TKR - Earnings call transcript Q1 2019

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Operator

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

As a reminder, this call is being recorded. At this time, I'd like to welcome everyone to Timken's First Quarter Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. will question-and-answer there [Operator remarks, speakers' be session a Instructions]. After you. Thank Mr. may Hershiser, your conference. you begin

Jason Hershiser

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

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

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

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

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

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

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

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

Rich Kyle

in basis more X% an Thanks Jason. XXX year of was excellent thanks line revenue we about We over organically the margins with excited grew per within are Bearings. were XXXX $X.XX. up inorganically We starts expectations. Good XX% Drive, everyone acquisitions up and joining quarter than Cone acquisitions our ABC of up X% delivered businesses for over our and share Timken. these to and remain of points record three We XXXX which Rollon today. start off and excellent driven by with earnings us morning future prior All

stronger. quarter. exceed $XX face included diamond dividend quarter of paid for is another chain. the was several record a We as industries, was scenarios. working and flood, well SG&A, and through goods million a as us in these operate of our the EBITDA across operating in inflation, on production points Our prior Emerge capital the variety these quarter basis We over bottom and XXXth full held was of another of of XX.X% operating it than points for capital acquisitions we line through year. purchased year prior currency, allocation, in we In due year. and sales and achieved for a Overall Timken strong Mobile company, very prior to cash growth. ahead volume, strength in of XXX and excellent the basis the completed ability XX% with XXXX. our as indicative $X.XX seasonally performance XX% expansion year margins performance, at expanded the quarter to Margin our reductions record strong margins of sold the even both which and Free deliver headwinds remained process the saved margins improvement put reduced share positive shares was first XX.X%, of up us margin and organic plan excellent the of inventory tariffs, Process to XXX,XXX lower costs regards from billed XXXX. margins flow strong XXX tighter from our beginning to and strong. for earnings material to were year We April in headwinds XX.X% levels market of levels of the mix cost of acquisitions. per by the price-cost increased portfolio positions

excellence, to allocation. through our and drive and We our expand continue year through for performance, outgrowth, our profitable mix. strategy, the three diverse operating categories our of our quarter outlook I'll market the product and growth operational capital and strategic on

from about we quarter pricing and revenue organic expected. an as standpoint out First played

environment markets have over market that but our and of XXXX up on well in some back is moved when do for second While rate the strong has up two well most outgrowth Timken price of we our stack an price know final peers growth stacked organic all the it we has to X% moderated first profitably of From of points rate and as our for we well. look and XX% XXXX's years growth basis that a quarter we growth further first realized together XXX grow. X% end in moderation and After nearly organic over will of growth segments in we realize run half quarter. down geographies as the pricing perspective From we and at year-on-year to expect for also organic are believe provides rate XXXX of in customers. planning a We X% flattened to opportunities perspective into remain expanding sequentially.

wind, is delivering food service in India places differentiated our And and industry-leading focus solar, and people. like results. China are with profitable the marketplace innovation in beverage, We products, our on and as markets expanding and well and our engineering, our and as our winning growing like

a off second sequential XXXX, and planning of weaker third experienced As for we're balance at in the uptick we would result year. slight then slightly in look declines demand and we quarters. in sequential the quarter the first quarter what than modest That of fourth the last

grow imply decline half the sequential again XXXX. not the few in years anticipated second not have demonstrated in does we As will we the last that

a is more forecast the have had experienced. conservative will customers solid. remains than months view demand that would trends of any that than we cautiously remains firm taken two have on While speculative and slightly year they ago their grow based I half more that say remain businesses view we that second this we optimistic and

We our have positioned to before from to quarter market slightly if incoming are be into any to orders too respond backlog well our impact acquisition second month second-half we from One and first and grow conservative. the excluding diamond outlook quarter currency. proves the the

continue existing as to our drive the will XXXX. for revenue value both a and I year extend initiatives the apply throughout made up on Repeating and call we setting we Additionally us point proposition our out market mixes last new and in markets. growth well margins to

yielding structural In initiatives. the also performance working delivered and cost strong and Our focus operational on productivity capital quarter contributed to margin reduction improved improved excellence our results. we expansion is with

in are we've made our platforms. investments the digital We leveraging

Our levels footprint, and we a continued our it’s as and acquisitions have percentage people Despite SG&A chains, of at to showing. sales as higher our supply reduce we SG&A grown. coming in have

advance and up and and full that material our our during cost the quickly Our through quarter footprint impact. the We operations. But rail disrupted to significant global operational the we investment but year. modestly capital costs quarter and value. responded positive to to expect were remain experienced teams customer to Tariffs positive a flood deliver the continue price in it remained of initiatives continue mitigate

and for approximately company in we margin that and hold XX% expect some quarter normal would margins above about seasonal XX% we first for the then We mobile. full to softening second year the half. for the target second quarter set us That will the see in the bring the

Moving focus the teams performing are on EBITDA this working and less conversion these The year when capital just as cash consume and them. our are we working acquisitions better increasing today allocation well. am on all with to I are as free as growth cash well expanded moderating in year purchase positive XXXX, increase capital in we place we businesses as increased the cash flow very capital. we outlook management full margins the expect as for

delivering are the from EBIT and performing high above As you plans aggregate and we running are the integration synergy and are at on In levels. revenue see they businesses the can walks the company margins, EBITDA EPS much accretive margins above the this for company average be will average year. the they for average growth and first organic the X.X% quarter EBIT in for company above

We provides higher sales we teams the and chain to businesses. market, opportunities. Diamonds forces portfolio transmission Asia portfolio. critical greatly leaders, combination diamond Timken are Diamond the Drives and distribution The expands moving significant chain strong and chain the Chain within Timken combines costs have and two channel, integrate to management added is pleased position to recently quickly of and our fit growth the North are between American in North American strengthens two our power energy

as we enough remain to allocation or to our excess CapEx be flow. deploy As M&A internal The our buyback look capital free reduction look our we dividend debt will priorities. pipeline further is that forward will this believe we active both and we cash year. After our top support to to our committed for activity bias and M&A, initiatives

continue that shares. reduce debt our last less flow be lower expect of back I magnitude full in also providing opportunity to cash However, than to or year completed the likely and would to year than activity we what buy

be year and Phil million increasing We to up expect the we revenue, $XXX detail. share at go X% the our to and modest on are start points quarter. the XXX generate over outlook free great finally, it outlook the to second And in full cash midpoint in remain will in now per a earnings margins in buyback further into XX% while to year was the we basis flow.

Phil Fracassa

Thanks morning everyone. Rich and good

materials. share up quarter last summary $XXX sales. am Revenue million For the XX financial the XX.X% our basis of results and year. in margin slide delivered adjusted came a can or was the at came million about on start and XXX up from a you to see earnings Adjusted at XX% in quarter I slide. great Timken points per any year. on XXX about a from last record for EBITDA the expanding company year-on-year is and first XX% going $X.XX for new review of in This

XXXX sizable from X% quarter top X.X% quarter about X% strength segment Sequentially, outgrowth ongoing to and headwind in performance. a at added XX, sectors around revenue our from most translation sales markets industry initiatives were of and We with the impacting to the Acquisitions let's end by the notably continued of dollar. of growth pricing. first positive the due negatively look up fourth reflecting benefits Turning several process currency line across quarter over to year. slide the U.S. net X.X% plus and in last our organic about take stronger the delivered sales fairly closer

this the region. by side slide hand growth On right organic outlined of we

we So currency both are and acquisitions. excluding

in the organically. up are can You regions quarter see most that

briefly. lower declines with were notable energy, gains by as across In India were partially Let down quarter. in me saw region up largest led and aerospace our Asia sectors industries and up heavy offset America the as markets and by X% as in by Asia were distribution as broad highway. were touch demand the were Europe heavy reach in in truck. shipments in wind largest region on Latin we rail XX%, process industries and two we X% in North are In lower distribution, and partially and we In energy, we in rail saw strength double-digits we up well finally growth wind most and China America continued XX% we each quarter. offset up growth up

Turning XXX to basis margins XXX sales points EBIT or with slide million last of up year. from adjusted XX.X% XX, was

I us. in margins XX% for over quarter that walk EBITDA a the milestone EBIT I point adjusted out move the to were Before would nice

first can mix, which and impact higher of we the acquisitions were costs currency. see partially SG&A higher the by price cost performance, of quarter manufacturing benefited you improved As and in volume, benefit offset material lower the from

Let further few a of on these me items. comment

On first the I but was both impact mitigating As was for offsetting inflation positive was price material we industries. as in cost mix tariffs the also and mentioned the despite negative and quarter the more than with tariffs. process positive quarter. of are planned positive Price Pricing cost tactics impact more segments in in pricing. coming through

With of manufacturing to offset grow. leverage our in benefit favorable our and cost initiatives the inflation. quarter excellence was cost we than Our the driven structure moderating to which extremely more growth well improved continue performance by impact as operational of the respect SG&A, we productivity and

the any to quarter driven which year. and first The property net on margin we quarter GAAP tax improved a That by for a or that that adding an the the for the the tax share record for last a of XX% acquisition for XXX earned quarter. charge a basis pre-tax And storm up expense expense EBIT rail from tax As the was $XX accounting our share related roughly our XX% On was GAAP adjusted impacted a year percentage facilities. $X.XX sales around discrete per of quarter one amortization. bulk of SG&A a contributing higher loss In was quarter XX, points slide of a finally period the revenue income from rate year-on-year. and damage posted $X basis an from represents last adjusted of Among see are diluted in basis million XX of a related that's the new to reform. million On positively in EBIT company our special flood U.S. purchase per in acquisitions after million we on our $X.XX basis. you'll net items the tax on XX%. results six U.S. rate

Our was XX.X% from adjusted the in line expectations. rate in tax down XX% year quarter with our last and

maintain We rate of adjusted the the rest expect of an XX.X% year. tax for to

up look led wind a or were heavy process across segment our up sales sales million industry distribution XX% slide results industries first year. take industrial last Organically, by over on business quarter were at for the with Process growth about sectors XX. energy, from million XX let's XX% with virtually all and industries. starting Now XXX

over unfavorable the almost top while quarter. X%. saw added XX% by also line was positive We pricing translation the currency of in Acquisitions

increases both with and strong Looking more gas, growth in and growth in Wind notable Asia. the Asia Latin the gains with and oil in aggregate in saw closely channel in of Asia some was industries bit up Europe the in we largest also America all with markets, regions a and a metals, in America at cement. quarter North except we heavy distribution growth saw the in energy

sales was EBIT For EBIT the industry XXX acquisition million price XXX favorable was of to process quarter EBIT year. of increase and benefit compared million The basis by was last of by volume, year-on-year. higher offset XX Process Adjusted industries XX.X% or adjusted XXX mix EBIT driven margin XX.X% material million. expanded the partially sales points in higher or cost.

our are with most X% to up for XX% Our to sales to sectors led process outlook industrial increase prior for industry XX% wind guidance sales the across distribution organically by we to for XXXX be X% planning energy. growth unchanged from and

around to We expect price cost EBIT expand to be positive for the year from and margin for adjusted by process XXXX. basis points industry XXX to

down off top-line pricing. well as in the slide Now impact were let's Rail were mobile industry Organically X% or up quarter. trucks aerospace added were of as heavy quarter industry slightly was year. the positive from of turn each X% quarter last sector the just up while the first to up under the XXX growth X% in slightly. and sales million highway almost Acquisitions reflecting over million sales mobile the on XX, in in X

was X%. over unfavorable by currency translation Our

sales at bit partially the in in of we reflects the cost slightly in some of growth industry XXX EBIT in were compared but was were in offset in relatively favorable closely truck and costs, manufacturing in SG&A driven by declines in had note North improved lower down quarter. or up growth last XX increase a sales and Asia in by to was price impact in but our EBIT and the EBIT offset with higher Adjusted industry of up highway ago tough million in year-on-year. benefit mobile XX the was we of points Heavy EBIT mix, Europe the by in performance, adjusted up In a Looking markets, or material construction agriculture and we defense and America million down mining down margins in XX slight basis some in America Americas. slight logistics highway XX.X% of Europe mainly was year. were XX.X% North slightly million Mobile The the Asia year the and comp North that quarter period. acquisitions and more rail America slightly related. aerospace and

as X%. below be to to up This outlook into last Our industry be X% planning for up Organically to a flat moderate outlook mobile our for prior to for rail is for more we off sectors. compared X% sales sales to highway year. are guidance takes and XXXX account and the

the by revenue aerospace a sectors expect offset we up, on across year mobile the net flattish For to basis. other be

expanding adjusted margins points We expect for the basis we from XXX margins with year expect XX% EBIT positive and industry over price exceed to mobile XXXX. cost

XX, Net you which versus the cash operating XX ago a times around last was the strong year. free spending of period. quarter seasonally March strong with cash from higher $X.X last the also The during EBITDA million slightly flow slightly balance end pro slide million adjusted down to around flow flow the debt down capital sheet. improved quarter around that first earnings XX was at our free and XX Turning quarter capital year-end. We from of ended from forma CapEx XX.X% generated increase up at end we million was working X.X After debt see billion cash will Net at reflects quarter. or was year. XXst management the in year

at highlights a so You items on make can regards see me slide. the in of some bottom just the covered of to Rich outlook. already capital comments this few of allocation the most let the

less on million expansion. of driving and X% most sales growth at aimed spend roughly spend or to than expect CapEx of with We margin XXX

respect our in buyback we stock And on expect finally, cases the intend with M&A. dividend maintain looking for continue have integrating to We're to modest balance more a prior an we and all XXXX acquisitions times. strong but than sheet. We ability years. In repurchase recent to we attractive to will additional pay focused

for see in should several us and the industrial now to and X%. summary We're energy for with fundamentals a adjusted to to outlook to at to planning aerospace markets deliver debt below last increase X X% EBITDA XX% X% look Organically year-end. XX. by up the expect momentum net year. distribution, and flow wind Our XXXX we We slide in to cash sectors will and expect positive opportunity including I strong we pricing end on year. versus total sales and earnings provide growth revenue be positive times for

guidance. backlog we the top X% Our to add be supports year we on acquisitions closed as This our X.X% revenue announced to And last March expect translation currency rates. the X.X% Acquisition XX diamond acquisition. chain exchange should negative includes to the well recently as line. based

and XXX that's million the of around above or points of and will $X.XX On the we the and for prior our the the of above $X.XX margin generate year special corporate incremental EBIT $X.XX on bottom per we from very share excluding estimate now share to that line acquisitions of in gap our will strong year. for adjusted XXXX XXXX. performance year XXX cash midpoint roughly earnings basis finally at implies outlook level which in record just $X.XXX amortization at be basis expect to midpoint charges diluted guidance flow over free earnings we XX% the and of range the rest adjusted anticipated The year-to-date estimate up outlook in XX% the from next a we last of the share is based after our $X.XX that $X.XX per expansion totaling per range

was it summary a first to great start. quarter great year a off and in So

growth, And and line concludes will This on said the focus optimal our excellence, capital will Rich questions. driving our As we profitable continue operator? and remarks. operational for we open to formal is now deployment. working strategy

Operator

question Thank Volkmann you, first sir. Jefferies. will Instructions] ahead. We from [Operator Please from the take Stephen go

Stephen Volkmann

Hi, morning guys. good

Rich Kyle

Steve. Morning

Stephen Volkmann

guys a was marginally I it's couple bit you probably lot just a lower a half. around when guess just provide maybe maybe more outlook color slightly that seeing little Can in color you you there. can when markets? the Rich But that threw are rail So was little highway second the a out those you in said you and give of what lower things

Rich Kyle

and Yes, one largely be but looking a puts else and where off some and in in are highway months that would is couple largely with of rail ago. correct. line we everything It takes

there. second On is a was it Rail the quarter more quarter. but for up first rail side, the the in little little complicated softer looking story

which the As water facility in get was I material global operations flood. damaged, mentioned we was Tennessee weren't Tennessee but had was No production mostly was but under week. significant for raw for into primarily although We lost a a a facility to U.S. warehouse a and a on global of facility week. in part we the over rail a able water or about equipment under

quarter am since So at some in little well we quarter that look been relatively modest we the as as term modest have But the caused customers than it I lower quarter, anticipated we on some the over well taken and but a full effects sorting has on a as second that lose had at is effects softer we production numbers actions we very the quarter confident some been happening our look of for sales think than was that we first in might as year. as then but the scrambling quarter a look in the little industry. be rail first the what what's share we If second the and reflected long are are impact through we market the our it will we in and some looks like half industry, through any still that. may not

bit us the counting you stronger mobile bode obviously were rail as will this being little and one second pessimistic was year. and are So more the the it mixes side there we more if I a too we for that of know half is in stronger time stuff we need think probably and a rail little be little time on well on rail up a we market to

did growth U.S. highway outside just better because looks market bit little Off OEMs well still So AG we're the doing working more than the us. first said that more and quarter a we and would slightly. I up pretty us. way the construction in I was good say again as probably for think little growing inventory we share No time for market are. mining I like on a issues moderating

Second good a into quarter choosing than how year looks sequentially would of but the the take slightly outlook last weaker up forecast to ended that that rest year. we little weaker that's it we and

So little We're the say some I'd demand just with the half the for out both being those strong. second of markets remain uncertainty on conservative a more there.

Stephen Volkmann

just side plus Asia? then mean outlook numbers. and I Super the the strong on some are very what's Those for

Rich Kyle

we would or Wind would Very say us. again I of say drive year. a wind looks on the quarters getting and our sorry demand was the visibility strong for that little wind I of to last a at start have we end quarter beyond and very is maybe and on China lot good year the good. when one bullish of year big out where would and to will more very numbers which then I'm wind say markets wind the I were China market a for strong nervous full

pretty good the the it the well I very that other say have items China seeing as I lead for would looks about order more coming generally read generally longer just China. time it And outlook a is quarter bit you we're second little And area and back good think in what third where and visibility. the thing not that from China quarter. wind looks an we book is about

Stephen Volkmann

appreciate color. Good I it.

Rich Kyle

Thanks Steve.

Operator

Next go from question Please [Indiscernible] ahead. comes of from Bank America.

Unidentified Analyst

my Hey question. taking actually for my guys thanks

Rich Kyle

Sure Mike.

Unidentified Analyst

first year? you took talked the little up you quarter in can that curious how of guys that you plan how through end half to just how second cash compares see just in the how out We out towards you or good margin. us a about in still kind you ramp the of maybe QX Can guys inventory. usually up did and inventory I'm seasonally the walk in Yes. take and you the guys put flow you

Rich Kyle

inventory the growth say year-on-year but we we're the of from Obviously, we've following for the quarters. that a opposite that for comps has standpoint each cost full volume year would would Yes. I with got moderating the production expect in good expecting impact factored manufacturing in. build that

would say I half year would moderating to seasonally with the inventory second we year. the this of reduce expect also So, growth in

So, half in in second the and second and we into why liquidate revenue sequential second then see second in too, And is quarter the up seasonally the well generating one half strong flat typically we in the flow slightly receivables slightly down very the the weighted that reasons and our that's of as the cash. with half second why cash half.

have half probably outlook to now. for good the So, than feel very cash the the would that be modelled be very really we good good problem The being stronger the start us I second about what and sales and year. probably biggest risk. a cash would outlook

Phil Fracassa

if inventory just a really use good We with us the of a we're seeing that you're when end and The but building add, that facilities year the lot We're could in can right throughout of where now. we productivity position now, out, deployment I obviously right year. inventory about I our that's year. we leveraging it result terminology Phil. the Mike, or at maybe dealt put in really inventory less controlling absorption. that And less much last this it But cost terrific taking are is does inventory talked

Romania a productivity we step-ups we had which then and of and of of clients a growth those the curve we're mobile as kind in growing We're lot. moderate if house continuing well. in in And benefitting help change now operational plans us you contributing. the year excellence couple up side a generally the in see So, new on to our last initiatives pursue and the environment, finally, will in plans are which Russia initial through that's which are

initiatives. So, productivity was volumes, it's cost we're setting, while fixed more up with we cost naturally reduction than are we're the absorption less and with our -- it seeing less production other

Rich Kyle

within to growth, inflection would the last when I capacity strong confidence opportunity add growth, would say the the skewed reason at us. quality, of year, working service that organic I plans. 'XX inventory, capital It's front always you where focus balanced, strong years, our on the but the organic service that for we look years have side capture in operational in side, two three very that market always an cost, etcetera focused safety the 'XX and to towards

much again more more addition today, but we're the better so, focus in where course that you're that and inventory you to to a but we standpoint, balanced adding in look and we through as of And that of with training, hiring, see productivity the event we're volume this on of shifts much benefit in year. more going the service doing leveraged in well are

Michael Feniger

Ag? this at within And particular April that some you change but that's being prompted see in did of question, a March last based Yes, than on and the with Ag. tweak helpful. kind forecast look mining construction anything you just kind in of Could in guys granularity you you, kind the and the of bit mining outlook. in construction you more better or slight when the that made you brought March anything said and And April on outlooks

Rich Kyle

have second would back a in have bit would into you out expected, and look mining been that than And February would extrapolating we're the we as lighter say I the then has half. I what would say there. little where say about anticipated half, I at first we just would nothing so

definitely in two look necessarily what what shipped a March/April have se but per bit would our of quarter the highway lighter than in believe little the we nothing in we as we what quarter the So, first you we'll in other anticipated. are segments ship but second

Michael Feniger

Thanks.

you think sales So the just up you was think I just full-year. the Could said to that's like and help the with I understand mean I lastly, how acquisition, large. just measures XXXX how million $XX for much first up

have to it is scale M&A. more stocks between clearly how dynamic the your up, understand than operating in of bolt-ons well. you of that's mentioned guys rather better. to you be seen the that to having think flow the gauging going bias kind shares in, a are trade guys Margins where bias your I but smaller you past what the of I'm own are cash are appearing just I bolt-on that probably more you curious where we’ve how

dynamic, Just understand that help us thanks.

Phil Fracassa

Okay.

questions on I are into 'XX the year it what the we say high acquisitions as did the sales business that 'XX would is mostly sales. versus in expansion. there I piece, few is was there I and which years growth think is America diamond last diamond as question it's two industrial not North in an think the

growth rates at line what would And say I a prior the be would they're seen. similar happened as that have would see years we with whole. So, higher in to in what we company in looking growth their

revenue we saw a 'XX and big in and that forward not the in backward delta 'XX EBITDA acquisitions. or So, versus revenue

part at. the between much forward a Although we EBITDA will case redundancy amount synergy businesses of more will question? And second come from good with can the a what two get really be the pretty that fair of

Michael Feniger

sorry? I'm

Rich Kyle

doing but is cyclicality. would making up regards I strong our the have and both shares mixing changing of bearing to in are as say however do the this package growth X) with attractively as been well our I point also priced would a margins the are say changing agreed to because part is and also reason attractively that the which your acquisitions priced, is shares buyback we we On our that modestly

also diamonds taken are about into we looking all and be just the cyclicality I account. some buying And look we versus acquisitions at industrial element of of forward the like point that has So, business at to stock our if EBITDA, think have trailing at the you to those. then, look most

we same don’t we've were if would And we experienced at looking all outlook we that today, positive but the I XX still months And Groeneveld slightly we had probably the months quite in have in. buying bought XX it, the revenue think that forward moderate. so factor that those in more on

come multiples -- we our like paid both share synergies organic we I EBITDA business still we growth that So, and down as for think as well the buyback quickly. have through these

what's two headline versus numbers. today think very I in So, our the multiple embedded different results are

Michael Feniger

Thank you.

Rich Kyle

Mike. Thanks,

Operator

from The Research. from Dankert Longbow comes question Chris next

Chris Dankert

thanks Hey, taking my good questions. morning for guys,

Rich Kyle

Chris. Hey,

Phil Fracassa

morning. Good

Chris Dankert

remarks or in XQ just in of we're I in XQ number. flattish the to And prepared that there's out? want impressed premises. the mind really trends the for XQ of it to typically the that off, conservatism that congratulations be on year. taper margin across just modeling kind bit put I sequential of kind both of we you just called on I bit guess in into point EBIT you're discrete half EBIT counted and a Is that margin, looking something more keeping then the fairly of you a guess should some first saying see a the and back forward softening as similar a call

Rich Kyle

second off typically is right not say a peak and drop it's close, typically margin would they're for the quarter year. I you're EPS peak but our big

holidays bit You and you that's get you the some some get the in typically further a in quarter shutdowns and into OEM the third obviously get into shutdowns then little into European U.S., quarter. expanding fourth

be there don’t seen have what So, years. we few on the unlike average we've I would last too anything think over that

Chris Dankert

of of targeted. percent at of that And of as know are some then, plotting guys this you're level mean internally kind things there kind probably out kind where where bit it, color comments get that Day I you in come does sure on what are more targeting Got sales here because any just not but SG&A point it's or Investor still are a kind I quite of just down and a we'll out helps. eventually

any there? help So,

Rich Kyle

XX.X% I grow. the mentioned was And which was around is where would on say as SG&A a Chris. significantly structure it continuing our quarter, we Yes, to as SG&A from couple ago. we years we're of leveraging on down of focus our sales

mobile important focused on to to we're growth really hard because so, SG&A it's And controlling continuing process margins and really industries and we're up, industries. invest for those get

of target I SG&A. And probably a And acquisitions SG&A in still on are long-term tell cost SG&A a you will more color little we're SG&A also industries. earlier is our continue structure. going up sales alluded an we're leverage to to give percentage going down. acquisitions terms like rich in from actually of feel and it's a standpoint, what something we bit But we're to processed the marginally So, targeted But range. as of but bring the the coming higher that able gross with higher the making most would margins as to a

I most So, growth dollars by absolute look obviously acquisition. basis in the if you of quarter, mean SG&A in was the driven the

well continue as Excluding grow. or compensation leverage look compensation controlling and we were to both was as we it we to lower well expenses, incentive down cost the it but acquisitions, as

Phil Fracassa

the $XX efficiently where synergy and to and may piece SG&A a platforms it the seeing story have of Maybe the playing versus part acquisitions or every outside that of look what we've productivity has last is several years million that we're back only there acquisition we acquisitions done to doing going in the and to a piece standalone operational leverage been digital of improved that. share with more family-owned a business operated even improve but not million buyback where $XX an we're are that and for

pipeline think done in will still productivity So, that core I across said have a now if things of SG&A. for come the well as to you pretty we it's the our the with improve that active big we've well of on SG&A part and but will

Chris Dankert

so much on Thanks quarter. for guys color the congrats and again it. the Got

Phil Fracassa

Thanks.

Rich Kyle

Thanks, Chris.

Operator

Sachs. The comes Joe next from question Ritchie from Goldman

Joe Ritchie

good everyone. Hi, morning

Phil Fracassa

Good Joe. morning,

Rich Kyle

Joe. Hi,

Joe Ritchie

would I in. Price to the give maybe be better any as can second margins of least margin XXX progresses. guess this and some touching Is expansion get by for you this there. of basis helpful. parse EBIT raised the of a One you out quarter guys the maybe year Obviously, expected base in for other color takes here. great guidance cost 'XX. quarter, just points there at so kind puts performance the Hey, on around already just there

Phil Fracassa

would a pass Yes, you down quarter, through charges, year. make is Certainly coming that natural than some through. some there going the also largely cost the at first bit And it sur of movements the margin Prices if have But comments the material more sustainability be done. that's our we up anticipated. at and hedge a about some maybe drivers been look little we improving there the forward. for that; less of a what with possibility have little will

expect going to inflationary the we I not of the from a call Or I hold see coming general of would say changes that to standpoint, meaning I what better, then cost, what up, and So, would on through cyclical the year. cost the the cost dramatic balance certainly that cost those full-year would side or steel mitigating we on for active. on On with case. the side, growth there remains to to tactics, that cost to deliver that our as so planned look have the that be done that we've start year. prior moderating And good on when talked various some I the about at continue in feel of both things will on pipeline that have restrucutal

log some look to assume side the overall, attainment upside where could But that is mobile play I May firm that. big been I lower believe look got and process five So, and and the there, May margin sides. looks I you completed very the the process that back and That on pretty industries, volume. have. already as risk hit the June front The downside And obviously we at and the on of scenarios you already we've see though I margins at feel got positive, the has it that with all that orders the us already strength is think at I acquisitions good. looking full-year. in Mix benefit see some have think and that and driver we with certainly a we're us we there's and volume sustainable out that the looks volumes. as of that feel on we've again third And on we quarter. again months we certainly think EBIT had then we've behind April for guided solid have the in and a And visibility

So, good. I pretty think it looks

Joe Ritchie

Super. around follow-on mobile just is My one question growth.

year talk looks turned to the up it gets bit a any you cadence but and progresses? like harder around you clearly comp mobile can slower around know year. color because in down quarters the don't the so growth And as so, guard expected, little you're any like typically cadence that significantly for for give XQ to I than about extent specifically took the commentary guys

Rich Kyle

last year first at looking versus weaker sequential a at QX QX year. of what QX quarter declined look little slightly prior last which year's planning and than play decline it for sequential and to to than bit first quarter greater from saw we if year I you would again then again from off we're we're last off and QX

Operator

comes question Partners. Joe O'Dea Research next from Your from Vertical

Joe O'Dea

Hi good morning.

Rich Kyle

Morning Joe.

Joe O'Dea

could the then the of You I little to notable growth more bit outgrowth that to some that but see out some think process for gains just to demonstrated a particularly of those relative ability the the the touched behind successes some talk a little maintain in to you you've bit industry? and outlook continuing

Rich Kyle

it's Staying are time other well the of shorter than market more projected the lead revenue well. Certainly is well to but with the we but you and industry [indiscernible] to since more wind about newer I'd others growth say bearing as Joe in is that levels of wind story outlook longer good there strong on wind market a months behind in the is term. looking been little solar and XXXX. in as a one into longer-term factored a extremely be story not what then going project-based We've through supplier is than to X-X and just to a become the over acquisition that completed Well as have very us Cone with wind that a Drive things. One good couple a certainly continues we to talked is we Yes. double-digit that XXXX. be portfolio well a and it's sustain

part of and beginning sales category but would say market us where an growth of have position got end the XX We and been a Looking marine really nice timeframe some bit for I I've has XX. area not years significant in us. story. the been is you where that growth we XX-XX underperformer sheet we've another high growth the as neutral for of XX segment it have long area at from over cycle. a did been an it's to seen the Aerospace of a is a and multi look the restructuring saw It's

I and think the sector believe the back we we you see if benefits would to XX-XX that were aerospace in to an where that go of underperforming. we area are I today. the been beginning outperforming market have are

for around for So story business, But that's in of and expansion, bearings is the again lot incremental. have our of even that focus aftermarket acquisitions, world. a and wins things a us bearing total more share are both and bigger a swing. geographic Distribution There they there. big demand company coupling, take small chain, than as etc. to belt

new We have people been in good some it's a big as in numbers it's geographical well. sales adding some for these inventory work Africa. but outlook people growth – for in very aren't It's so base us small

of others the you it lot there sample are be years all few together we go well. add a you I to think there dollars but that as that's doing will are $XXX,XXX million in and into So last if year pretty

Phil Fracassa

regard that undertaking products Joe with product development several complete and in word. and been just better guess but talked pay I you bearing types to picking product really full really bearing. that small Yes, the for share new for years a are in of markets maybe bearings spherical out up We have of last now gains add if industrial shares efforts could line lack to roller I all about roller across over are we relatively mean these we start the dividends have I are Rick starting

as we that general bearing serving taper bearings about ago. the of well a as industrial we years plant couple metric markets So, [indiscernible] talked like markets built

relatively shared facility we given tapered we bearings us size have are new now seeing of modest the there. and leader metric on We some in bearings metric ability the world side to in house a outgrow tapered has gains the where have this share

add small and the products of as do on up Rich the be that it definitely they process industry wins you more and tends side to see but So said known certainly. house

Rich Kyle

beverage market will cyclicality much a of a but necessarily but I growth not markets market. off Phil and different growth to one back said what food high and go feeding Another good a

talked a the our done bearing bearing and a EDT bearing put organically built Diamond there portfolio have with the package with have Cone out lot we of complete as portfolio acquisition about side We complementing have have Phil and our on an also together.

I be space in and think short in lubrication as order will in beverage it well. the food

feel that a good more that for things but we're you So types you go the could of on on gives doing.

Joe O'Dea

incremental to when you all seen process now you've I in seen think and detrimental on have maybe arguably past anticipate about we've of see little higher done better also be detrimental bit is details. just your have process we how the a we to through cycles? those the than things that process what don't I'm well out and what but we one but we When of broaden not much to go manage sure really good do might the about done I really feel pricing history No broaden you a the how distribution variation portfolio you as think ability appreciate think would long about into you've to also out –

Rich Kyle

we're that know not too right really don't detrimental because on train the into Joe want that I go I now. far to

We incremental are on the outlook.

cyclical a about things just are in we the we're So of heavy cyclicality markets. gross I doing with and that would say everything I talked still lot

and off – changing with rail again don't markets. highway we are not mean cycle food certainly there we I and the those and beverage So in when will are day a be portfolio contracting we but

Solar to goods. capital still tied

X% to we're cycles sequential quarter the to is that get of [indiscernible] down some lot taken are better get cost to No still XX contraction actions of when the per next growth. XX so last that. the cyclicality a the we only specific a would From take actions are same. on went variable to has grow share. not off structure that We've cost still but we'll to earnings the a thing it's and XX% be around it XX% tied a our I continue more fresh but to of in point say but inorganically it'll two level So we organically, guess that cycle we I standpoint lot time

Joe O'Dea

Very good. I Thanks very much. it. appreciate

Operator

Your next question comes from from Market. Capital KeyBanc [indiscernible]

Unidentified Analyst

morning guys. Hey good

XQ the incremental down wrap XX% a or or that should margin and and you looks cost the run contribution growth then comments and for minus thinking to can in the more up as Just progresses should saw like leverage rest plus thinking be XQ year be year to more of that range steps the half year? we on stable we we last

Rich Kyle

did Yes a roughly say I year-on-year the incremental in the full quarter XX% mean think you or at at of I level. I corporate I if first around would Steve think the look year we

I think probably closer to XX. full-year something guide our would imply

year good we slightly mean we mean through of sequentially in half I the I year then relatively the of probably relatively second normal as relatively differential bit quarter-to-quarter decrement the the but year moderate so incremental would of rest I slightly quite then a moves. volume consistent. below as XX as into expect aside then little obviously the XX So incremental But mean expect still just a mixed we maybe and walk move to maybe that putting and the first range. would you second would a and or but I there's say consistent bit that

Unidentified Analyst

America seeing so of you in can talk about that some rebound you're follow normal are you North and pattern given China just sales what both the for April and And there? Did seeing things distribution far? the Thanks. quarter progression through seasonal

Rich Kyle

January what see going got would be would little was only little first It's millions first a the dollars The I nothing to and weaker to good April good. week we're better a historically talking the January was revenue. quarter is say off of and the May thing December than we of on maybe also quarter. but start in of material

I management that that XX year our of look customers. in from that end as the as in think more the So market not we a us between hot typical inventory that's when it's for at if XX was for get you a just from you and little quite again fairly and it

backlog Just rest strong. of remains quarter the for in and I'd normal distribution global the say that was

Phil Fracassa

I end flattish Yes and last add year I our the from probably year. is backlog singles actually Rich's global the order versus comments up the books think would call just of it distribution the

outlook. and it's year still So supportive quite of strong well still our full

Unidentified Analyst

due if you trend more Got I through flood it for North understand aftermarket the the the domestically? can American I talk in it in you're market can to seeing but lag one slide and rail you the

Rich Kyle

traffic, say say – slight in remains that I the would and aftermarket of hauled, and been stable been still consistent flood and I'd the has but in large a part penetration terms of good the then impacted market I obviously that would of miles pretty markets terms to by say across degree North etc. and seeing stable. the American we're part of

Operator

Instructions] Justin from Bergner from G.B [Operator comes Research. Our question next

Justin Bergner

morning Good Phil. morning Rich, good

Rich Kyle

Morning Justin.

Justin Bergner

wind helping to process? year you maybe prior versus in has just and start are that improved the single some guess talk wise I prior sort the the tailwinds view about high of from quarter of digit mix your of

Rich Kyle

quarter on phenomena that now, from two a from is continue going that this say delivered to I be the has in say we of will standpoint to a years an continue first continued phenomena and that make year solidified would Two, really multi-year outgrow sure strong. I build be confidence platforms for order wind from we XXXX wind good that not traction production book to now. would So, is be to a

would it's it So and it's but up say bit we then had up. little more probably yes I a

all that's So good.

look that corporation is in I and XXX-XXX current and a the fact at say and the basis thing. that company, better niche we is trucks the than global up the industry and fact in good U.S. fact fact mix the work it process points growth bearing is are the first clearly industries higher the even space is fact think automotive M&A I done industries the corporation then would mixes the a side the mobile more engine other that are On was pickup have we the that on niche thing is that we running the of really

when pretty outside part industries mix I that solid solar to there So is and again to are that I you just is back one. of within I is on for and think Europe heavier look wind, another process wider in we market North peers and Coming would think all where question from space America it's then us an say China end a positive at generally a participate. standpoint are

Justin Bergner

basis the of I of sort improved mean margin points there basis XXX margin trajectory Switching seems that points gears falling mix probably of improvements outlook sort SG&A prior for I it to XXX manufacturing expansion is five in that's sort you but mean are and and of rank if your raw those versus Thank and you. improved guess external productivity under. the framework buckets logistics. cost I if framework like the is maybe orders the don't right margin factors I more regional like it's if which materials meaningful a outlook? know could are

Rich Kyle

two quarter X.X% a currency well. on a as drop and is the all other some the sometimes are actually way steps and Acquisitions favorable would be that's Yes it and one would as through a drivers has are that that's positive a quite in negatively I would maybe and volume to volume. on highlight all past but they're biggest I the two sizable but in it a pretty didn't headwind And we think which I mix and they contributing orders. positive overcame as throw one that has the say in inverts the and I in potential

So for shows of [indiscernible]. that are and the outlook quite you others us bump to these few overcome that a

difference XX% fairly of at say the So a XX mobile in the industries revenue exception in I'd sizable makes process no at margin dollar there's of every with versus driver companies mix. one

Phil Fracassa

maybe less would say versus in more guidance line. add I our would it's or pricing I Justin add, just prior Yes

the and I little I in has very performance inflation the operating Rich's the comment been has and think think manufacturing it the bigger think good, there it's you've would outlined about as least we the anticipated good it's bit items think them. I items I think it's as mix while clearly say been outlook about at say I safe would modest those we productivity been be on a more certainly to than full-year think I and

Justin Bergner

part margin versus acquisitions I will is for and XXXX for you your is of what EBITDA that growing your assumed are the sneak had maybe one more and in months ago? which improved acquisitions margins improved outlook outlook the three margin

Rich Kyle

say X.X%, are there I Cone well the growth for margins organic said and the up the three would are and above X.X% Rollon is acquisitions the in growth company. organic modestly I for aggregate and the story as

still some months too similar make say and number got and EBIT them the to to ABC margin needle is but happen. going focus anyway. definitely corporate do and what to to story leverage a it's really our we've those small very process expansion certainly to that's would EBITDA there on it'll not more focuses It positive is encouraging all there that the work margins get really move be come margins on I six and very but of industries frankly looks in in and them about. focus we growing at they're So good but our and at the

Operator

closing today's conference concludes answer remarks. and Mr. back Hershiser any to I'll turn session. additional That for time you or at question this the

Jason Hershiser

joining you number for Thank Again our Jason name concludes if is Thanks today's and you thank after my and Hershiser you is Alison and XXX-XXX-XXXX. further me. questions this please have contact us today. call my call. everyone

Operator

for concludes you calls. this gentlemen and participation. Ladies your today's Thank

disconnect. You now may

The Timken Company (TKR) 1 May 192019 Q1 Earnings call transcript