Good morning. My name is Katie. 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 fourth quarter earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question- and- answer session. If you would like to ask a question during this time, simply press star one on your telephone keypad. If you would like to withdraw your question, please press the star, then the number two on your telephone keypad. Thank you. Mr. Frohnapple, you may begin your conference. Thanks, Katie, and welcome everyone to our fourth quarter 2020 earnings conference call. This is Neil Frohnapple, Director of Investor Relations for the Timken Company. We appreciate you joining us today. Before we begin our remarks this morning, I want to point out that we have posted presentation materials on the company's website that we will reference as part of today's review of the quarterly results. You can also access this material through the Download feature on the earnings call webcast link. With me today are the Timken Company's President and CEO, Rich Kyle, and Phil Fracassa, our Chief Financial Officer. We will have opening comments this morning from both Rich and Phil before we open up the call for your questions. During the Q&A, I would ask that you please limit your questions to one question and one follow-up at a time to allow everyone a chance to participate. During today's call, you may hear forward-looking statements related to our future financial results, plans, and business operations. Our actual results may differ materially from those projected or implied due to a variety of factors, which we describe in greater detail in today's press release and in our reports filed with the SEC, which are available on the timken.com website. We have included reconciliations between non-GAAP financial information and its GAAP equivalent in the press release and presentation materials. Today's call is copyrighted by the Timken Company, and without express written consent, we prohibit any use, recording, or transmission of any portion of the call. With that, I would like to thank you for your interest in the Timken Company, and I will now turn the call over to Rich. Thanks, Neil. Good morning, everyone, and thanks for joining us today. Our fourth quarter revenue was higher than we anticipated as the sequential strengthening in our markets that started late in the second quarter of 2020 continued to accelerate. Sales were down slightly from 2019, less than 1% in total and 3% organically. That market momentum is continuing through the start of 2021, which I will talk more about in a moment. Earnings per share and margins for the quarter were in line with prior year on a similar sales level. They were below our expectations. Currency was a significant year-on-year impact on the bottom line, and we do not expect that to recur at this level to start 2021. Our mix was a headwind, we experienced a variety of cost challenges, primarily related to improving demand, which Phil will elaborate on as he goes through the details of the quarter. We expect to see a significant step up from the fourth quarter in revenue, earnings per share, and margins in the first quarter of 2021. For the full year of 2020, I'm very proud of how Timken navigated the unexpected challenges that came at us through the year and how we served customers and performed financially. Safety is always a top priority for us, in 2020, it took on an entirely different meaning as our leaders and associates adjusted to the challenges of working through the pandemic. We were there for our customers when they were ramping- down and when they were ramping back up. We won new business and had a record year in renewable energy and across Asia Pacific. Our results demonstrate our resiliency and how the company today is better positioned to perform through industrial cycles. Slide seven in the deck compares our 2020 financial performance to the industrial contraction of 2016 and highlights how far we've advanced as a company. Our revenue was down 7% in 2020, which given the market, was good performance and demonstrates the improved diversity of our portfolio. Our EBITDA margins of 18.8% were 400 basis points higher than 2016, despite the turbulent market conditions. Charts on slide eight highlight the progress we have made as a company financially. In 2017 to 2019, we demonstrated how we could perform in good industrial markets. In 2020, we demonstrated how we could perform in weak industrial markets. Over the period, we have demonstrated the ability to grow and generate value through the industrial cycle. As we look forward, we're even better positioned today than we were coming out of 2016 to set new levels of performance as the world recovers and expands from the pandemic. Some additional highlights from the year include the generation of over $450 million in free cash flow. The acquisition of Aurora Bearings, which broadens our leading position in the global bearing market. The integrations and synergy realization of BEKA Lubrication Systems and Diamond Chain. The advancement of our product vitality, manufacturing footprint, operational excellence, and digital initiatives. Finally, we grew our renewables business by over 50%, a breakout year for us. In 2020, renewable energy became our single largest market, representing 12% of company revenue. Strong underlying market, share gains, and our competitive advantage in application engineering and R&D drove this growth. Our active pipeline of new business wins and ongoing investments have positioned us for growth around 15% again this year. Our recently announced $75 million of investments will prepare us for further growth in renewables in 2022 and beyond. We achieved all those accomplishments in the middle of a global pandemic. 2020 was not a year that any of us expected or would like to repeat, but we made the most of the situation while advancing the company for the better times ahead. As we look forward to this year, a few comments on what we are seeing in our markets and planning for in the year. First, I would say that uncertainty continues to diminish, but does remain higher than normal. Our customers and Timken continue to navigate the pandemic-related challenges to our workforces and our supply chains. We've experienced cost and supply issues with logistics, material, and labor, as have our customers, and we expect that to continue through the first quarter. We expect bumpiness over the next few months, but much of that is being driven by an improving demand situation across our end markets. These are normal issues for us in an upturn, and we are confident in our ability to manage through the issues effectively. We're planning for first quarter revenue to be up at least high single digits sequentially from the fourth quarter. In Mobile Industries, heavy truck and off-highway continue to strengthen significantly, while automotive and the defense side of aerospace are also strong and above prior year. Rail and commercial aerospace will start the year down. We expect commercial aero to remain down through the year, but rail to improve and turn positive as the year progresses. In Process Industries, we expect renewables and marine to start 2021 strong and be up double digits for the year. Industrial distribution finished 2020 weak as expected, but picked up in January, is continuing to strengthen in early February, and we plan to be up meaningfully for the full- year. Industrial services, general industrial, and power transmission start the year down, but we see a good improvement trend and expect them to strengthen and turn through the first half of the year. After the step-up in first quarter revenue, our guide assumes a modest sequential increase to the second quarter and then normal seasonality, which is a slightly weaker second half of the year than the first half. Should market demand continue to accelerate across global industrial markets greater than those assumptions, we would be in an excellent position to respond. Regardless of where our markets go in the second half of 2021, we will continue to aggressively pursue our new application pipeline and product vitality initiatives to make sure we are capturing more than our share of the market growth. We expect to deliver record bottom-line performance on the improving revenue situation, with earnings per share of $4.90 and EBITDA margins up slightly from 2020 at the midpoint. We also expect to deliver solid free cash flow of over $300 million for the year. There are a lot of moving pieces in both directions from a cost perspective in the guidance. In the bottom line projection, we have accounted for the cost pressures we're currently experiencing in our operations, the impact of variable costs ramping back up with volume, the benefit of the structural cost reductions taken last year, as well as those planned for this year, and the non-recurrence of the temporary cost actions taken primarily in the second quarter of last year. We expect pricing to be roughly flat for the year. From a balance sheet perspective, we are back in a position to deploy capital in 2021. After the dividend and CapEx, our bias remains towards M&A. Finally, five summary points that I would like to wrap with before turning it over to Phil. We performed very well in a challenging market in 2020. Over the last five years, we've demonstrated our ability to grow the earnings power and cash generation of the company through the industrial cycle. We will continue to create value through strong free cash flow generation and disciplined capital allocation. Our markets have strong momentum to start 2021. We are well-positioned to deliver record results in 2021 while building the future of the company for shareholders and employees. I'll now turn it over to Phil to go into more detail. Okay, thanks, Rich, and good morning, everyone. For the financial review, I'm going to start with a summary of our results on slide 14. Revenue for the fourth quarter was $892 million, down less than 1% from last year and almost flat sequentially compared to the third quarter. We delivered an adjusted EBITDA margin of 16.2% and adjusted earnings per share of $0.84, both roughly in line with last year. Turning to slide 15, let's take a closer look at our fourth quarter sales performance. Organically, sales were down 3.2%, with both of our segments seeing lower net sales volume versus the year ago period, while pricing was positive. Acquisitions and currency each added a little over 1% to the top line in the quarter. On the right-hand side of this slide, we show year-on-year organic growth by region, so excluding both currency and acquisitions. Let me comment briefly on each region. In Asia, we saw strong growth once again in the quarter, up 16%. Our sales were up in both China and India, driven by strong growth in renewable energy and other sectors like off-highway and heavy truck. In Latin America, we were up 6%, driven by growth in both the on and off-highway sectors. In North America and Europe, most sectors were still down versus last year. However, the rates of decline moderated compared to what we saw in the last couple of quarters. Turning to slide 16, adjusted EBITDA was $144 million or 16.2% of sales in the fourth quarter, compared to $146 million or 16.3% of sales last year. The slight decline in adjusted EBITDA reflects the impact of lower volume and unfavorable price mix as negative mix more than offset positive pricing in the quarter. Note that the negative mix is a function of the higher OEM sales in the quarter, coupled with lower industrial aftermarket revenue. Currency was also a significant headwind on EBITDA in the quarter, as we experienced FX transaction losses this year versus gains in the year-ago period. The impact of currency negatively reduced EBITDA margins by over 100 basis points in the quarter. On the positive side, we benefited from favorable manufacturing performance and lower operating expenses across the enterprise. Let me comment a little further on our manufacturing and expense performance. On the manufacturing line, our team responded well in the quarter to increasing customer demand. We had higher production volume versus last year, which gave us better fixed cost absorption. We also continued to benefit from ongoing cost reduction actions and other productivity initiatives across our footprint, which more than offset some cost headwinds related to production ramp-ups, including at our new bearing manufacturing facility in the Americas. Material and logistics costs were lower than last year, but they were a little higher than we expected, as we encountered some supply chain and logistics challenges during the quarter to serve accelerated customer demand. Finally, on the SG&A line, we saw a significant reduction in expense versus last year, which reflects the benefit of structural cost reduction initiatives and lower discretionary spending. We also had lower incentive compensation expense in the quarter. On slide 17, you'll see that we posted net income of $53 million, or $0.69 per diluted share for the quarter on a GAAP basis. This includes $0.15 of net special charges driven by pension mark-to-market expense and other items. On an adjusted basis, we earned $0.84 per share, flat with last year. Our fourth quarter adjusted tax rate was 23.6%, which brought our full year rate down to 25.5%, slightly lower than our previous projection of 26%. The improvement in the tax rate reflects our geographic mix of earnings and the benefit of some tax planning initiatives completed in the quarter. Next, let's take a look at our business segment results, starting with Process Industries on slide 18. For the fourth quarter, Process Industries sales were $458 million, up 1.5% from last year. Organically, sales were down 1.4%, driven by declines in distribution and other industrial sectors, offset mostly by strong growth in renewable energy, higher marine revenue, and positive pricing. The favorable impact of currency translation added roughly 2% to the top line in the quarter, while the impact of acquisitions added around 1%. Process Industries' adjusted EBITDA in the fourth quarter was $102 million, or 22.4% of sales, compared to $98 million, or 21.8% of sales last year. The increase in adjusted EBITDA reflects the impact of lower operating expenses and other cost reductions, favorable manufacturing performance, and positive pricing, offset partially by the impact of lower organic volume and unfavorable mix in currency. Let's turn to Mobile Industries on slide 19. In the fourth quarter, Mobile Industries' sales were $434 million, down 2.6% from last year. Organically, sales declined 5.1%, reflecting lower shipments in the rail, aerospace, and automotive sectors, offset partially by growth in off-highway and heavy truck and positive pricing. Acquisitions added nearly 2% to the top line in the quarter, while currency translation was slightly favorable. Mobile Industries' adjusted EBITDA for the fourth quarter was $54 million, or 12.4% of sales, compared to $60 million, or 13.5% of sales last year. The decline in adjusted EBITDA reflects the impact of lower volume and unfavorable mix in currency, offset partially by the favorable impact of lower operating expenses and cost reductions. Turning to slide 20, you'll see the details of our strong cash flow performance for the fourth quarter and full year. We generated operating cash flow of $121 million in the quarter, and after CapEx, free cash flow was $85 million. Our full-year free cash flow was $456 million and represents nearly 150% conversion on adjusted net income. Free cash flow was nearly $50 million higher than last year, despite lower earnings, as we benefited from improved working capital, lower CapEx, and lower cash payments for employee benefits. During the fourth quarter, we raised our dividend by 4% to $0.29 per share and bought back 100,000 shares of company stock. In total, we've repurchased 1.1 million shares during 2020. Taking a closer look at our capital structure, we ended 2020 with a strong balance sheet as we reduced net debt by over $275 million during the year. Our leverage, as measured by net debt- to- adjusted EBITDA, was 1.9 x at year-end, down from 2.1 x at the end of 2019. Our leverage is solidly within our targeted range and positions us well for opportunities going forward. Our liquidity position remains very strong, with cash and unused committed credit lines totaling just under $1 billion at December 31st. Now let's turn to the outlook with a summary on slide 21. As Rich mentioned, we expect strong revenue and earnings growth in 2021. We're planning for sales to be up around 12% in total at the midpoint of our guidance versus 2020. Organically, we're planning for sales to be up around 9% at the midpoint, with roughly similar growth rates in both Mobile and Process Industries, as we expect most market sectors to be up in 2021. Currency translation should contribute about 2% to the top line based on year-end exchange rates, and the Aurora Bearing acquisition should add close to 1%. On the bottom line, we expect record adjusted earnings per share in the range of $4.70-$5.10, which is up about 20% from last year at the midpoint. The midpoint of our earnings outlook implies that consolidated adjusted EBITDA margins will be up slightly from 2020, driven by higher organic volume, offset partially by higher operating expenses to serve increased customer demand. On price cost, we expect roughly flat pricing for the year, but we do expect higher material costs, which is not unusual at this point in the cycle. For the first quarter, we're planning for sales to increase in the high single digits compared to the fourth quarter. We also expect first quarter adjusted EBITDA margins to be up meaningfully from the fourth quarter, but be below last year's first quarter level. For 2021, we estimate that we'll generate free cash flow of at least $300 million, which reflects higher working capital to support the sales upturn, higher CapEx spending versus last year, and a more normalized level of cash used for employee medical benefits. We're planning for CapEx of around $150 million in 2021, or just under 4% of sales at the midpoint, which includes several growth-related projects, including investments we recently announced to expand our capabilities in renewable energy and marine. For the full year, we anticipate net interest expense of around $60 million and estimate that our adjusted tax rate will remain in the 25.5% range. Finally, I want to point out that our guidance is based on the assumption that COVID-19 conditions will improve as we move through the year. To summarize, we delivered strong performance in 2020 despite challenging conditions. Our top line was resilient, and we demonstrated our ability to generate higher margins and cash flow through the cycle. We are confident in the outlook for 2021, and we are excited about the opportunities that lie ahead. This concludes our formal remarks, and we'll now open the line for questions. Operator? Thank you. If you would like to ask a question, you may signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We'll take our first question from Rob Wertheimer with Melius Research. Hey, good morning, everybody. Morning, Rob. If I can sneak in, I guess the obvious thing is just the margin in the quarter. If it's a fair question, do you have where it came in versus your EBITDA expectation? Phil, maybe if you could detail the currency issue that happened. How do you typically kind of manage through that or manage against that? Was it more unexpected? Do you normally hedge more? Maybe just talk through the dynamics of that. I'll start with the expectation part. I'd say it was slightly less. The currency ended up being 100 basis points of year-over-year, more than 100 basis points of margin impact year-over-year. If that would've been neutral, which we weren't necessarily expecting neutral, if that would've been neutral, I think we would've been in line with our expectations. As we said last call, we were expecting to be up a little bit on slightly less revenue. With the revenue beat, we would've liked to have been up a little bit more than that. I'll let Phil expand a little bit more on the specifics of the expectation. Yeah, sure, Rob. Obviously, big picture relative to the quarter in terms of EBITDA margin expectations overall, it was really three buckets, if you will, as Rich talked about. The mix was a little negative relative to what we thought. Most of the sales beat was on the OEM side. Distribution was more in line with where we thought, so we had a little bit of mix there. Even within the OE sectors, mix was a little bit unfavorable relative to what we were expecting going in. The currency which I'll talk about, the currency was negative. Typically with currency, it was a benefit on the top line. There's translation and there's transaction. Normally, the translation comes through at an EBITDA type margin, then the transaction really depends on individual currencies around the world. In that particular case, we just happened to have gains last year and had larger losses this year than we anticipated, which kind of drove that big negative. We do hedge currencies. We hedge call it the developed market currencies. We will hedge euro. We don't hedge 100%. We'll hedge a portion of the exposure. Euro and Canada, Australia, et cetera. A lot of the losses we saw in the quarter were coming out of China, in particular, with some U.S. dollar balances we had there, and Brazil, with some imports into Brazil. With the China currency strengthening against the dollar, Brazil weakening. It was sort of a mixed bag. I think as we sit here today, we have seen a little bit more stability to start the year, so wouldn't expect that to recur at the same level moving into 2021. The third bucket would probably be the logistics cost Rich talked about. A normal ramp, when we're ramping in markets like off-highway and heavy truck, having some level of logistics challenges is common. I'd say they were exacerbated by COVID with some of the additional challenges we had to face around freight and employee absenteeism, both in our plants, but also in some of our suppliers, et cetera. That was the combination of sort of what caused margins for the quarter to come in a little bit lower than what we thought. When you look at those three, they are all transitory to a degree. We do get on top of the logistics over time. We do expect, as I said, the currency not to recur at the same level. The mix, as we look ahead, we are expecting recovery across most sectors in 2021, including industrial distribution to be up high single digits plus for the year. I think that would make mix certainly less of a headwind in 2021 than it was in 2020. Rich, anything you want to add? Yeah, I would also just maybe put it in perspective as well. We weren't pleased with the result. The margins in EPS were flat with prior year on organic revenue decline of 3%, and a currency headwind of over 100 basis points of margin. I think we also need to put it in perspective. Perfect. Okay, thanks, Rich. If I may, one of the many things that's improved at Timken, I guess, is your focus on pricing of systems on sort of better processes to manage pricing. I wonder if you'll share how you're thinking about the flat pricing in the next year, whether you don't need it, whether you've had too much in recent years, whether you could take more. Just a little bit of curiosity on that number, which I might have thought would've been a little bit higher. I will stop there. Thank you. Well, I think there's a couple elements on that. First, on the pricing, one of the costs that we began to experience in the fourth quarter and are experiencing to start this year, and again, as Phil said, like logistics, it's pretty normal for us, when our business inflects to go up as steel costs. That as an example, though, we typically do recover that through pricing mechanisms we have in our contracts and/or price increases that we'll pass through, but there's generally a little bit of a lag. We would expect if that continues to strengthen, you would also start to see us pick up some recovery of that as the year goes on. We do have the ability to do that as the year goes forward. From a contractual basis, again, a lot of our contracts were negotiated four or five months ago for this year. I think generally there, we've got pricing mechanisms if costs go out of line. We would generally be locked in on those prices for the year. We moved some prices up a little bit and some down a little bit, but we've been expecting flattish pricing for the year and think we'll deliver good results with that. I guess the other final point I'd put, seeing there's well over half of our business is not contractually tied in any sort of a way from a pricing standpoint. We do have the ability, as the year progresses, if we have to do more in that area. Thank you. Thanks, Rob. Thank you. We'll take our next question from Stephen Volkmann with Jefferies. Good morning, guys. Morning, Steve. Morning, Steve. I guess I can answer to Goatman as well, if it means G-O-A-T, but that's probably overstating my experience. Anyway, can I just back up and sort of ask a really big picture question? Phil, I think in the past you've provided some thoughts about what sort of a normal incremental margin should be for you guys, and clearly 2021 is a bit of a messy year with various costs and things happening. As we move out into 2022- 2023, what's a normal incremental margin for the new Timken these days? Let me comment first on 2020 and 2021 and then maybe Rich can comment on expectation for 2022 and 2023. What we saw in 2020, we did variabilize a significant amount of our cost last year, and the decrementals were quite good. It was 24% all in, but if you take the currency and acquisitions out, which were significant headwinds, the organic decremental was kind of on the order of 14%-15%. Really strong decrementals last year, which does create a challenging base as we move to 2021. I think as you move forward to 2021, we do sort of have that to deal with, and not to mention some of the cost headwinds we'd normally see in an inflection year. As we have talked about our incremental/decremental margin framework, at high level, we've always said, hey, we'll start at the gross margin line and then probably do less than that in an inflection year, which 2021 is. I'd say it's exacerbated a little bit by the strong decrementals we did last year. Then obviously you move up cycle, you move into year two, year three, you get back up to that gross margin level, if you will, as you're leveraging your SG&A and you're moving into year two, year three of an up cycle. In the past, in some years, we've done maybe even a little bit better than that. As you look at 2021, the ability for us with revenue being up despite some of the year-over-year cost deltas we've got to manage through, I think the ability to expand margins and the implied incremental is about 21%, which again is lower than what maybe a normal year one would be, a little bit lower. Given where we're starting from, the midpoint of the guidance would imply EBITDA margins of around 19% with revenue at that level, I think historically speaking is quite good. Rich, do you want to comment on anything else you want to add? I'd just add to Phil's point on the 14% decremental last year. Our strategy for multiple years has been to variabilize more of our cost structure. To the degree we're successful doing that in the 14% decrementals when volume comes back, we need to add back more variable costs than when a higher percentage of our costs were fixed. Some of it is the strategy of having a greater variable cost structure and tightening the range of our margins through cycles. We've talked a lot about various things that we're doing to do that. I think this year is obviously a little bit unique in regards to the comps being a little different as well. I think on the longer term, we're really managing more towards margin targets, we've still got our long-term margin target out there of 20% EBITDA margin, which is where we're really focused on going. Okay. All right. That's helpful. Then I don't know if you want to get into this or not, probably Phil, but is there any way to kind of bucket the costs that come back in 2021, whether it's incentive comp or whatever temporary stuff, and then sort of net that against the benefits of the restructuring that you did and so forth, just to kind of give us a sense of how those things kind of play out in 2021? As you said, Rich, they're a little bit unusual, that'd be helpful if you can. Yeah, I would say, we'd really want to get you guys a little bit more focused on the margin outlook for the year. I'll try to talk directionally. Clearly we had a lot of temporary actions in 2020. Majority of them were in the second quarter. We did have some in the third and a little in the fourth. We put some structural cost actions in to give us some benefits in 2021 to help mitigate, call it, the absence of those temporary actions. The structural cost actions are there, but as Rich mentioned, as volumes go up and you move back up cycle costs, some costs do come back in. We've got the inflation to deal with on the material side and some of the logistics, which I think the logistics challenges could persist through the first quarter, certainly. Then, incentive comp would be a negative. If we hit the guidance number, we'll pay out a little bit more for 2021 than we will for 2020. You couple that with ongoing cost reduction initiatives, looking to offset the material cost increases, looking to continue to streamline and implement lean principles, et cetera. It all kind of nets to incrementals a little bit lower than what you might expect to see otherwise, but still expanding margins from 2020 to 2021. The last point on the pricing. When pricing's neutral, that's a headwind, and as history would tell us that we do have years like this on occasion where pricing is flat when volume's moving up, our revenue's moving up. Usually year two, as Rich said, usually no later than year two when you're repricing some contracts, you're typically picking it up if not more than recapturing it. You get to year two, we'll have that benefit. Incentive comp can typically flatten out at some point as well. Just looking at 2021, there's a lot of pluses and minuses. The temporary actions are a minus, the permanent actions are a plus. We'll see the permanent actions more front-loaded and then even out as they move through the year. The net effects would be expanding margins for the full year, and as Rich said, Q1 will be a little bit lower than last year, just given some of the mix and logistics headwinds. Then we would expect margins to improve in Q2 and Q3, and then with normal seasonality, probably be down a little bit in Q4. Okay. I appreciate it. Thanks. Great. Thank you. We'll take our next question from Ross Gilardi with Bank of America. Hey, good morning, guys. Morning, Ross. Hi, Ross. Just on all the puts and takes for margins this year, aren't you guys also just reinvesting in the renewables business? Isn't that a big part of it? You don't seem to really be calling that out and I don't know. No, I think it's. Based on what you said in the past, that seems[crosstalk] like it's an issue. Not just renewables, but I think investing in the business, our footprint work, and again, that's why we've really tried to talk more about margin ranges and when we're running high utilization levels, we're looking to invest. When we were in a down year last year, we continued to invest. Yeah, we are not focused on 2021 on absolute margin optimization of going out and mega pricing and running full utilization. We're looking to grow the earnings power of the company through the cycle. A big part of that is what you highlight of the investment in renewables. We've got the investment in the Mexico plant, which is a margin drain this year, will be a margin help long term. A lot of other investments in our digital initiative, our product vitality initiatives, et cetera. Yes. What's the incremental investment in renewables this year from an OpEx perspective? I don't know if some of it's CapEx as well. I don't know that we provided that because we didn't really break out the CapEx last year. We put in a fair amount of CapEx last year. That's helping us get the 15% growth. This year we're not at full utilization for the full year, so we still could do better than that if the markets come through. All of that obviously, in putting any sort of SG&A resources or CapEx into something that's not going to deliver until 2022 or 2023 is going to be a negative impact on us this year. I know, but you guys seem almost apologetic for your incrementals this year, and it's good to see a company actually reinvesting in the core business for a change. We're certainly not seeing that across a lot of other companies in the industry. Didn't you say that in your press release when you put out the reinvestment in renewables, that it was something like $75 million over the next several years? I don't know if I'm recalling that properly. Yeah, in the next five-ish quarters, we would expect to complete the $75 million. Yeah, I think that is, you're hitting on point that It's one of the reasons why when we came out with the 20% EBITDA margin target, we're like, hey, get to 22%. Well, we're working to grow at 20%, that's really what our strategy is, I think you look at those charts in the deck that we put out for the last five years, we've been doing that. Again, I think we're doing even more of it today than we were as we started the last upcycle in early 2017. Okay. Got it. Just on the growth, you're saying mid-teens growth in the renewables business this year. You'd grow over 50% in 2020. It's hard to repeat on 50% growth, I realize. Are you seeing any real deceleration in your order book, or is that just what you've got up until now, and you're keeping it conservative? Well, I don't think we'll have another- Yeah, more color on your growth going forward would be great. I don't think we'll have another 50% year probably under any circumstance. Obviously, it's on a much bigger base now. 15% in absolute dollars is still quite a bit as compared to historical. We generally have, I'd say, longer than normal, five to six months of visibility to that, and I think we're going to have an excellent first half of the year. Last year, at this time, we thought we were going to have an excellent first half. We were unsure about the second half. The second half got even better. In the second half, we've got more of a leveling off than another step up in the renewable side. We're going to have a very good first half, and it's got a little less visibility on the solar. That's a little bit of a shorter lead time, but we're going to have a very good first quarter on solar as well. Thank you. Thanks, Ross. Thanks, Ross. We'll take our next question from Steve Barger with KeyBanc Capital Markets. Hey, good morning, guys. Morning, Steve. Just thinking about this revenue forecast, it looks really strong. I want to make sure I understand the focus. Is it really just adjusting back to growth and managing those variable costs, or do you have the bandwidth to also push the team on specific growth or market share initiatives beyond what just the cycle is going to give you? Well, definitely, we have the bandwidth, and we're doing it, and I think some of that is embedded in the numbers. I think certainly our renewable numbers the last few years have been above market. The market's been good, so it certainly helped us with those numbers, but our numbers will be on that. Same thing with marine. We have a good year for marine embedded in that guidance, and we made some announcements last year on some new programs that really kick in this year. Off-highway, certainly the big number would be the cyclical return of that, but we've been winning new platforms there for the last couple of years. I think a lot of what we're talking here is the self-help. Certainly, if you look at 9% organic, again, our target's 100 basis points- 200 basis points of outgrowth a year, and most of that 9% is certainly the markets. Yeah. As I just think about it, I hear the conversation on the EBITDA margin being slightly up this year. If you drive some growth in operating leverage this year and next year, you're going to end up close to that 20% EBITDA margin. Two questions. One, can you keep a 15% SG&A as you drive towards that? Two, just any thought on when you might reset what that target might look like, just given all the progress that you've made? Yeah. We're certainly not ready to reset it now, and I'd say the SG&A over cycle's been a little more over 16%, probably, than the 15%, and the 15% would've had some variable-izing some fixed costs last year in it. I think the real answer to your question is really what Ross was alluding to, which is we're really got our eyes out for three to four years, and we're really trying to grow the company in these high teen margin levels. To do that requires SG&A, it requires capital, and some of that hits in good years like this year, and some of it hits in bad years like last year, but we keep plowing through that, and I think we'll continue to do that. Certainly not ready to increase the 20%, but I think it's certainly not far out of our range to get there. Yeah. The only thing I would add, Steve, is we'd obviously rather we want to grow and hit the 20% versus, say, shrink and expand. When you look at the margins, in particular within the segments, like Process Industries as an example. In a year when distribution was actually down. We did EBITDA margins close to 25%. That would put us easily top quartile of suppliers or companies that serve those sectors. Even in Mobile margins were down from 2019, but still did mid-teens kind of EBITDA margins in Mobile. We do expect Mobile margins to be up in 2021. That would put us also, when you look at the companies that serve those sectors, top quartile type margins. So while, as Rich said, always looking to improve mix, which can give us a little bit of margin uplift. We feel like if we can grow and hit the 20% that we've set and, who knows, maybe reset it at some point, but that would be a clear path to create shareholder value in our mind. Understood. Steve, we're always relentlessly driving efficiency always and our acquisition integration, driving leverage. Again, it's a balance of doing that while investing in the business for growth opportunities at the same time. Again, we think we can do both in that margin range. Yeah. Everybody always wants more, but the track record clearly speaks for itself. Thanks. Thanks, Steve. Thanks, Steve. We'll take our next question from Chris Dankert with Longbow Research. Hey, morning, guys. Morning, Chris. Morning. I guess coming back to renewables again, great outlook this year on top of good growth last year, obviously. I assume is that mid-teens number, is that principally still driven by ongoing strength in Asia and kind of some of those offshore projects? I assume any kind of shift in the new administration's priorities here in North America, that's more of a 2022 and beyond kind of renewables opportunity. Am I thinking about that the right way? Yes. I would say we have very little North American impact on wind. The solar business for us is much more global. Those installs are much more spread around the world. There as well, we really have no impact factored in from any sort of incentive or acceleration in North America for the U.S. Got it. Thanks for that. Thanks so much for the breakdown and the color on the margin for the year. I guess, I want to make sure I'm understanding it correctly. On a year-over-year basis, first quarter down a bit. Does the full- year guide assume we can hold EBITDA margin flat in the second quarter despite all those returning costs, and then kind of the back half is where we could potentially get some lift? Is that the right way to think about it? Well, I think when you're looking at 2021, Chris, when you say flat in the second quarter, flat with last year? Yes. With second quarter of last year. I think as we said, the guidance would imply the first quarter will be higher than the fourth quarter, probably a little bit below last year just because of some of the challenges. I think when you look at the second quarter in particular, this temporary cost, permanent cost phenomenon will likely say while margins will step up from the first to the second quarter, not likely to hit the levels we had last year, just given the magnitude of the temporary cost actions in that quarter. Having said that, they will step up nicely. Then obviously, normal seasonality would say, which is what we're assuming, just a slight step down in the second half, which again would get you to that, call it roughly, 19-ish% at the midpoint for the year. Got it. Okay. Thank you for that clarification. Really appreciate it, guys. Best of luck into the New Year here. Thanks, Chris. Thanks, Chris. We'll take our next question from Ronny Scardino with Goldman Sachs. Hey, guys. Thanks for taking the question. Hi, Ronny. Good morning. Hey. Just focusing on price cost, you mentioned negative price cost for 2021. How should we think about it really across the segments? I think half your process business is really in the industrial distribution. Is it really fair to say that most of your price cost pressures will be on the Mobile side? If you're able to quantify that would be really helpful as well. Yeah, I would say we don't typically quantify the magnitude, if you will. I would say on the pricing side, I think the flattish assumption on pricing would be comparable across the segments, just given the OE. You're right, we do have distribution, and we do typically take prices up in distribution every year. We do have the OE offset. I think the right way to think about pricing across both segments would be roughly flattish, and I think both segments will see some material cost inflation. The timing will vary depending on the geographies. Process is more international, Mobile is more North America, and the timing of pass-throughs from our suppliers vary a little bit. I think we'd see a relatively modest amount of inflation for the year, but it's probably running a little bit high at present. It's not a big number. It's been positive the last couple of years. The inflection from positive to negative makes it a little more impactful on the year-over-year comparisons. Great. Thanks, guys. This is a specific question on the cost savings for the quarter. Have you quantified how much came through in 4Q? I think we were thinking around $30 million. Is that roughly a correct number? I'm going to let Phil answer that. Before I do, though, I did want to add on your last question. The other thing with Mobile, I would say Mobile is disproportionately benefiting from the structural cost savings that we implemented last year as well as those we have in the pipeline for this year. To the degree there is a little more material cost there, other things, I think we also have more cost savings coming through Mobile. Yeah. On the cost save in particular, Ronny, if you look at the bridge, which would be on slide 16, the full-year EBITDA bridge, you'd see the SG&A benefit in the quarter of around $27 million. Most of that would be cost saves in the quarter, either structural or temporary spending reductions. Like we're still seeing much lower than normal travel levels and lower discretionary spend. There's also an element of lower incentive compensation in there as well. On the manufacturing line, it's a little bit netted in there because we did have some cost savings in manufacturing, we also had some of the ramp headwinds that we talked about earlier, which a little bit offset in there. It was certainly meaningful in the quarter. As Rich said last call, we don't see major changes in the cost structure heading into Q1. We don't see the discretionary spending really coming back as we sit here today. We would expect as the year progresses, we will have some travel coming back. As I said, our assumption is for COVID-19 conditions would improve as we move through the year, so we will have some of that coming back as we move through the year. Not 100%, probably. For the first quarter, we think the cost structure we ended the year with will be the cost structure we'll have for Q1. Other than some of the inflationary and logistics kind of things that are difficult to control. Yeah. We mentioned on costs, as I said in my comments, this is not abnormal for us, and certainly there is a coronavirus element to this in the logistics side. In particular, it's maybe a little more amplified than normal. If you go back to 2016 to 2017. In 2017, we were talking about logistics costs, we were talking about compensation costs, we were talking about steel costs being up, and we grew earnings 30%. Our margins expanded as well. This is normal for us, and we're good at managing it, and we're good at optimizing it, and we're good at managing it through the cycle. Again, there's some unique situations with coronavirus right now with absenteeism and some things like that are magnifying some things. I would not pin this on coronavirus. I would pin it on improving demand, and that's a situation that we want to be in, and we're glad to be there. Thanks, guys. Really helpful context. Thanks, Ronny. Thank you. We'll take our next question from Courtney Yakavonis with Morgan Stanley. Hi. Thanks for the question, guys. I guess, don't want to belabor this point much more, but just on the price cost comment, I think last quarter you guys had talked about potentially eking out some positive price costs. Obviously, now switching to negative even though pricing was expected to be flat both last quarter and this quarter. Is the only thing really just steel price inflation that's impacting that view, or is there anything else to be thinking about? I guess if it is steel prices, given that 50% of your sales still have some more variable pricing, why wouldn't you increase your pricing at this point, or is it just your expectations that you'll see steel prices fall by the back half of this year? Well, I think the big thing that's changed over that time is the volume outlook has continued to improve and improved in the third quarter, the fourth quarter. It's improved again to start this year. Again, with that volume, generally comes some of these cyclical type of cost pressures like steel. Steel specifically, scrap costs in the U.S. went up a lot in the last three months. In the U.S., our prices that we pay for raw material are scrap based to an index. Now, again, we pass that through to the market with time. Yeah, steel would be a factor, but I think everything that goes along with volume, there's been a greater factor that we've brought more people into our plants. We're working more shifts. We're working more overtime than what we were. All those things are part of, again, a normal ramp-up that we work to optimize. Again, it's an offset to an incremental. It's still going to be expanding revenue, expanding margins, and expanding earnings per share. I would say on the pricing question, Courtney, obviously a lot goes into pricing, but as you know, we went through 2018, 2019, and 2020, three years of 100 + basis points of net pricing across the company. We feel we're in a good position from a pricing standpoint. There is this timing element which can enter into it. You're exactly right. When we look at our business, about half is OEM, and that OEM piece is split between multi-year with passthroughs, Rich talked about. The other half is annual that we've got to sort of wait till the contracts renew. The other half would be distribution and used where we technically have the ability to price as conditions warrant, I think a lot goes into it. We did put through some price increases at the beginning of the year. As Rich said, depending on how the situation evolves, that's always available to us. At this point, our planning assumption is for relatively flat pricing, and then I think you'll see next year, as I said, if history repeats itself, we'll see some positive pricing next year, which will more than make up for probably the headwinds we're getting on material this year. Okay, great. Just you commented on the negative mix this quarter with sales distribution being relatively in line with what you thought. I think you guys were expecting them to continue to destock in the fourth quarter. Is that what you saw? Given the increases that you've been seeing kind of sequentially in January and February, is it safe to assume that we are starting to see the restock in the first quarter on the distributor channel? We definitely saw destocking in the fourth quarter, and industrial distribution inventories came down. I don't know if I'd be ready to say we're restocking, I think we are through destocking, is what we would at least say. The year-over-year comps were quite weak in the fourth quarter of last year, and that was on a down fourth quarter of 2019. They're coming back to start this year. I think that's a big part of the mix. The strength in that market would be a big factor for us to have a little better top-line growth on the distribution side and the Process Industries, that mixes us up within Process as well. Yeah, I would only add, I would say, we do see the momentum there. Distribution was up slightly sequentially, actually third to fourth, although Rich said we did see some destock. We think inventory's in good shape, and the order book certainly supports the full year outlook for distribution to be up in the high single digits range. Okay, great. Thank you. Thanks, Courtney. Thank you. We'll take our next question from Justin Bergner with G.research. Good morning, Rich, Phil, and Neil. Good morning. Hey, Justin. Good morning. A lot's been covered. One thing that hasn't been covered, the acquisition you recently made of Aurora Bearings. If I'm reading your cash flow statement correctly, you only expended $17 million on acquisitions in the fourth quarter. I'm assuming that's for Aurora, which would seem to be a very small outlay for $30 million of sales in plain spherical bearings sold into the Aerospace end market. Maybe if you could just comment on how we should think about the price paid. Is that sort of a distressed asset, or what enabled sort of the low price to sales expenditure? The price paid is directionally accurate that you mentioned there, as are the sales. Obviously it is a pretty low multiple of sales. It also comes to us as a marginally profitable cash-generating business. That being said, we also know it's in a segment that its peers and competitors do quite a bit better than they do in that space. Family-owned business, again, probably run a little differently than how we're going to run it. We are very confident we've got really good cost synergies with that business, both in this year and longer term. Long term, we would expect that to be a business that's at least at the fleet average. I'd say business, long term, it'll become more of a product line within the company than a business. It will be at least at the fleet average of the company. Small, so it's not huge, but we think it's a significant value creator, and then it makes our portfolio stronger as well. Great. Congrats on that deal. Secondly, you mentioned that the outgrowth assumption was pretty modest. Is there nothing in terms of outgrowth in that 9% organic, or is it just more the low end of your 100 basis point-200 basis point range? I assume the renewables must have some outgrowth in it if it's growing mid double digit. Yeah, no, there's definitely, I would say, more than 100 basis points of outgrowth embedded in the 9% organic. Some of that would be, Well, there'd be some in every sector. I'm looking through the list here. I don't think we have anything that's negative this year. We do lose platforms that end of life and things. Certainly after renewables, marine, off-highway. Always work in the general industrial side, although that tends to be smaller and harder to identify with. Automotive hasn't been a growth engine for us, but it'll be a net winner for us this year as well. Great. Maybe if I could slip one more in. You mentioned in the third quarter that your 2021 framework for margin sort of had mix as a slight positive, I believe. Would you say that's sort of shifted to a neutral, maybe slight negative, just given the strong OE growth that is driving the strong sales outlook versus where you saw things a quarter ago? Yeah, I would say, Justin, for the full- year 2020, certainly mix was a sizable negative just in terms of the strong growth on the OE side and distribution being down. I think as we look ahead to 2021 with distribution coming back and really the strong growth across the portfolio, mix will be far less of a headwind. I would kind of think of mix as more neutral year-on-year, and could be a slight positive, but in that range, if you will. Great. Thanks, and good luck for this year. Thanks, Justin. Thank you. We'll take our next question from Brett Linzey with Vertical Research Partners. Hi. Good afternoon, everybody. Good. Thanks for squeezing me in. First question, just similar line of questioning on bandwidth, but less about the organization and more about the supply chain. We've been hearing a number of areas of short and stretched supply. Are you seeing that in your value chain early in the year? Just curious how much of that is factored into the revenue guide. Yes, we are seeing, I would say, tightness across various supply chains around the world, and then compounded by tightness within logistics. We're having tightness in getting product through ports, into containers. I would say fairly broad, nothing that's disruptive, that we can't get enough steel or can't get enough of the things, but just delays. I think some of our customers are seeing that as well, and we're seeing some interruptions and inefficiencies in our deliveries as a result of that. That was a factor in the fourth quarter. It's a factor to start the year this year. I think we've got it baked in. Again, I'd probably go back to, again, it's a little more complicated because of coronavirus, but I would also say this is normal and not all that different than what we were faced in early 2017, which again, year-on-year ended up being a very good year for us. Okay, great. Just a last one on the $75 million of investments. Could you just talk about the payback you expect and how that's being allocated? As that capacity ramps, should we anticipate some buffer stock build in that renewables business as you work through the transition? The last part, I would say no. Within that market space, we definitely don't build anything on a forecast where it's pretty much all tied to end user demand and firm customer orders. On the ramp up, it's not one project, it's multiple projects. We're going to see the solar piece of that as an example. We've grown into three or four buildings. We're moving to a new, larger, more modern, more automated operation. That'll largely be done by the second quarter. We're expanding one of our facilities in China. That'll be one of the longer ones, because we've got to put some bricks and mortar onto that operation. It's not one big investment. It's a handful. We're also expanding, putting some new assets into our Romanian operation. It's a combination of things that'll come online at different times. The return on investment on these initiatives is very good, which is why our general bias is towards organic growth and CapEx. There'll be very good returns. Okay, great. Best of luck. Thank you. Thanks, Brett. With no further questions in queue, I will turn the call back over to our speakers for any additional or closing remarks. Okay. Thanks, Katie, and thank you everyone for joining us today. If you have any further questions after today's call, please contact me. Again, my name is Neil Frohnapple. My number is 234-262-2310. Thank you, and this concludes our call. That concludes today's call. We appreciate your participation.