Lagersmit, very focused on European, Nordic marine industry, and very focused on the OEM side of that, have not put as much energy and emphasis historically in capturing the aftermarket around the world. So the two opportunities there very much for us to sell more bearings into that Nordic marine market and other Industrial Motion products, but then also to do a better job of capturing their aftermarket around the world as well as penetrating some of the OEM base around the world as well. So different synergy cases in both, but both very revenue base pretty light on the operational side in the case of those 2. I’d add before we go to the next question, too, both really fit our portfolio well. Product innovation, product leadership positions, strong brand names within their niche markets, and a really good technical fit with the Timken portfolio.
Operator: Our next question comes from Mike Shlisky from D.A. Davidson. Mike, your line is now open.
Mike Shlisky: Yes, hi, good morning. Thanks for taking my questions. Thank you. It’s good to be here. I think you had mentioned in your remarks some headcount reductions that have already taken place or about to take place. Just give a little bit more detail there. Are those permanent or just trying to flex with the current environment? And were they – are they hourly or salaried people? I’m just kind of curious if you could give us some more kind of color around that.
Richard Kyle: It would be – so our demand started leveling off into the first quarter last year after 2.5, three years of hiring and then the market is difficult to hire, et cetera. So while the turnover had been running a higher, turnover had been a challenge for us for those couple of years. It was – it enabled us to attrit our workforce and reduce our workforce without forced reductions quicker last year. So largely in a lot of cases, we stopped hiring in the second quarter of last year and started capturing attrition. The answer to your question is what I quoted was operative factory hourly workers down 8%. We have captured some attrition in the salaried ranks as well, and we’ve done some restructuring on the salaried side as well, as I mentioned, the integration of some of the businesses.
But the 8% is factory workers. The predominance of that would be flex that we brought the head count down as wind demand and other things have softened. And then there is a piece of it that is structural. I talked about the plant consolidations that we had happening last year as well as those that we have planned for this year. But the predominance of it would be flexing our workforce and head count through the demand. And most of that would have been second half weighted. So a little bit in the second – really none in the first quarter, probably flat or maybe up head count in the first quarter, down a little in the second, and down pretty significantly in the third and fourth, and I expect we’ll be down a little bit more at the end of the first quarter.
Mike Shlisky: Great. And then for my follow-up, and you just touched on the four plant consolidations you’ve got in the pipeline, I think, for this year. Can you maybe kind of bucket for us, the maybe once it’s all said and done, the annualized EBITDA potential impact that you might save perhaps for the full year ’25 and beyond? And also, are there any onetime cash needs or need in ’24 to make these consolidation taxes?
Richard Kyle: Was that in regards to the plant consolidations?
Mike Shlisky: Correct.
Richard Kyle: Okay. Nothing significant on the cash or restructuring side. We generally are doing a little bit of this every year. We had some in last year a little bit more this year. So there is some but nothing out of the line of what we’ve done the last few years. And I would say we don’t generally talk about exact cost-out targets with those. We have them, but we embed it more in our margin target, and it’s all part of our objective to get margins up to 20% through cycle. And certainly, what we did the last few years was a contributor to our margins last year of 19.7%, and it would contribute to margins in 2025, but wouldn’t give us exact number on it.
Philip Fracassa: And the only thing I would add, Mike, is on our guide, the delta between GAAP and adjusted for the year is around $0.90. $0.75 of that is roughly the deal amortization and the other $0.15 would be kind of normal restructuring type expenses we would need to incur to do the plant rationalizations that Rich talked about. And that’s already in line with what we would typically do in a given year.
Mike Shlisky: Great. Fair enough. Thanks very much, guys.
Richard Kyle: Thanks Mike.
Operator: Our next question comes from Joe Ritchie from Goldman Sachs. Joe, your line is now open.
Joe Ritchie: Thanks. Good morning, guys.
Richard Kyle: Hi Joe.
Joe Ritchie: I just want to make sure I heard the organic growth cadence for the year. So I think you guys said flattish in the second half, but maybe I misheard that. And I’m just curious, as it relates to renewables, I think of that business as being a little bit longer cycle for you. When do you think you have visibility on that business as the year progresses?
Richard Kyle: Yes, I’ll take the second part first. We would usually have close to six months of order visibility within wind, and to our outlook for the first half of the year, certainly, you can do a little bit better, but it’s not going to be double digits better. But the second half remains pretty open and that to go favorably, certainly.
Philip Fracassa: Yes. And I would say on the organic progression, Joe, quarterly, so midpoint of the guide is down 6.5% for the year. Think of the first half as being down double digits, both in the first quarter and the second quarter, probably a little worse in the first quarter just with the comps. And then we would flatten out as we move into the back half of the year.
Joe Ritchie: Okay. Got it. That’s clear. And then Phil, maybe just a follow-up on just the price-cost commentary. Is there anything we need to be aware of from a cadence standpoint as the year progresses? Like you have started to see some commodities to play, but that usually takes a little bit of time before you see it in your P&L. So any commentary on just price cost as the year progresses?
Philip Fracassa: No. I would say we finished a really strong pricing year in ’23, north of 3% for the year. We were north of 2% in the fourth quarter. We do have slight positive pricing in for 2024, and that would be net of any anticipated index or pass-through givebacks we may have to give. We still think we’ll net slightly positive pricing. So that would be slightly positive, think north of 50 bps, probably more in Industrial Motion – a little bit more Industrial Motion than Bearings just because of the way the pricing dynamics are working in the two segments. But I feel pretty good about some of the pricing already in, for example, in the first quarter that we’ve put in through some of our markets and channels. And obviously, if commodity prices were to decline significantly, there would be a little bit of risk there, but the benefit on the cost side would typically outweigh that to us and probably be a net positive to us just where our pricing mechanisms work now.
So it’s a good story. It’s a more the flatter price-cost environment, ’24 than ’23. We did see significant positivity in ’23 with material and logistics favorable pricing up, cost moderating. I think we’ll see a flatter price cost curve in ’24, but not negative. I mean, we do – we would expect it to be flat to slightly positive, helping us to offset some of the volume declines we’re anticipating.
Joe Ritchie: Very helpful. Thank you both.
Operator: Our next question comes from Angel Castillo from Morgan Stanley. Angel, your line is now open.
Angel Castillo: Hi, good morning. Thanks for taking my question. I just wanted to go back to the commentary – just maybe on the first half, I just wanted to unpack that a little bit more. I think earlier you talked about not seeing any catalyst to suggest kind of an improvement here in your guidance. And I totally understand that maybe there’s limited visibility. But as you think about some of your customers maybe focusing on heavy industries and off-highway given I think you’ve unpacked wind pretty well. Just in those segments, to the extent that your customers have been doing some of their own destocking here in the 3Q, 4Q time frame, what – are you not – I guess, what are you seeing from your customers? And why is there not kind of a step-up maybe in the first half versus kind of the second half dynamic as they’re kind of done destocking and maybe moving to just underlying demand that’s maybe a little bit weak but not to the same degree?
