What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-02 compared with 2021-11-01 · 153 added, 376 removed, 470 unchanged (53% of the section changed)

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(Dollars in millions, except per share data)

8 unchanged sentences

Non-service pension and other postretirement income 1.3 4.0

Other income (expense), net 1.5 ( 1.0 ) 0.3 1.1

Other income, net 0.2 1.0

Income Before Income Taxes 160.1 141.3

10 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(Dollars in millions)

Net Income $ 121.9 $ 116.0

Other comprehensive (loss) income, net of tax:

Other comprehensive loss, net of tax:

Foreign currency translation adjustments ( 22.6 ) ( 44.4 )

Pension and postretirement liability adjustments ( 1.5 ) ( 1.6 )

Change in fair value of marketable securities — ( 0.1 ) — —

Change in fair value of derivative financial instruments 2.0 2.2

Other comprehensive (loss) income, net of tax ( 31.9 ) 60.4 ( 54.4 ) 5.0

Other comprehensive loss, net of tax ( 22.1 ) ( 43.8 )

Comprehensive Income, net of tax 99.8 72.2

comprehensive income (loss) attributable to noncontrolling interest 3.7 3.0 7.8 ( 0.1 )

comprehensive income attributable to noncontrolling interest 1.1 2.3

Comprehensive Income Attributable to The Timken Company $ 98.7 $ 69.9

1 unchanged sentence

Consolidated Balance Sheets

(Dollars in millions) September 30,

(Dollars in millions) March 31,

2022 December 31,

13 unchanged sentences

Operating lease assets 116.7 118.9

Non-current pension assets 4.0 2.0

Deferred income taxes 65.2 67.6

4 unchanged sentences

Current Liabilities

Short-term debt $ 27.9 $ 119.8

Current portion of long-term debt 11.1 10.9

Short-term operating lease liabilities 25.7 27.2

Accounts payable, trade 416.1 430.0

Short-term debt, including current portion of long-term debt 41.0 53.8

Salaries, wages and benefits 118.3 136.0

20 unchanged sentences

Retained earnings 1,711.1 1,616.4

Accumulated other comprehensive (loss) income ( 12.3 ) 41.3

Accumulated other comprehensive loss ( 42.5 ) ( 23.0 )

Treasury shares at cost (2022 – 3,326,669 shares;

7 unchanged sentences

Consolidated Statements of Cash Flows

Nine Months Ended

September 30,

Three Months Ended

(Dollars in millions)

7 unchanged sentences

Acquisition-related gain — ( 0.6 )

Deferred income tax benefit ( 6.4 ) ( 6.7 )

Deferred income tax provision (benefit) 1.8 ( 2.0 )

Stock-based compensation expense 7.1 6.5

9 unchanged sentences

Other, net 8.0 2.8

Net Cash Provided by Operating Activities 284.6 457.2

Net Cash (Used in) Provided by Operating Activities ( 1.2 ) 31.7

Investing Activities

Capital expenditures ( 34.3 ) ( 29.4 )

Acquisitions, net of cash received ( 7.2 ) ( 6.7 )

Investments in short-term marketable securities, net ( 0.8 ) ( 9.9 )

12 unchanged sentences

Short-term debt activity, net ( 11.1 ) 8.8

Noncontrolling interest dividends paid ( 0.5 ) ( 15.8 )

Net Cash Used in Financing Activities ( 222.4 ) ( 257.7 )

Net Cash Provided By (Used in) Financing Activities 204.7 ( 6.4 )

Effect of exchange rate changes on cash ( 1.2 ) ( 3.9 )

(Decrease) Increase in Cash, Cash Equivalents and Restricted Cash ( 58.5 ) 97.8

Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash 167.3 ( 18.0 )

Cash, cash equivalents and restricted cash at beginning of year 257.9 321.1

12 unchanged sentences

New Accounting Guidance Adopted:

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, “Income Taxes (ASC 740) – Simplifying the Accounting for Income Taxes,” which is intended to reduce complexity in the accounting for income taxes while maintaining or improving the usefulness of information provided to financial statement users.

The guidance amends certain existing provisions under ASC 740 to address a number of distinct items.

This standard is effective for public companies in fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU 2021-08, "Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers." ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized in accordance with ASC Topic 606 as if the acquirer had originated the contracts.

This new guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted.

The Company adopted ASU 2021-08 effective January 1, 2022, and the impact of the adoption was not material to the Company's results of operations and financial condition.

New Accounting Guidance Issued and Not Yet Adopted:

In November 2021, the FASB issued ASU 2021-10, "Government Assistance (Topic 832)." ASU 2021-10 is intended to increase transparency of government assistance by requiring entities to disclose the types of government assistance, the entity's accounting for government assistance, and the effect of the government assistance on an entity's financial statements.

This new guidance is effective for all entities for annual reporting periods beginning after December 15, 2021.

The Company is currently evaluating the impact of the new guidance on its disclosures.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This guidance is intended to provide temporary optional expedients and exceptions to the U.S.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting." ASU 2020-04 is intended to provide temporary optional expedients and exceptions to the U.S.

GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates.

1 unchanged sentence

The Company is currently assessing which of its various contracts will require an update for a new reference rate and will determine the timing for implementation of this guidance after completing that analysis.

Note 3 - Acquisitions

On August 20, 2021 , the Company completed the acquisition of the assets of Intelligent Machine Solutions ("iMS"), a manufacturer of industrial robotics and automation solutions, with annual sales of approximately $ 6.0 million.

iMS is headquartered in Norton Shores, Michigan.

The purchase price due at closing for this acquisition was $ 7.4 million, subject to customary post-closing adjustments.

In addition, the seller has the opportunity to earn $ 3.0 million of contingent performance-based consideration between January 1, 2022 and June 30, 2024.

This additional component will be accounted for as compensation expense over that period because the payment is contingent in part upon the continued employment of a former executive of the seller.

Based on markets and customers served, results for iMS are primarily reported in the Process Industries segment.

The following table presents the purchase price allocation at fair value for the iMS acquisition:

Initial Purchase Price Allocation

Total assets acquired $ 9.9

Total liabilities assumed 2.5

Net assets acquired $ 7.4

In determining the fair value of the amounts above, the Company utilized various forms of the income, cost and market approaches depending on the asset or liability being valued.

The estimation of fair value required significant judgment related to future net cash flows, discount rates, competitive trends, market comparisons and other factors.

Inputs were generally determined by taking into account independent appraisals and historical data, supplemented by current and anticipated market conditions.

The amounts in the table above represent the preliminary purchase price allocation for iMS.

This purchase price allocation is based on preliminary information and is subject to change as additional information concerning final asset and liability valuations are obtained.

As of September 30, 2021, no elements of the purchase price allocation have been finalized.

During the applicable measurement period, the Company will adjust assets and liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date.

The effect of measurement period adjustments to the estimated fair values will be reflected as if the adjustments had been completed on the acquisition date.

The above purchase price allocation is subject to change as additional information concerning final asset and liability valuations is obtained.

On November 30, 2020 , the Company completed the acquisition of the assets of Aurora Bearing Company ("Aurora").

With annual sales of approximately $ 30 million, Aurora serves a diverse range of industrial sectors, including aerospace and defense, racing, off-highway equipment and packaging.

Aurora is headquartered in Montgomery, Illinois.

The total purchase price for this acquisition was $ 17.2 million, including a post-closing net working capital adjustment.

Based on markets and customers served, results for Aurora are reported in both the Mobile Industries segment and the Process Industries segment.

Note 3 - Acquisitions (continued)

The following table presents the purchase price allocation at fair value, net of cash acquired, for the Aurora acquisition as of September 30, 2021:

Initial Purchase

Price Allocation Adjustments Final Purchase

Price Allocation

Accounts receivable $ 2.7 $ — $ 2.7

Inventories 16.4 0.4 16.8

Other current assets 0.1 — 0.1

Property, plant and equipment 10.9 — 10.9

Total assets acquired $ 30.1 $ 0.4 $ 30.5

Accounts payable, trade $ 0.8 $ — $ 0.8

Other current liabilities 0.9 ( 0.4 ) 0.5

Total liabilities assumed 1.7 ( 0.4 ) 1.3

Net assets acquired $ 28.4 $ 0.8 $ 29.2

As a result of applying the accounting rules on business combinations, the Company recognized a bargain purchase gain of $ 12.0 million on the acquisition of Aurora.

The Company recognized $ 0.9 million of the bargain purchase price gain during the first nine months of 2021 primarily due to the net working capital adjustment.

The Company believes it was able to negotiate a bargain purchase price for the business due to some historic operational performance challenges, as well as the seller's desire to exit the business in an expedited manner in an exclusive process with the Company.

Note 3 - Revenue

The following table presents details deemed most relevant to the users of the financial statements about total revenue for the three and nine months ended September 30, 2021 and 2020, respectively:

The following table presents details deemed most relevant to the users of the financial statements about total revenue for the three months ended March 31, 2022 and 2021, respectively:

Three Months Ended Three Months Ended

September 30, 2021 September 30, 2020

Mobile Process Total Mobile Process Total

United States $ 235.3 $ 194.2 $ 429.5 $ 220.7 $ 163.2 $ 383.9

Americas, excluding the United States 54.9 47.4 102.3 45.1 36.0 81.1

Europe / Middle East / Africa 118.2 137.5 255.7 92.7 114.3 207.0

China 27.7 125.9 153.6 27.6 117.8 145.4

Asia-Pacific, excluding China 51.2 45.0 96.2 42.5 34.7 77.2

Net sales $ 487.3 $ 550.0 $ 1,037.3 $ 428.6 $ 466.0 $ 894.6

Nine Months Ended Nine Months Ended

September 30, 2021 September 30, 2020

March 31, 2022 March 31, 2021

Mobile Process Total Mobile Process Total

6 unchanged sentences

When reviewing revenue by sales channel, the Company separates net sales to original equipment manufacturers ("OEMs") from sales to distributors and end users.

The following table presents the percent of revenue by sales channel for the nine months ended September 30, 2021 and 2020, respectively:

Nine Months Ended

Revenue by sales channel September 30, 2021 September 30, 2020

The following table presents the percent of revenue by sales channel for the three months ended March 31, 2022 and 2021, respectively:

Three Months Ended Three Months Ended

Revenue by sales channel March 31, 2022 March 31, 2021

Original equipment manufacturers 60 % 61 %

1 unchanged sentence

In addition to disaggregating revenue by segment, geography and by sales channel as shown above, the Company believes information about the timing of transfer of goods or services, type of customer and distinguishing service revenue from product sales is also relevant.

During the nine months ended September 30, 2021 and September 30, 2020, approximately 8 % and 12 %, respectively, of total net sales were recognized on an over-time basis because of the continuous transfer of control to the customer, with the remainder recognized as of a point in time.

Approximately 4 % and 5 % of total net sales represented service revenue during each of the nine months ended September 30, 2021 and September 30, 2020, respectively.

Finally, the United States ("U.S.") government or its contractors represented approximately 7 % and 9 % of total net sales during the nine months ended September 30, 2021 and September 30, 2020, respectively.

During the three months ended March 31, 2022 and March 31, 2021, approximately 9 % of total net sales were recognized on an over-time basis because of the continuous transfer of control to the customer, with the remainder recognized as of a point in time.

Approximately 5 % and 4 % of total net sales represented service revenue during each of the three months ended March 31, 2022 and March 31, 2021, respectively.

Finally, business with the United States ("U.S.") government or its contractors represented approximately 7 % of total net sales during the three months ended March 31, 2022 and March 31, 2021.

Remaining Performance Obligations:

2 unchanged sentences

government or its contractors.

The aggregate amount of the transaction price allocated to remaining performance obligations for such contracts with a duration of more than one year was approximately $ 417.8 million a t September 30, 2021.

Note 4 - Revenue (continued)

The aggregate amount of the transaction price allocated to remaining performance obligations for such contracts with a duration of more than one year was approximately $ 213.1 million a t March 31, 2022.

Unbilled Receivables:

The following table contains a rollforward of unbilled receivables for the nine months ended September 30, 2021 and the twelve months ended December 31, 2020:

September 30,

2021 December 31,

The following table contains a rollforward of unbilled receivables for the three months ended March 31, 2022:

Beginning balance, January 1 $ 104.5

2 unchanged sentences

Ending balance $ 88.5

There were no impairment losses recorded on unbilled receivables for the nine months ended September 30, 2021 and September 30, 2020, respectively.

There were no impairment losses recorded on unbilled receivables for the three months ended March 31, 2022 .

Note 4 - Segment Information

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Mobile Industries $ 540.4 $ 504.5

6 unchanged sentences

Unallocated corporate expense ( 12.9 ) ( 11.6 )

Corporate pension and other postretirement benefit

related (expense) income (1)

Corporate pension and other postretirement benefit related expense (1)

( 2.6 ) ( 0.9 )

4 unchanged sentences

Income before income taxes $ 160.1 $ 141.3

(1) Corporate pension and other postretirement benefit related (expense) income represents actuarial (losses) and gains that resulted from the remeasurement of pension and other postretirement plan assets and obligations as a result of changes in assumptions or experience.

(2) The acquisition-related gain represents measurement period adjustments to the bargain purchase gain on the acquisition of Aurora, which closed on November 30, 2020.

See Note 3 - Acquisitions for additional information.

(1) Corporate pension and other postretirement benefit related expense represents actuarial (losses) and gains that resulted from the remeasurement of pension and other postretirement plan assets and obligations as a result of changes in assumptions or experience.

(2) The acquisition-related gain represents measurement period adjustments to the bargain purchase gain on the acquisition of Aurora Bearing Company ("Aurora"), which closed on November 30, 2020.

Note 5 - Income Taxes

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Provision for income taxes $ 38.2 $ 25.3

Effective tax rate 23.9 % 17.9 %

Income tax expense for the three and nine months ended September 30, 2021 was calculated using forecasted multi-jurisdictional annual effective tax rates to determine a blended annual effective tax rate.

Income tax expense for the three months ended March 31, 2022 was calculated using forecasted multi-jurisdictional annual effective tax rates to determine a blended annual effective tax rate.

The effective tax rate differs from the U.S.

federal statutory rate of 21 % primarily due to the release of accruals for uncertain tax positions related to the settlement of the 2017 and 2018 U.S.

federal tax years and adjustments in other foreign jurisdictions, and favorable U.S.

permanent book-tax differences.

These items were partially offset by the unfavorable impact of earnings in foreign jurisdictions with higher tax rates.

The effective tax rate of 18.2 % for the three months ended September 30, 2021 was lower than the rate for the three months ended September 30, 2020 primarily due to the release of accruals for uncertain tax positions and favorable U.S.

permanent book-tax differences, including the new elective Global Intangible Low Tax Income ("GILTI") high tax exemption rules.

These impacts were partially offset by a greater percentage of earnings in higher tax rate jurisdictions.

The effective tax rate of 19.3 % for the nine months ended September 30, 2021 was lower than the rate for the nine months ended September 30, 2020 primarily due to the release of accruals for uncertain tax positions and favorable U.S.

permanent book-tax differences, including the tax impact from stock-based compensation awards and the new elective GILTI high tax exemption rules.

These impacts were partially offset by a greater percentage of earnings in higher tax rate jurisdictions.

federal statutory rate of 21% primarily due to the projected mix of earnings in international jurisdictions with relatively higher tax rates.

The effective tax rate of 23.9 % for the three months ended March 31, 2022 was higher than the rate for the three months ended March 31, 2021 primarily due to higher pre-tax earnings and a higher discrete tax benefit in the prior year due to the release of accruals for uncertain tax positions from the settlement of the 2017 and 2018 U.S.

federal tax years during the three months ended March 31, 2021.

Note 6 - Earnings Per Share

The following table sets forth the reconciliation of the numerator and the denominator of basic earnings per share and diluted earnings per share for the three and nine months ended September 30, 2021 and 2020, respectively:

The following table sets forth the reconciliation of the numerator and the denominator of basic earnings per share and diluted earnings per share for the three months ended March 31, 2022 and 2021, respectively:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net income attributable to The Timken Company $ 118.2 $ 113.3

12 unchanged sentences

Stock options are antidilutive when the exercise price exceeds the average market price of the Company’s common shares during the periods presented.

The antidilutive stock options outstanding during the three months ended September 30, 2021 and 2020 were zero .

The antidilutive stock options outstanding during the nine months ended September 30, 2021 and 2020 were zero and 902,169 , respectively.

There were no antidilutive stock options outstanding during the three months ended March 31, 2022 and 2021.

Note 7 - Inventories

The components of inventories at September 30, 2021 and December 31, 2020 were as follows:

September 30,

The components of inventories at March 31, 2022 and December 31, 2021 were as follows:

2022 December 31,

6 unchanged sentences

Total inventories, net $ 1,112.6 $ 1,042.7

Inventories are valued at net rea lizable value, with approximately 60 % valued on the first-in, first-out ("FIFO") method and the remaining 40 % v alued on the last-in, first-out ("LIFO") method.

Inventories are valued at net realizable value, with approximately 58 % valued on the first-in, first-out ("FIFO") method and the remaining 42 % valued on the last-in, first-out ("LIFO") method.

The majority of the Company's domestic inventories are valued on the LIFO method, and all the Company's international inventories are valued on the FIFO method.

The LIFO reserve at September 30, 2021 and December 31, 2020 was $ 191.0 million and $ 172.1 million, respectively.

The LIFO reserve at March 31, 2022 and December 31, 2021 was $ 211.7 million and $ 199.4 million, respectively.

An actual valuation of the inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time.

Accordingly, interim LIFO calculations must be based on management’s estimates of expected year-end inventory levels and costs.

Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs.

Because these calculations are subject to many factors beyond management’s control, annual results may differ from interim results as they are subject to the final year-end LIFO inventory valuation.

Note 8 - Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended September 30, 2021 were as follows:

The changes in the carrying amount of goodwill for the three months ended March 31, 2022 were as follows:

Industries Process

1 unchanged sentence

Beginning balance $ 371.7 $ 651.0 $ 1,022.7

Acquisitions — 5.8 5.8

Foreign currency translation adjustments and other changes ( 5.6 ) ( 6.7 ) ( 12.3 )

Ending balance $ 366.1 $ 644.3 $ 1,010.4

The acquisition of iMS added $ 5.8 million of goodwill.

The goodwill for iMS is expected to be 100% tax deductible.

The following table displays intangible assets as of September 30, 2021 and December 31, 2020:

Balance at September 30, 2021 Balance at December 31, 2020

The following table displays intangible assets as of March 31, 2022 and December 31, 2021:

Balance at March 31, 2022 Balance at December 31, 2021

Amount Accumulated

15 unchanged sentences

Total intangible assets $ 1,207.3 $ ( 558.7 ) $ 648.6 $ 1,219.2 $ ( 550.4 ) $ 668.8

Amortization expense for intangible assets was $ 41.7 million and $ 42.1 million for the nine months ended September 30, 2021 and 2020, respectively.

Amortization expense for intangible assets is projected to be $ 54.9 million in 2021;

Amortization expense for intangible assets was $ 12.7 million and $ 14.1 million for the three months ended March 31, 2022 and 2021, respectively.

Amortization expense included $ 10.9 million and $ 12.1 million related to intangible assets acquired as part of a business combination for the three months ended March 31, 2022 and 2021, respectively.

Amortization expense for intangible assets is projected to b e $ 50.9 million in 2022 ;

$ 45.5 million in 2023;

3 unchanged sentences

Substantially all amortization expense for intangible assets is recorded in Cost of product sold on the Consolidated Statement of Income.

Note 9 - Other Current Liabilities

The following table displays other current liabilities as of March 31, 2022 and December 31, 2021:

March 31, December 31,

(Dollars in millions) 2022 2021

Sales rebates $ 54.7 $ 70.3

Product warranty 13.0 11.7

Operating lease liabilities 25.7 26.2

Professional fees 11.2 10.8

Restructuring 7.0 7.0

Taxes other than income and payroll taxes 21.5 16.0

Interest 8.3 10.8

Other 119.4 97.8

Total other current liabilities $ 260.8 $ 250.6

Note 10 - Financing Arrangements

Short-term debt at September 30, 2021 and December 31, 2020 was as follows:

September 30,

Short-term debt at March 31, 2022 and December 31, 2021 was as follows:

2022 December 31,

Variable-rate Accounts Receivable Facility with an interest rate of 0.96 % at December 31, 2020

Borrowings under lines of credit for certain of the Company’s foreign subsidiaries with various banks with interest rates ranging fro m 0.50 % to 1.10 % a t September 30, 2021 and 0.24 % to 1.75 % at December 31, 2020

Borrowings under lines of credit for certain of the Company’s foreign subsidiaries with various banks with interest rates ranging from 0.50 % to 2.10 % at March 31, 2022 and 0.50 % to 2.00 % at December 31, 2021

$ 29.9 $ 42.6

Short-term debt $ 29.9 $ 42.6

The Company has a $ 100 million Amended and Restated Asset Securitization Agreement (the "Accounts Receivable Facility"), which matures on November 30, 2021 .

The Company intends to renew the Accounts Receivable Facility prior to its maturity.

Under the terms of the Accounts Receivable Facility, the Company sells, on an ongoing basis, certain domestic trade receivables to Timken Receivables Corporation, a wholly-owned consolidated subsidiary that, in turn, uses the trade receivables to secure borrowings that are funded through a vehicle that issues commercial paper in the short-term market.

Borrowings under the Accounts Receivable Facility may be limited to certain borrowing base limitations;

however, availability under the Accounts Receivable Facility was not reduced by any such borrowing base limitations at September 30, 2021.

As of September 30, 2021, there were no outstanding borrowings under the Accounts Receivable Facility.

The cost of this facility, which is the prevailing commercial paper rate plus facility fees, is considered a financing cost and is included in interest expense in the Consolidated Statements of Income.

The lines of credit for certain of the Company's foreign subsidiaries provide for short-term borrowings up to $ 268.4 million in the aggregate.

Most of these lines of credit are uncommitted.

At September 30, 2021, the Company’s foreign subsidiaries had borrowings outstanding of $ 27.9 million and bank guarantees of $ 0.5 million, which reduced the aggregate availability under these facilities to $ 259.0 million.

Long-term debt at September 30, 2021 and December 31, 2020 was as follows:

September 30,

At March 31, 2022, the Company’s foreign subsidiaries had borrowings outstanding of $ 29.9 million and bank guarantees of $ 0.3 million, which reduced the aggregate availability under these facilities to $ 238.2 million.

Long-term debt at March 31, 2022 and December 31, 2021 was as follows:

2022 December 31,

Variable-rate Senior Credit Facility with an average interest rate on U.S.

Dollar of 1.12 % and Euro of 1.05 % at September 30, 2021 and U.S.

Dollar of 1.17 % and Euro of 1.00 % at March 31, 2022 and U.S.

Dollar of 1.09 % and Euro of 1.00 % at December 31, 2021

Variable-rate Term Loan (1) , maturing on September 11, 2023 , with an interest rate of 1.21 % at September 30, 2021 and 1.63 % at December 31, 2020

Variable-rate Term Loan (1) , maturing on September 11, 2023, with an interest rate of 1.58 % at March 31, 2022 and 1.23 % at December 31, 2021

Fixed-rate Senior Unsecured Notes (1) , maturing on September 1, 2024, with an interest rate of 3.875 %

2 unchanged sentences

Fixed-rate Medium-Term Notes, Series A (1) , maturing at various dates through May 2028, with interest rates ranging from 6.74 % to 7.76 %

Fixed-rate Bank Loan, maturing on June 30, 2033 , with an interest rate of 2.15 %

Fixed-rate Senior Unsecured Notes (1) , maturing on April 1, 2032, with an interest rate of 4.125 %

Fixed-rate Euro Bank Loan, maturing on June 30, 2033, with an interest rate of 2.15 %

Other 6.4 5.0

3 unchanged sentences

(1) Net of discounts and fees

The Company has a $ 100 million Amended and Restated Asset Securitization Agreement (the "Accounts Receivable Facility"), which matures on November 30, 2024.

Borrowings under the Accounts Receivable Facility may be limited to certain borrowing base limitations;

however, availability under the Accounts Receivable Facility was not reduced by any such borrowing base limitations at March 31, 2022.

As of March 31, 2022, there were no outstanding borrowings under the Accounts Receivable Facility.

Note 10 - Financing Arrangements (continued)

1 unchanged sentence

The Senior Credit Facility is a $ 650.0 million unsecured revolving credit facility, which matures on June 25, 2024.

At September 30, 2021, the Co mpany had $ 9.2 million of outstanding borrowings under the Senior Credit Facility, which reduced the availability under this facility to $ 640.8 million.

At March 31, 2022, the Company had $ 8.8 million of outstanding borrowings under the Senior Credit Facility, which reduced the availability under this facility to $ 641.2 million.

The Senior Credit Facility has two financial covenants:

a consolidated leverage ratio and a consolidated interest coverage ratio.

On May 27, 2020, the Senior Credit Facility was amended to, among other things, effectively increase the limit with respect to the consolidated leverage ratio.

As amended, the consolidated leverage ratio was calculated using a net debt construct, netting unrestricted cash in excess of $ 25 million, instead of total debt.

The change to the consolidated leverage ratio calculation was effective through June 30, 2021.

In the third quarter of 2021, the calculation of the consolidated leverage ratio under the Senior Credit Facility reverted back to a total debt construct.

On March 28, 2022, the Company issued fixed-rate unsecured senior notes ("2032 Notes") in the aggregate principal amount of $ 350 million with an interest rate of 4.125 %, maturing on April 1, 2032 .

Proceeds from the notes were used to repay borrowings under the Senior Credit Facility and the Accounts Receivable Facility outstanding at the time of issuance, and for general corporate purposes.

On September 11, 2018, the Company entered into a $ 350 million variable-rate term loan that matures on September 11, 2023 (the "2023 Term Loan").

1 unchanged sentence

On July 12, 2019, the Company amended the 2023 Term Loan agreement to, among other things, align covenants and other terms with the Senior Credit Facility.

On May 27, 2020, the 2023 Term Loan agreement was further amended to align the calculation of the consolidated leverage ratio and other terms with the Senior Credit Facility.

The change to the consolidated leverage ratio calculation was effective through June 30, 2021.

In the third quarter of 2021, the calculation of the consolidated leverage ratio under the 2023 Term Loan reverted back to a total debt construct.

At September 30, 2021, the Company was in full compliance with all applicable covenants on its outstanding debt.

At March 31, 2022, the Company was in full compliance with all applicable covenants on its outstanding debt.

In the ordinary course of business, the Company utilizes standby letters of credit issued by financial institutions to guarantee certain obligations, most of which relate to insurance contracts.

At September 30, 2021, outstanding letters of credit tot aled $ 42.5 million, most with expiration dates within 12 months.

At March 31, 2022, outstanding letters of credit totaled $ 42.8 million, most with expiration dates within 12 months.

The maturities of long-term debt (including $ 3.8 million of finance leases) subsequent to March 31, 2022 are as follows:

Thereafter 866.0

Note 11 - Contingencies

9 unchanged sentences

All previously pending property damage and personal injury lawsuits against Lovejoy related to the Site were settled or dismissed prior to our acquisition of Lovejoy.

The Company had total environmental accruals of $ 5.2 million and $ 5.3 million for various known environmental matters that are probable and reasonably estimable at September 30, 2021 and December 31, 2020, respectively, which includes the Lovejoy matter described above.

The Company had total environmental accruals of $ 6.4 million and $ 6.0 million for various known environmental matters that are probable and reasonably estimable at March 31, 2022 and December 31, 2021, respectively, which includes the Lovejoy matter described above.

These accruals were recorded based upon the best estimate of costs to be incurred in light of the progress made in determining the magnitude of remediation costs, the timing and extent of remedial actions required by governmental authorities and the amount of the Company’s liability in proportion to other responsible parties.

1 unchanged sentence

In addition to the contingencies above, the Company provides limited warranties on certain of its products.

The product warranty liability included in "Other current liabilities" on the Consolidated Balance Sheets was $ 11.5 million and $ 9.4 million at September 30, 2021 and December 31, 2020, respectively.

The increase in the liability since year end primarily relates to accruals that are based on the best estimate of costs for future claims based on products sold that are still under warranty.

The product warranty liability included in "Other current liabilities" on the Consolidated Balance Sheets was $ 13.0 million and $ 11.7 million at March 31, 2022 and December 31, 2021, respectively.

The increase in the liability primarily relates to accruals that are based on the best estimate of costs for future claims based on products sold that are still under warranty.

The estimate of these accruals is based on historical claims and expected trends that continue to mature.

Any significant change to these assumptions may be material to the results of operations in any particular period in which that change occurs.

The following is a rollforward of the consolidated product warranty accrual for the nine months ended September 30, 2021 and twelve months ended December 31, 2020:

September 30,

The following is a rollforward of the consolidated product warranty accrual for the three months ended March 31, 2022 and twelve months ended December 31, 2021:

2022 December 31,

4 unchanged sentences

Note 12 - Equity

The following tables present the changes in the components of equity for the three and nine months ended September 30, 2021 and 2020, respectively:

The Timken Company Shareholders

Capital Other

Capital Retained Earnings Accumulated

Comprehensive

Income (Loss) Treasury

Balance at June 30, 2021 $ 2,367.3 $ 40.7 $ 778.6 $ 1,510.9 $ 19.8 $ ( 59.1 ) $ 76.4

Net income 91.6 88.1 3.5

Foreign currency translation adjustment ( 32.9 ) ( 33.1 ) 0.2

Pension and other postretirement liability

adjustments (net of income tax benefit

of $ 0.5 million)

( 1.5 ) ( 1.5 )

Change in fair value of derivative financial

instruments, net of reclassifications 2.5 2.5

Dividends declared to noncontrolling interest ( 0.6 ) ( 0.6 )

Dividends – $ 0.30 per share

( 22.8 ) ( 22.8 )

Stock-based compensation expense 3.1 3.1

Stock purchased at fair market value ( 30.3 ) ( 30.3 )

Balance at September 30, 2021 $ 2,376.4 $ 40.7 $ 781.7 $ 1,576.2 $ ( 12.3 ) $ ( 89.4 ) $ 79.5

The following tables present the changes in the components of equity for the three months ended March 31, 2022 and 2021, respectively:

The Timken Company Shareholders

12 unchanged sentences

instruments, net of reclassifications 2.0 2.0

Dividends declared to noncontrolling interest ( 0.6 ) ( 0.6 )

Dividends – $ 0.30 per share

5 unchanged sentences

stock-based compensation ( 7.5 ) ( 7.5 )

Balance at September 30, 2021 $ 2,376.4 $ 40.7 $ 781.7 $ 1,576.2 $ ( 12.3 ) $ ( 89.4 ) $ 79.5

Note 12 - Equity (continued)

The Timken Company Shareholders

Capital Other

Capital Retained Earnings Accumulated

Comprehensive

(Loss) Treasury

Balance at June 30, 2020 $ 1,967.6 $ 53.1 $ 924.4 $ 2,005.7 $ ( 99.2 ) $ ( 1,000.4 ) $ 84.0

Net income 91.3 88.8 2.5

Foreign currency translation adjustment 63.5 63.0 0.5

Pension and other postretirement liability

adjustments (net of income tax benefit

of $ 0.4 million)

( 1.2 ) ( 1.2 )

Unrealized gain on marketable securities ( 0.1 ) ( 0.1 )

Change in fair value of derivative financial

instruments, net of reclassifications ( 1.8 ) ( 1.8 )

Dividends declared to noncontrolling interest ( 16.1 ) ( 16.1 )

Dividends – $ 0.28 per share

( 21.1 ) ( 21.1 )

Stock-based compensation expense 7.8 7.8

Stock option exercise activity 10.7 ( 1.5 ) 12.2

Restricted share activity — ( 0.1 ) 0.1

Payments related to tax withholding for

stock-based compensation ( 1.6 ) ( 1.6 )

Balance at September 30, 2020 $ 2,099.0 $ 53.1 $ 930.6 $ 2,073.4 $ ( 39.3 ) $ ( 989.7 ) $ 70.9

Balance at March 31, 2022 $ 2,355.0 $ 40.7 $ 795.4 $ 1,711.1 $ ( 42.5 ) $ ( 233.6 ) $ 83.9

The Timken Company Shareholders

2 unchanged sentences

Comprehensive

(Loss) Treasury

Income (Loss) Treasury

Balance at December 31, 2020 $ 2,225.2 $ 40.7 $ 740.7 $ 1,339.5 $ 41.3 $ ( 9.3 ) $ 72.3

Cumulative effect of ASU 2016-13

(net of income tax benefit of $ 0.2 million)

( 0.4 ) ( 0.4 )

Net income 116.0 113.3 2.7

6 unchanged sentences

instruments, net of reclassifications 2.2 2.2

Change in ownership of noncontrolling

interest 0.5 0.5

Dividends declared to noncontrolling interest ( 16.1 ) ( 16.1 )

Dividends – $ 0.29 per share

3 unchanged sentences

Stock option exercise activity 14.1 14.1

Restricted share activity — ( 23.8 ) 23.8

Payments related to tax withholding for

stock-based compensation ( 17.8 ) ( 17.8 )

Balance at September 30, 2020 $ 2,099.0 $ 53.1 $ 930.6 $ 2,073.4 $ ( 39.3 ) $ ( 989.7 ) $ 70.9

Balance at March 31, 2021 $ 2,250.1 $ 40.7 $ 761.3 $ 1,429.0 $ ( 2.1 ) $ ( 53.4 ) $ 74.6

Note 13 - Impairment and Restructuring Charges

Impairment and restructuring charges by segment are comprised of the following:

For the three months ended September 30, 2021:

Mobile Industries Process Industries Unallocated Corporate Total

Severance and related benefit costs $ 2.2 $ 0.3 $ — $ 2.5

Exit costs 0.4 — — 0.4

Total $ 2.6 $ 0.3 $ — $ 2.9

For the nine months ended September 30, 2021:

Mobile Industries Process Industries Unallocated Corporate Total

Impairment charges $ 1.1 $ 3.4 $ — $ 4.5

Severance and related benefit costs 2.2 0.9 — 3.1

Exit costs 0.6 — — 0.6

Total $ 3.9 $ 4.3 $ — $ 8.2

For the three months ended September 30, 2020:

Mobile Industries Process Industries Unallocated Corporate Total

For the three months ended March 31, 2022:

Mobile Industries Process Industries Total

Severance and related benefit costs $ 0.4 $ ( 0.1 ) $ 0.3

1 unchanged sentence

Total $ 1.1 $ ( 0.1 ) $ 1.0

For the nine months ended September 30, 2020:

Mobile Industries Process Industries Unallocated Corporate Total

For the three months ended March 31, 2021:

Mobile Industries Process Industries Total

Impairment charges $ 0.1 $ 3.3 $ 3.4

4 unchanged sentences

however, it is not intended to reflect a comprehensive discussion of all amounts in the tables above.

Coronavirus ("COVID-19") Pandemic Cost Reduction Initiatives:

During the three months and nine months ended September 30, 2020 , the Company recorded $ 9.5 million and $ 11.5 million, respectively, in severance and related benefit costs to eliminate approximately 200 salaried positions to align then current employment levels with customer demand.

Of the $ 9.5 million charge, $ 4.9 million related to the Mobile Industries segment, $ 4.2 million related to the Process Industries segment and $ 0.4 million related to Unallocated Corporate.

Of the $ 11.5 million charge, $ 5.5 million related to the Mobile Industries segment, $ 5.6 million related to the Process Industries segment and $ 0.4 million related to Unallocated Corporate.

Note 13 - Impairment and Restructuring Charges (continued)

Mobile Industries:

3 unchanged sentences

The Company expects to incur approximately $ 9 million to $ 11 million of expenses related to this closure.

During the t hree months ended September 30, 2021, the Company recorded $ 2.2 million in severance and related benefits related to this closure.

A head of this announcement, the Company reviewed assets for impairment.

As a result, the Company recorded impairment charges of $ 1.0 million during the three months ended June 30, 2021.

The Company has incurred cumulative pretax costs related to this closure of $ 5.4 million as of September 30, 2021, including rationalization costs recorded in cost of products sold.

On October 16, 2019, the Company announced the reorganization of its bearing manufacturing facility in Gaffney, South Carolina.

The Company transferred its high-volume bearing production and roller production to other Timken manufacturing facilities in the United States.

The transfer of these operations was substantially completed by the end of the third quarter of 2020 and affected approximately 150 employees.

The Company expected to incur approximately $ 8 million to $ 10 million of pretax costs in total related to this reorganization.

During the nine months ended September 30, 2020, the Company recognized severance and related benefits of $ 0.3 million and exit costs of $ 0.4 million related to this reorganization.

The Company incurred cumulative pretax costs related to this reorganization of $ 7.8 million as of September 30, 2021, including rationalization costs recorded in cost of products sold.

During the t hree months ended March 31, 2022, the Company recorded severance and related benefits of $ 0.4 million and exit costs of $ 0.6 million related to this closure.

The Company has incurred cumulative pretax costs related to this closure of $ 7.5 million as of March 31, 2022, including rationalization costs recorded in cost of products sold.

On January 31, 2022, the Company entered into an agreement to sell this facility with the sale expected to close in the fourth quarter of 2022.

Process Industries:

4 unchanged sentences

The Company expects to hire approximately 130 full-time positions in Fulton, Illinois and expects to incur approximately $ 11 million to $ 14 million of expenses related to this closure.

During the three months ended September 30, 2021 and September 30, 2020, the Company recorded severance and related benefit costs of $ 0.3 million and $ 0.3 million, respectively, related to this closure.

During the nine months ended September 30, 2021 and September 30, 2020, the Company recorded severance and related benefit costs of $ 0.9 million and $ 2.6 million, respectively, related to this closure.

The Company has incurred cumulative pretax costs related to this closure of $ 9.6 million as of September 30, 2021, including rationalization costs recorded in cost of products sold.

On September 3, 2020, the Company announced the reorganization of its bearing plant in Canton, Ohio.

The Company will be transferring production for certain product lines to other Timken locations in order to streamline resources and better align capacity with demand.

The transfer of these operations is expected to occur by 2022 and is expected to affect approximately 40 employees.

The Company expects to incur approximately $ 2.0 million to $ 2.5 million of pretax costs related to this reorganization.

During the three months ended September 30, 2020 , the Company recognized severance and related benefits of $ 0.6 million related to this reorganization.

The Company has incurred cumulative pretax costs related to this reorganization of $ 1.2 million as of September 30, 2021 , including rationalization costs recorded in cost of products sold.

In addition, the Company recorded impairment charges of $ 3.3 million related to certain engineering-related assets used in the business during the nine months ended September 30, 2021 .

During the three months ended March 31, 2021, the Company recorded severance and related benefit costs of $ 0.3 million, respectively, related to this closure.

The Company has incurred cumulative pretax costs related to this closure of $ 11.1 million as of March 31, 2022, including rationalization costs recorded in cost of products sold.

In addition, the Company recorded impairment charges of $ 3.3 million related to certain engineering-related assets used in the business during the three months ended March 31, 2021 .

Management concluded no further investment would be made in these assets and as a result, reduced the value to zero.

1 unchanged sentence

Consolid ated Restructuring Accrual:

The following is a rollforward of the consolidated restructuring accrual for the nine months ended September 30, 2021 and twelve months ended December 31, 2020:

September 30,

The following is a rollforward of the consolidated restructuring accrual for the three months ended March 31, 2022 and twelve months ended December 31, 2021:

2022 December 31,

3 unchanged sentences

Ending balance $ 7.0 $ 7.0

The restructuring accrual at September 30, 2021 was included in other current liabilities on the Consolidated Balance Sheets.

The restructuring accrual at March 31, 2022 and December 31, 2021 was included in other current liabilities on the Consolidated Balance Sheets.

Note 14 - Retirement Benefit Plans

The following table sets forth the net periodic benefit cost for the Company’s defined benefit pension plans.

The amounts for the three and nine months ended September 30, 2021 are based on calculations prepared by the Company's actuaries and represent the Company’s best estimate of that period’s proportionate share of the amounts to be recorded for the year ending December 31, 2021.

The amounts for the three months ended March 31, 2022 are based on calculations prepared by the Company's actuaries and represent the Company’s best estimate of that period’s proportionate share of the amounts to be recorded for the year ending December 31, 2022.

Plans International Plans Total

Three Months Ended

September 30, Three Months Ended

September 30,

2021 2020 2021 2020 2021 2020

Components of net periodic benefit

cost (credit):

Service cost $ 2.4 $ 2.7 $ 0.5 $ 0.5 $ 2.9 $ 3.2

Interest cost 4.3 5.2 1.1 1.4 5.4 6.6

Expected return on plan assets ( 5.5 ) ( 6.3 ) ( 2.5 ) ( 2.2 ) ( 8.0 ) ( 8.5 )

Amortization of prior service cost 0.4 0.4 — — 0.4 0.4

Recognition of net actuarial losses

(gains) 3.9 ( 12.8 ) — — 3.9 ( 12.8 )

Curtailment loss — 0.9 — — — 0.9

Net periodic benefit cost (credit) $ 5.5 $ ( 9.9 ) $ ( 0.9 ) $ ( 0.3 ) $ 4.6 $ ( 10.2 )

Plans International Plans Total

Nine Months Ended

September 30, Nine Months Ended

September 30,

March 31, Three Months Ended

2022 2021 2022 2021 2022 2021

6 unchanged sentences

Recognition of net actuarial losses 2.6 0.9 — — 2.6 0.9

(gains) 8.3 ( 4.0 ) — — 8.3 ( 4.0 )

Curtailment loss — 0.9 — — — 0.9

Net periodic benefit cost (credit) $ 3.7 $ 2.0 $ ( 0.6 ) $ ( 0.9 ) $ 3.1 $ 1.1

Note 14 - Retirement Benefit Plans (continued)

The Company currently expects to make contributions and payments related to its global defined benefit pension plans totaling approximately $ 17 million in 2021.

Approximately $ 9.6 million of this amount related to the payout of deferred compensation in June 2021 to a former executive officer of the Company.

This payment triggered a remeasurement of the pension obligation for one of the Company's U.S.

defined benefit pension plans during the six months ended June 30, 2021.

No remeasurement was required for this defined benefit pension plan during the three months ended September 30, 2021.

In addition, the Company made lump sum payments to new retirees in 2021 in excess of annual interest and service costs for two of its other U.S.

defined benefit pension plans.

These payments triggered a remeasurement of assets and obligations for these U.S.

defined benefit pension plans during the three and nine months ended September 30, 2021.

As a result of these remeasurements, the Company recognized net actuarial losses ("remeasurement losses") of $ 3.9 million and $ 8.3 million during the three and nine months ended September 30, 2021, respectively.

During the three months ended September 30, 2020 , the Company announced the reorganization of its bearing plant in Canton, Ohio.

The reorganization triggered a curtailment of one of the Company's U.S.

defined benefit pension plans.

The Company recognized a curtailment loss of $ 0.9 million and an actuarial gain of $ 0.7 million as a result of this reorganization.

During the three and nine months ended September 30, 2020, t he Company made lump sum payments to new retirees in 2020 in excess of annual interest and service costs for one of the Company's U.S.

defined benefit pension plans.

This triggered a remeasurement of assets and obligations for this plan during the three and nine months ended September 30, 2020.

As a result of these remeasurements, the Company recognized actuarial gains of $ 12.1 million and $ 3.3 million during the three and nine months ended September 30, 2020 , respectively.

The Company expects full year 2022 lump sum payments for one of its U.S.

defined benefit pension plans to exceed annual interest and service costs.

This expectation triggered a remeasurement of assets and obligations for the plan.

As a result of this remeasurement, the Company recognized net actuarial losses ("Mark-to-Market Charges") of $ 2.6 million during the three months ended March 31, 2022.

For the three months ended March 31, 2021, the Company expected to make lump sum payments related to new retirees in excess of annual interest and service costs for three of the Company's U.S.

defined benefit pension plans in 2021.

This expectation triggered a remeasurement of assets and obligations for these plans.

As a result of this remeasurement, the Company recognized net actuarial losses of $ 0.9 million during the three months ended March 31, 2021.

Note 15 - Other Postretirement Benefit Plans

The following table sets forth the net periodic benefit cost for the Company’s other postretirement benefit plans.

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Components of net periodic benefit credit:

Service cost $ — $ — $ 0.1 $ 0.1

Interest cost $ 0.4 $ 0.4

Expected return on plan assets — ( 0.1 ) — ( 0.3 )

Amortization of prior service credit ( 2.5 ) ( 2.5 )

Net periodic benefit credit $ ( 2.1 ) $ ( 2.1 )

In January 2021, the Company transferred the remaining $ 11.1 million in an existing Voluntary Employee Beneficiary Association ("VEBA") trust for certain retiree medical benefits to a second VEBA trust for the payment of certain active employees’ medical benefits.

The Company utilized all of the assets in the second trust during the nine months ended September 30, 2021.

Note 16 - Accumulated Other Comprehensive Income (Loss)

The following tables present details about components of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020, respectively:

Foreign currency translation adjustments Pension and other postretirement liability adjustments Unrealized gain (loss) on marketable securities Change in fair value of derivative financial instruments Total

Balance at June 30, 2021 $ ( 38.2 ) $ 60.1 $ — $ ( 2.1 ) $ 19.8

The following tables present details about components of accumulated other comprehensive income (loss) for the three months ended March 31, 2022 and 2021, respectively:

Foreign currency translation adjustments Pension and other postretirement liability adjustments Change in fair value of derivative financial instruments Total

Balance at December 31, 2021 $ ( 80.3 ) $ 56.6 $ 0.7 $ ( 23.0 )

Other comprehensive (loss) income before

10 unchanged sentences

interest ( 20.0 ) ( 1.5 ) 2.0 ( 19.5 )

Balance at September 30, 2021 $ ( 71.3 ) $ 58.6 $ — $ 0.4 $ ( 12.3 )

Balance at March 31, 2022 $ ( 100.3 ) $ 55.1 $ 2.7 $ ( 42.5 )

Foreign currency translation adjustments Pension and other postretirement liability adjustments Change in fair value of derivative financial instruments Total

Balance at December 31, 2020 $ ( 18.0 ) $ 63.4 $ ( 4.1 ) $ 41.3

4 unchanged sentences

taxes — ( 2.2 ) 1.7 ( 0.5 )

Income tax benefit (expense) — 1.6 — ( 1.8 ) ( 0.2 )

Income tax (expense) benefit — 0.6 ( 0.9 ) ( 0.3 )

Net current period other comprehensive

4 unchanged sentences

interest ( 44.0 ) ( 1.6 ) 2.2 ( 43.4 )

Balance at September 30, 2021 $ ( 71.3 ) $ 58.6 $ — $ 0.4 $ ( 12.3 )

Note 16 - Accumulated Other Comprehensive Income (Loss) (continued)

Balance at June 30, 2020 $ ( 163.3 ) $ 64.1 $ 0.1 $ ( 0.1 ) $ ( 99.2 )

Other comprehensive income (loss) before

reclassifications and income taxes 63.5 ( 0.2 ) — ( 1.9 ) 61.4

Amounts reclassified from accumulated other

comprehensive (loss) income before income

taxes — ( 1.4 ) ( 0.2 ) ( 0.7 ) ( 2.3 )

Income tax benefit — 0.4 0.1 0.8 1.3

Net current period other comprehensive

income (loss), net of income taxes 63.5 ( 1.2 ) ( 0.1 ) ( 1.8 ) 60.4

Noncontrolling interest ( 0.5 ) — — — ( 0.5 )

Net current period comprehensive income (loss),

net of income taxes and noncontrolling

interest 63.0 ( 1.2 ) ( 0.1 ) ( 1.8 ) 59.9

Balance at September 30, 2020 $ ( 100.3 ) $ 62.9 $ — $ ( 1.9 ) $ ( 39.3 )

Balance at December 31, 2019 $ ( 115.3 ) $ 66.9 $ — $ ( 1.7 ) $ ( 50.1 )

Other comprehensive income before

reclassifications and income taxes 9.2 — 0.5 2.3 12.0

Amounts reclassified from accumulated other

comprehensive (loss) income before income

taxes — ( 5.4 ) ( 0.5 ) ( 2.6 ) ( 8.5 )

Income tax benefit — 1.4 — 0.1 1.5

Net current period other comprehensive income

(loss), net of income taxes 9.2 ( 4.0 ) — ( 0.2 ) 5.0

Noncontrolling interest 5.8 — — — 5.8

Net current period comprehensive income (loss),

net of income taxes and noncontrolling

interest 15.0 ( 4.0 ) — ( 0.2 ) 10.8

Balance at September 30, 2020 $ ( 100.3 ) $ 62.9 $ — $ ( 1.9 ) $ ( 39.3 )

Balance at March 31, 2021 $ ( 62.0 ) $ 61.8 $ ( 1.9 ) $ ( 2.1 )

Other comprehensive income (loss) before reclassifications and income taxes includes the effect of foreign currency.

5 unchanged sentences

Level 3 – Unobservable inputs for the asset or liability.

The following tables present the fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020:

September 30, 2021

The following tables present the fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021:

March 31, 2022

Total Level 1 Level 2 Level 3

Cash and cash equivalents $ 407.0 $ 404.4 $ 2.6 $ —

Cash and cash equivalents measured at net asset value 17.5 — — —

Restricted cash 0.7 0.7 — —

Short-term investments 57.8 — 57.8 —

Interest rate swap contract 2.6 — 2.6 —

Foreign currency forward contracts 6.6 — 6.6 —

12 unchanged sentences

Cash and cash equivalents are highly liquid investments with maturities of three months or less when purchased and are valued at the redempti on value.

Short-term investments are investments with maturities between four months and one year, and generally are valued at amortized cost, which approximates fair value.

Short-term investments are investments with maturities between four months and one year, and generally are valued at amortized cost, which approximat es fair value.

A portion of the cash and cash equivalents and short-term investments are valued based on net asset value.

The Company uses publicly available foreign currency fo rward and spot rates to measure the fair value of its foreign currency forward contracts.

In addition, the Company remeasures certain assets at fair value, using Level 3 inputs, as a result of the occurrence of triggering events such as purchase accounting for acquisitions.

See Note 3 - Acquisitions for further discussion.

No other material assets were measured at fair value on a nonrecurring basis during the nine months ended September 30, 2021 and 2020, respectively.

The Company uses publicly available market interest rates to measure the fair value of its interest rate swap contracts.

The Company uses publicly available foreign currency forward and spot rates to measure the fair value of its foreign currency forward contracts.

Note 17 - Fair Value (continued)

In addition, the Company remeasures certain assets at fair value, using Level 3 inputs, as a result of the occurrence of triggering events such as purchase accounting for acquisitions.

No other material assets were measured at fair value on a nonrecurring basis during the three months ended March 31, 2022 and 2021, respectively.

Financial Instruments:

1 unchanged sentence

Due to their short-term nature, the carrying value of cash and cash equivalents, short-term investments, accounts receivable, trade accounts payable and short-term borrowings are a reasonable estimate of their fair value.

Due to the nature of fair value calculati ons for variable-rate debt, the carrying value of the Company's long-term variable-rate debt is a reasonable estimate of its fair value.

The fair value of the Company’s long-term fixed-rate debt, based on quoted market prices, was $ 1,193.7 million and $ 1,220.7 million at September 30, 2021 and December 31, 2020, respectively.

The carrying value of this debt was $ 1,091.1 million and $ 1,103.2 million at September 30, 2021 and December 31, 2020, respectively.

The fair value of long-term fixed-rate debt w as measured using Level 2 inputs.

Due to the nature of fair value calculati ons for variable-rate debt, the carrying value of the Company's long-term variable-rate debt is a reasonable estima te of its fair value.

The fair value of the Company’s long-term fixed-rate debt, based on quoted market prices, was $ 1,468.0 million and $ 1,171.1 million at March 31, 2022 and December 31, 2021, respectively.

The carrying value of this debt was $ 1,424.5 million and $ 1,087.5 million at March 31, 2022 and December 31, 2021, respectively.

The fair value of long-term fixed-rate debt was measured using Level 2 inputs.

The Company does not believe it has significant concentrations of risk associated with the counterparties to its financial instruments.

10 unchanged sentences

dollar and the Euro.

The net impact for the three and nine months ended September 30, 2021, respectively, was a gain of $ 1.5 million and $ 3.5 million to accumulated comprehensive income (loss) with a corresponding offset to o ther income (expense) , which partially offsets the impact of the foreign currency adjustment on the 2027 Notes.

The Company does not purchase or hold any derivative financial instruments for trading purposes.

As of September 30, 2021 and December 31, 2020, the Company had $ 232.0 million a nd $ 173.2 million, respectively, of outstanding foreign currency forward contracts at notional value.

The net impact for the three months ended March 31, 2022, respectively, was a gain of $ 1.7 million to accumulated comprehensive (loss) income with a corresponding offset to other income, which partially offsets the impact of the foreign currency adjustment on the 2027 Notes.

The Company entered into $ 350 million floating-to-fixed 10-year Treasury rate locks during the first quarter of 2022, prior to issuing the 2032 Notes.

This fixed the 10-year Treasury yield and settled at pricing of the 2032 Notes, resulting in $ 6.4 million of cash proceeds received by the Company.

This amount was recorded to accumulated comprehensive income and will be amortized as a reduction in interest expense over the 10-year tenor of the 2032 Notes.

The Company does not purchase or hold any derivativ e financial instruments for trading purposes.

As of March 31, 2022 and December 31, 2021, the Company had $ 291.4 million and $ 300.8 million, respectively, of outstanding foreign currency forward contracts at notional value.

Refer to Note 17 - Fair Value for the fair value disclosure of derivative financial instruments.

Note 18 - Derivative Instruments and Hedging Activities (continued)

Cash Flow Hedging Strategy:

For certain derivative instruments that are designated and qualify as cash flow hedges ( i.e ., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings.

Note 18 - Derivative Instruments and Hedging Activities (continued)

To protect against a reduction in the value of forecasted foreign currency cash flows resulting from export sales, the Company has instituted a foreign currency cash flow hedging program.

1 unchanged sentence

When the dollar strengthens significantly against foreign currencies, the decline in the present value of future foreign currency revenue is offset by gains in the fair value of the forward contracts designated as hedges.

Co nversely, when the dollar weakens, the increase in the present value of future foreign currency cash flows is offset by losses in the fair value of the forward contracts.

As of September 30, 2021 and December 31, 2020, the Company had $ 81.6 million and $ 86.9 million, respectively, of outstanding foreign currency forward contracts at notional value that were classified as cash flow hedges.

Co nverse ly, when the dollar weakens, the increase in the present value of future foreign currency cash flows is offset by losses in the fair value of the forward contracts.

As of March 31, 2022 and December 31, 2021, the Company had $ 83.5 million and $ 80.0 million, respectively, of outstanding foreign currency forward contracts at notional value that were classified as cash flow hedges.

The maximum length of time over which the Company hedges its exposure to the variability in future cash flows for forecast transactions is generally eighteen months or less.

4 unchanged sentences

The revaluation of these contracts, as well as the revaluation of the underlying balance sheet items, is recorded directly to the income statement so the adjustment generally offsets the revaluation of the underlying balance sheet items to protect cash payments and reduce income statement volatility.

As of September 30, 2021 and December 31, 2020 , the Comp any had $ 150.4 million and $ 86.3 million, r espectively, of outstanding foreign currency forward contracts at notional value that were not designated as hedging instruments.

The following table presents the impact of derivative instruments not designated as hedging instruments for the three and nine months ended September 30, 2021 and 2020, respectively, and the related location within the Consolidated Statements of Income:

As of March 31, 2022 and December 31, 2021, the Company had $ 207.9 million and $ 220.8 million, respectively, of outstanding foreign currency forward contracts at notional value that were not d esignated as hedging instruments.

The following table presents the impact of derivative instruments not designated as hedging instruments for the three months ended March 31, 2022 and 2021, respectively, and the related location within the Consolidated Statements of Income:

Amount of gain or (loss) recognized in income

Three Months Ended

September 30, Nine Months Ended

September 30,

Derivatives not designated as hedging instruments:

1 unchanged sentence

Foreign currency forward contracts Other income (expense), net $ ( 1.0 ) $ 0.2

Note 19 - Subsequent Events

On April 29, 2022, the Company reached an agreement to acquire Spinea, s.r.o.

(Spinea), a European technology leader and manufacturer of highly engineered cycloidal reduction gears and actuators.

Spinea’s solutions primarily serve high-precision automation and robotics applications in the factory automation sector.

Spinea is located in Presov, Slovakia, and is expected to have sales around $ 40 million for the full year of 2022.

The transaction, which is subject to customary closing conditions, is expected to close in the second quarter and will be funded with cash and borrowings from existing credit facilities.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements