms obviously this next has think really hits more of expect across range getting look the that as mobile expect as better will end Rich you

David Raso

I'm starred sorry question me anecdotal speculative any mobile or comments for sign already next on pricing that next year stage contracts your year contract? you mobile suggest a better early for in more at pricing for actual on this or that better are this

Philip Fracassa

I speculation. contracts positive negative through to and say of have than a not would will is can but more to that good them through them and say from so some pass wrapped even our in in from on on the confidence always I up us pricing degree through than inflecting would quarterly, material prior than the it pass etcetera, we market, say have had a improvement and more it would we but plus contractually and of so of early had different we've mobile things we in mobile speculation. some have quarter some dynamic we've that two this XXXX pass already and in some working pricing for inflect a quarter contracts the say we of working what been we quarters market we on high been on would I and I pricing, working of favor feel more definitely annually will what in

David Raso

you All much, appreciate very right. it. Thank

Operator

from we with & our Justin And will Company. question Gabelli take next Bergner

Justin Bergner

actually thank the third I just in at for of Good the my morning, over quarter? clarification quarter questions, quick you was you questions. price the hear start on call Had made about a couple the slightly and did second taking that up the comment

Philip Fracassa

it material in It in quarter, quarterly second very was little through, pass of but effect in third slightly some down, the quarter, it the essentially was the material year-on-year less a passes was was was was less through. and quarter third so down down little the that mostly down less the down

Justin Bergner

was Okay, Or from sequentially the that was but second it up actually not? quarter?

Philip Fracassa

nominally have through up pass would quarterly truce again very material Yeah, been some from yes. that

Justin Bergner

Thank the outgrowth? that organic cross-sell got was the the outgrowth just or XXXX further from being trying you that that were by markets outgrowing some the and you'd outgrow organic you. outgrowth then in on growth that to acquisitions opportunities benefiting talked driven it. Okay, might about and And was to the you the say allow acquisitions acquisitions

Philip Fracassa

I in stack stood. organically to lot across sum certainly, those year grow acquisition will latter, carry-over. start to and organic the the different competitive X% terms with delivering, just revenue expecting the of pretty up will the of selling acquisitions was have that numbers add-on on believe so now are where on we're incremental and think been year-on-year that two of well believe then some XX%, same market landscapes when initiatives of outgrowth we cross but we're up the growth, to working a and market three we both obviously top we deliver look top And our various

Justin Bergner

way year lower in good and in in seemed might maybe then than come Okay, the it you're like cost come the side, of great. And year looks would some to the a a of XXXX, restructuring bit if on it restructuring restructuring this earlier into provide maybe little the looking of sort glimpse to sort is what so view that number? willing it

Philip Fracassa

a next $X.XX would somewhere the number in this of historical and to took see going is, been and the generally that happening earlier but improvement not we probably to the happened so don't to year say on saying year point, margin over mobile that number some this be things we lower what the year's range range $X.XX the make $X.XX below your we the major is land. Yeah, what between to need, the probably high make beyond what the long I end has and of ready restructuring typically sense. term any need to would level question to we range would where the we normal And of end would that within we're be good is

Justin Bergner

in back queue. Okay. Thanks the for questions. hop taking I'll my

Operator

we And question Elliott Stifel. Stanley from our will take next from

Stanley Elliott

good in question. In Is along about that be quarter morning or and you any platforms somewhat talked positive then the business other thank we Hey some that you turn seasonal outlook guys, comments, to for business continue are we - aware of? prepared the to taking auto those that the fourth the change should over. being there for and think how anything do new lines about and

Philip Fracassa

Stanley. up real thanks business we participate the where is Actually, Yeah, automotive well. holding

as North like know As premium well American globally. SUVs as truck you exposed we're mostly in cars

we and third So those sectors than a more as will which quarter to. a than I you more normally used changeover What said up know a well. as saw we're in was did out if our took one few of holding seasonality normal model in days the customers you market bit the

in quarter year. see year-on-year. we're impact quite We So, last down to impact didn't virtually have very the little the

after, if And from would we on or the at although so, quarter to a provide on get will here and bit remain behind to the fourth strong as markets benefit expect turn few quote and kind expecting we we months moved what forward remain et strong, after little not new for expect back. business growth in so will more continue flattish, to you probably markets color of cetera level XXXX the we're to year remain our the seeing markets but more at we this levels, albeit but strong

Stanley Elliott

auto you crack to a which business tracking you're heat square will, map, is In would maybe comments real and right done in say changed? to look markets if maybe negative, business the fair. and the now what this expectations of that How kind were have fair backlogs positive, and if guys XX% to the kind at you heat up map are outlook. the about positive sounds past that you That almost the of probably

Richard Kyle

The talked across with the a look half as flattish rail flattish couple really the be down heat inflected in and of would plus the fourth me map year significantly on first about would three just side. percent rail of were positive that as inflected that would all was we the aero minus generally everything other being those year on the and and north exception force the that first markets three be has well automotive, comps within flattish of rail on and flattish quarter markets plus the and or in give in half the

Stanley Elliott

a next Perfect. And up being bit equal of neutral, a whatever ultimately thinking talked become those business improving comp up had step in incentive Does a for headwind. here kind All we've it markets incentive big guys you the about again trend guided. given continuing of into with comp, ends not about or being trajectory one, of is been more the that last XXXX? kind the little headwind what year,

Philip Fracassa

set the Our and are year-on-year board plans year every they the year next it. principally, philosophically, price, are improvement but been share incentive two-primary EBIT comp by being EPS were on approved drivers primary they practically set the for approved and haven't with of

be a certainly So, it tailwind leverage improvement with headwind a from it on target a or tailwind would expected the but move be dollars, headwind in in year may those not may was year leverage. in in to a or to set generally

Stanley Elliott

you much luck. and Thank best very of

Richard Kyle

Stanley. Thanks

Operator

Vertical Partners. our Joe And we Research with will O'Dea question next take from

Joseph John O'Dea

Hi. Good morning.

gauge feeling moving as those bit distribution and to distributors more a we're process on see end of are a some going side, recovery of forward? if the the continuation I'm little growth, wondering just seeing thinking question some confident market kind seeing into bit little demand general perhaps recovery get a of outpaced about levels where First and inventory inventory but you extends what's there in restock of boost of and

Philip Fracassa

have parts seen as than really, has I been, think, more probably other little historical the it us it's pace, softer upside North median, North North We've not world, seen more America America but we America. number at lows bit that in more probably been let's Certainly, upside so growing of there. as also around a little for We look the much bit would the look downside inventory below to more levels than would way. be sees put we out, in restock

Joseph John O'Dea

bit the price that about the cost rising thinking did just within it from a have would sounds I'm mobile, cost on helped and get quarter, you the capture like on little then kind bit in other sequentially XQ, that cost items quarter offset? acquisition degree of better And Perfect. margins and is which to little to better of the trying understand capture, a little would or a the flattish offset been have with bit the just

Richard Kyle

there look to and - take to had well. there sort you actually bit some we guides other the we as sequentially, got continue thing us any adjustments than prior little as sure think of well, better items that's mix it, you in the I the material deal look Yeah, quarter with at hitting and I'll comp then incentive as like Joe, as as just of well impact adjustments it

Joseph John O'Dea

quarter, process little what it sequentially? about should And little but quarter, on mobile I'm third coming then down flattish understand, down about looks a about think sequentially in focused bit of thinking to like margin sounds corporate it corporate, we on in trying side, was the process the the just bit thinking like kind be mostly on fourth a we should

Richard Kyle

be fourth No, I likely say, similar, think quarter third we I to in say would the the would would similar process. that be

Joseph John O'Dea

a lot. Okay, thanks

Operator

question with from Markets. we would next take Steve our And Barger, Capital

Steve Barger

Hey, good morning guys.

Richard Kyle

morning Steve. Good

Steve Barger

to said be the just wanted the comment, shouldn't had year. real to that But square back go next we've trying you that, it year it Just that was this headwind to traffics been translate solid rail expect into past XQ, after-market in year. the increasing sequentially or that you would XQ rail and to OE growth? what orders car car point At over

Philip Fracassa

inefficiencies the we the expecting except now. of and six truck up down year, - highway for there heavy when had last ramp for this ramping nearly ramp about quarters is XXXX Again, some what rail call in to off we're inefficiencies talk through also, rail but both we're - we

that's and than saying strength, your you and - there's make seen strength a some - we've we'd North that seen in some other to off point parts to to America, can case really, we've the world, So, certainly be we've going would of part an the yet, next out and of to seen the uptake we've we've so, would a end year. you the bottom first uptake, through seen that's what us seen and - take year tell I that we've not an

Steve Barger

early Got you trends try inventory better And expect do some North earning in comment there season America? being rather sooner in distribution it. American at thinking back And how North are from volumes up? about with improving than price to you below average pick does but seeing levels company's to then your orders, if later we're volume volumes

Philip Fracassa

my this then distribution on be finish to better we rates on that compared rates as the so start in an the run this but major company in would think have off price the year some backlog. I higher, price the backlog would will if comments start the be our of higher, anything expect again that to expecting to inventory next year-on-year up good we've, channel. certainly year, year, with we total And realizing to element a not are are as give side be order higher favorable generally the expect and year daily there would

Steve Barger

on last, And as you your issues times just about lines expected product just any factories in or that? are of talk one running lead or can any

Philip Fracassa

has constraints, organically mid something customers. been Yeah, that some that X% hard-core I constraints but certainly pressure down, not would with not is produce, on put say some teens some we but running running any to again or is but could into up sort what hard machines our we capacity of certainly have at from of things numbers certainly to and of a clearly standpoint us, and high implies up flat, are something

compared things, we're see a historically Let's global as from that how and responding they like and industry a to that would say and but power and I industry think of competitive standpoint transmission bearing some bearing strength in sort well of we ours. well have products faster

Steve Barger

you. Thank Understood.

Operator

Bank And question take Lynch. Merrill we Ross of next America our Gilardi will with from

Ross Gilardi

Good morning, guys.

Richard Kyle

Good morning Ross.

Ross Gilardi

our margins take up less get being next getting $X in to pricing to pricing assuming know couldn't and talking usually given XX around cost inflation XX% about to and mobile I to back In you're year standpoint to multiple my respect very and to up comments than to mean talking what to your but your mobile trying I'm you're why from market what is via would cost improved SPQ SPQ just assumption XX million the which for just trying and about that's points if price you narrow, hard what with characterization head seem steel slightly but about I'm say, follow year? that points of you case be see we're pricing. it's next improve for so to basis of going we're higher price cost don't mobile than seeing basis base

Richard Kyle

which negative month we price negative a material while had cost that yes. year. term? again of up and in would and absolute point projecting talking go a we right would mobile. been for versus down again on cost longer and an a call negative film has us timing Yes, on sort go flip positive or recover cost the couldn't it it positive been negative relatively now what also stable next mean doesn't starting that Would cost if to price, price, from next solution had does now to next be quarter, we Yeah we was pinch well I'm biggest then little or to price pinch again right to has bit that the or probably about two not expecting down quarters to from if negative

good we and rail that at next tactics be And seeing of have said to over same underway and margins triangulate year. mix look we we and up cost believe and can what just will that the also lot into back with will our in get add carry year. that factor next So as we price I a up up are XX%

Ross Gilardi

point? December be is thought in to into trying negotiated and in the thought I being surcharges remember I own But mean you of for from quarters aside most sort visibility this that SPQ steel your in bill so always our kind going do to stable when annually, have I'm happened at of just you stable to you prices of the year I what XXXX used on of terms materials two SPQ any

Richard Kyle

when And then be my us. North and sizeable in or was mechanism got generally timing our the on it specifically up referencing to then mechanism agreements generally our as the we in in we've price how in again, have surcharge try base know a American we Ross, favorable there's the you agreements. the yes, just term locked and favor, Yeah, back all and generally for the it shorter table which buy whole pass pass through goes where bunch goes different U.S. world through negative not case we the as to down we around year a then lag but it's when get on within on short is to that surcharge so market can

but stable your market from two point mean stable on my that it global generally point three or be was the quarters necessarily to referencing will So, doesn't now.

Ross Gilardi

several competitor preps speaking in base I the thanks. a pricing rather changing per of all, with at some does the outlook there on the big experiencing this distributor performance that pricing bearings is think And generally all than any influence you the over general and unit just customers moving the how of or shift bearings were your big next global potentially your mean industry for are basis the about model more any just guys selling is then model bearings, big OEMs I Okay, towards years?

Richard Kyle

questions very them phenomenon niche probably of a that is better than the us. part at directed the still think I market,

replacement some place business very commitment are that where our or would services a that mechanisms more have we We price that rate of et to in service agree we like do small cetera. in would a

don't us starts the in So, be move in are on world small impact, it see the now really would obviously a could of a but major we largest for too huge it's XXXX. part that year certainly as a not a seeing player the business, that or part an in next of in that direction moving swing it our very but big have

Ross Gilardi

guys. thanks Okay,

Operator

a Company. And will Bergner from Justin question Gabelli and Instructions] follow-up with we [Operator take

Justin Bergner

prints as acceleration sort at world. Is the or PMI there mean follow-up process the it guys. given other anything ISM unchanged guidance the distributors in further process, Thanks back was have to of seen kept restock My we I prints organic some industry yet and around question was be factors? holding in fading that your relates process of and, exceptional

Richard Kyle

weak just it it had the OE in still No, our said pretty but a improved little heavy really in still seems of market quarter, in to oil can commodity and oil Wind exposure the tell distribution sector general saw the growth aftermarket, I was that to also still Justin in we was a drives, there. good inventory up we and cement. saw we it be we you gear industries it's OE to little say base, the would a soft sector aggregate I very we not and would nicely in bit quarter I saw pretty industrial that say I'd bit in saw the industrial gas as metals, there little lumpy be good project we including tied a related can business be services a then lot gas. and

pretty the while was of still in kind soft. So, flat quarter that

process sectors will positives think in the broadly that far more but negatives. than of So, I you do soft are still couple if

Justin Bergner

a is a to was percentage I of up it down tending mix process just view, of margin to as me services up remind point And from that or big overall Okay. a process. how follow question, versus mean

Richard Kyle

- of have don't And me, then XX it's process, confirm from our and little a a I back to a get that of can maybe quite is can bit in as see services probably the say expect tend mixes to would bit OE bulk in that. standpoint in as we maybe that standpoint up range. to I the line percentage of operated little I would in I but relative not good distribution of we from but you kind the a kind of process on what mean services it and front

Justin Bergner

Thanks. Okay.

Operator

that question additional at to for this session. Mr. Hershiser, you sir. point and answer conference And back I any closing today's turn concludes the will remarks

Jason Hershiser

Thanks Alan, joining us you and for thank everyone today.

our is me. call. Thank Jason further XXX-XXX-XXXX. today's contact you please after name this have If call, number questions and Again, my concludes you is my Hershiser,

Operator

And their thank Thank that ladies and does to for everyone today's sir. like conference, I participation. you, conclude gentlemen

now disconnect. may You

The Timken Company (TKR) 25 Oct 172017 Q3 Earnings call transcript