What changed in this filing

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Item 1. Financial Statements

2022-10-26 compared with 2022-07-28 · 202 added, 130 removed, 681 unchanged (33% of the section changed)

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

8 unchanged sentences

Interest income 1.1 0.5 2.7 1.7

Non-service pension and other postretirement (expense) income ( 7.9 ) 1.4 ( 6.6 ) 5.4

Other expense, net ( 1.1 ) ( 2.2 ) ( 0.9 ) ( 1.2 )

Non-service pension and other postretirement income (expense) 1.3 0.5 ( 5.3 ) 5.9

Other income, net 2.3 1.5 1.4 0.3

Income Before Income Taxes 117.1 112.0 426.8 389.9

10 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

5 unchanged sentences

Change in fair value of derivative financial instruments 1.8 2.5 6.0 4.5

Other comprehensive (loss) income, net of tax ( 112.3 ) 21.3 ( 134.4 ) ( 22.5 )

Comprehensive (loss) income, net of tax ( 6.7 ) 128.5 93.1 200.7

Other comprehensive loss, net of tax ( 136.4 ) ( 31.9 ) ( 270.8 ) ( 54.4 )

Comprehensive income (loss), net of tax ( 46.0 ) 59.7 47.1 260.4

comprehensive income attributable to noncontrolling interest 0.1 3.7 2.9 7.8

Comprehensive (loss) income attributable to

Comprehensive income (loss) attributable to

The Timken Company $ ( 46.1 ) $ 56.0 $ 44.2 $ 252.6

1 unchanged sentence

Consolidated Balance Sheets

(Dollars in millions) June 30,

(Dollars in millions) September 30,

2022 December 31,

53 unchanged sentences

Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

(Dollars in millions)

6 unchanged sentences

Loss on sale of assets 1.0 1.0

Loss on divestiture 2.1 —

Acquisition-related gain — ( 0.9 )

17 unchanged sentences

Proceeds from disposal of property, plant and equipment 3.3 —

Proceeds from divestitures, net of cash divested 1.0 —

Investments in short-term marketable securities, net 27.8 ( 5.4 )

12 unchanged sentences

Short-term debt activity, net 17.0 ( 30.3 )

Noncontrolling interest dividends paid ( 0.5 ) ( 0.5 )

Net Cash Provided by (Used in) Financing Activities 88.5 ( 222.4 )

20 unchanged sentences

New Accounting Guidance Issued and Not Yet Adopted:

In September 2022, the FASB issued ASU 2022-04, "Liabilities - Supplier Finance Programs (Subtopic 405-50)." ASU 2022-04 is intended to establish disclosures that enhance the transparency of a supplier finance program used by an entity in connection with the purchase of goods and services.

Supplier finance programs, which also may be referred to as reverse factoring, payables finance or structured payables arrangements, allow a buyer to offer its suppliers the option for access to payment in advance of an invoice due date, which is paid by a third-party finance provider or intermediary.

Under the guidance, a buyer in a supplier finance program would disclose qualitative and quantitative information about its supplier finance programs.

The new guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted.

The Company is currently evaluating the impact of the new guidance.

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.

The Company is currently evaluating the impact of the new guidance.

Note 2 - Significant Accounting Policies (continued)

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

3 unchanged sentences

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

The Company continues to monitor future amendments, such as the current proposal by the FASB to defer the sunset date of reference rate reform relief by two years to December 31, 2024, after which entities would no longer be permitted to apply the relief in Topic 848.

Note 3 - Acquisitions and Divestitures

Acquisitions:

On May 31, 2022, the Company completed the acquisition of Spinea, s.r.o.

4 unchanged sentences

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

The following table presents the purchase price allocation at fair value, for the Spinea acquisition as of June 30, 2022.

The following table presents the purchase price allocation at fair value, for the Spinea acquisition as of September 30, 2022.

Initial Purchase

10 unchanged sentences

Other current liabilities 1.2

Short-term debt 0.1

Long-term debt 0.2

3 unchanged sentences

Net assets acquired $ 152.4

Note 3 - Acquisitions and Divestitures (continued)

The following table summarizes the preliminary purchase price allocation for identifiable intangible assets acquired in 2022:

9 unchanged sentences

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

Note 3 - Acquisitions (continued)

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

This purchase price allocation, including the residual amount allocated to goodwill, is based on preliminary information and is subject to change as additional information concerning final asset and liability valuations are obtained.

As of June 30, 2022, no elements of the purchase price allocation have been finalized.

As of September 30, 2022, 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.

11 unchanged sentences

Net assets acquired $ 7.7

On September 6, 2022, the Company entered into an agreement to acquire GGB Bearing Technology ("GGB Bearings"), a division of Enpro, Industries and a global technology and market leader of premium engineered metal-polymer plain bearings for $ 305 million subject to customary post-closing adjustments.

GGB Bearings revenue is estimated to be $ 200 million for the full year 2022.

GGB Bearings' products are used mainly in industrial applications, and the acquisition has manufacturing facilities across the United States, Europe and China.

The transaction, which is subject to customary closing conditions, is expected to close in the fourth quarter of 2022 and will be funded with cash on hand and borrowings from existing credit facilities.

Note 3 - Acquisitions and Divestitures (continued)

Divestitures:

On September 1, 2022, the Company completed the divestiture of Timken-Rus Service Company ooo ("Timken Russia"), one of its two subsidiaries in Russia.

Timken Russia had net sales of $ 4.8 million and $ 19.6 million in 2022 and 2021, respectively.

The results of operations of Timken Russia were reported in the Mobile Industries and Process Industries segments based on customers and underlying market sectors served.

The Company recorded proceeds of $ 1.0 million, net of cash divested of $ 5.3 million, and recognized a loss of $ 2.1 million on the sale of the business.

The loss was reflected in other income, net in the Consolidated Statement of Income.

The Company made the decision to sell its Timken Aerospace Drive Systems, LLC ("ADS") business, located in Manchester, Connecticut.

On October 7, 2022, the Company entered into a definitive agreement to sell the ADS business.

During the third quarter of 2022, the business met the held for sale criteria, and the Company reclassified its assets and liabilities accordingly.

Assets held for sale of $ 40.1 million are included in other current assets, and liabilities held for sale of $ 7.3 million are included in other current liabilities on the Consolidated Balance Sheet.

As a result of the carrying value of the business exceeding the estimated sales price less costs to sell, the Company recorded an impairment charge of $ 29.3 million.

The impairment charge is included in the impairment and restructuring line on the Consolidated Statement of Income.

The Company expects to complete the sale during the fourth quarter of 2022, subject to customary closing conditions.

Operating results of the ADS business are included the Mobile Industries segment.

The following table provides the major captions of assets and liabilities held for sale at September 30, 2022:

Accounts receivable, net $ 6.0

Unbilled receivables 25.4

Inventories, net 13.4

Property, plant and equipment, net 4.4

Operating lease assets 3.7

Intangible assets, net 16.2

Other assets 0.3

Total assets 69.4

impairment charge ( 29.3 )

Assets held for sale $ 40.1

Accounts payable, trade $ 2.1

Salaries, wages and benefits 1.1

Other current liabilities 1.0

Long-term operating lease liabilities 3.1

Liabilities held for sale $ 7.3

Note 4 - Revenue

The following table presents details deemed most relevant to the users of the financial statements about total revenue for the three and six months ended June 30, 2022 and 2021, respectively:

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, 2022 and 2021, respectively:

Three Months Ended Three Months Ended

June 30, 2022 June 30, 2021

September 30, 2022 September 30, 2021

Mobile Process Total Mobile Process Total

5 unchanged sentences

Net sales $ 526.9 $ 609.5 $ 1,136.4 $ 487.3 $ 550.0 $ 1,037.3

Six Months Ended Six Months Ended

June 30, 2022 June 30, 2021

Nine Months Ended Nine Months Ended

September 30, 2022 September 30, 2021

Mobile Process Total Mobile Process Total

5 unchanged sentences

Net sales $ 1,610.9 $ 1,803.8 $ 3,414.7 $ 1,486.0 $ 1,639.6 $ 3,125.6

Note 4 - Revenue (continued)

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 six months ended June 30, 2022 and 2021, respectively:

Six Months Ended Six Months Ended

Revenue by sales channel June 30, 2022 June 30, 2021

The following table presents the percent of revenue by sales channel for the nine months ended September 30, 2022 and 2021, respectively:

Nine Months Ended Nine Months Ended

Revenue by sales channel September 30, 2022 September 30, 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 six months ended June 30, 2022 and June 30, 2021, approximately 9 %, 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 % of t otal net sales represented service revenue during the six months ended June 30, 2022 and June 30, 2021, respectively.

Finally, business with the United States ("U.S.") government or its contractors represented approximately 6 % and 7 % of total net sales during the six months ended June 30, 2022 and June 30, 2021, respectively.

During the nine months ended September 30, 2022 and September 30, 2021, approximately 9 % and 8 %, 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 4 % of t otal net sales represented service revenue during the nine months ended September 30, 2022 and September 30, 2021, respectively.

Finally, business with the United States ("U.S.") government or its contractors represented approximately 7 % of total net sales during each of the nine months ended September 30, 2022 and September 30, 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 $ 245.5 million a t June 30, 2022.

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 $ 170.7 million a t September 30, 2022.

Note 4 - Revenue (continued)

Unbilled Receivables:

The following table contains a rollforward of unbilled receivables for the six months ended June 30, 2022 and the twelve months ended December 31, 2021:

The following table contains a rollforward of unbilled receivables for the nine months ended September 30, 2022 and the twelve months ended December 31, 2021:

September 30,

2022 December 31,

2 unchanged sentences

amounts billed to customers ( 297.4 ) ( 389.4 )

unbilled receivables reclassified to assets held for sale ( 25.4 ) —

Ending balance $ 83.6 $ 104.5

There were no impairment losses recorded on unbilled receivables for the six months ended June 30, 2022 and June 30, 2021.

There were no impairment losses recorded on unbilled receivables for the nine months ended September 30, 2022 and September 30, 2021.

Note 5 - Segment Information

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

20 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

1 unchanged sentence

Effective tax rate 22.8 % 18.2 % 25.5 % 19.3 %

Income tax expense for the three and six months ended June 30, 2022 was calculated using forecasted multi-jurisdictional annual effective tax rates to determine a blended annual effective tax rate.

Income tax expense for the three and nine months ended September 30, 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 projected mix of earnings in international jurisdictions with relatively higher tax rates.

The effective tax rate of 29.4 % for the three months ended June 30, 2022 was higher than the rate for the three months ended June 30, 2021 primarily due to an unfavorable mix of earnings in higher tax rate jurisdictions, the net unfavorable impact of discrete tax items, and lower deductions for stock-based compensation.

The effective tax rate of 26.5 % for the six months ended June 30, 2022 was higher than the rate for the six months ended June 30, 2021 primarily due to an unfavorable mix of earnings in higher tax rate jurisdictions, the net unfavorable impact of discrete tax items, including a discrete tax benefit in the prior year in connection with the settlement of the 2017 and 2018 U.S.

federal tax years during the six months ended June 30, 2021, and lower deductions for stock-based compensation.

The effective tax rate of 22.8 % for the three months ended September 30, 2022 was higher than the rate for the three months ended September 30, 2021 primarily due to the net unfavorable impact of discrete tax items in comparison to the year ago period.

The effective tax rate of 25.5 % for the nine months ended September 30, 2022 was higher than the rate for the nine months ended September 30, 2021 primarily due to an unfavorable mix of earnings in higher tax rate jurisdictions, the net unfavorable impact of discrete tax items, including a discrete tax benefits in the year ago period in connection with the settlement of the 2017 and 2018 U.S.

federal tax years during the nine months ended September 30, 2021, and lower deductions for stock-based compensation.

Note 7 - 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 six months ended June 30, 2022 and 2021, 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 and nine months ended September 30, 2022 and 2021, respectively:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

13 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.

There were no antidilutive stock options outstanding during the three and six months ended June 30, 2022 and 2021.

There were no antidilutive stock options outstanding during the three and nine months ended September 30, 2022 and 2021.

Note 8 - Inventories

The components of inventories at June 30, 2022 and December 31, 2021 were as follows:

The components of inventories at September 30, 2022 and December 31, 2021 were as follows:

September 30,

2022 December 31,

8 unchanged sentences

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 June 30, 2022 and December 31, 2021 was $ 216.7 million and $ 199.4 million, respectively.

The LIFO reserve at September 30, 2022 and December 31, 2021 was $ 229.1 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.

2 unchanged sentences

Note 9 - Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the six months ended June 30, 2022 were as follows:

The changes in the carrying amount of goodwill for the nine months ended September 30, 2022 were as follows:

Industries Process

6 unchanged sentences

The goodwill is expected to be 100 % tax deductible.

The following table displays intangible assets as of June 30, 2022 and December 31, 2021:

Balance at June 30, 2022 Balance at December 31, 2021

The following table displays intangible assets as of September 30, 2022 and December 31, 2021:

Balance at September 30, 2022 Balance at December 31, 2021

Amount Accumulated

15 unchanged sentences

Total intangible assets $ 1,114.9 $ ( 520.2 ) $ 594.7 $ 1,219.2 $ ( 550.4 ) $ 668.8

Amortization expense for intangible assets was $ 25.3 million and $ 28.2 million for the six months ended June 30, 2022 and 2021, respectively.

Amortization expense included $ 21.5 million and $ 24.3 million related to intangible assets acquired as part of a business combination for the six months ended June 30, 2022 and 2021, respectively.

Amortization expense for intangible assets was $ 37.4 million and $ 41.7 million for the nine months ended September 30, 2022 and 2021, respectively.

Amortization expense included $ 32.2 million and $ 35.8 million related to intangible assets acquired as part of a business combination for the nine months ended September 30, 2022 and 2021, respectively.

Amortization expense for intangible assets is projected to be $ 49.7 million in 2022;

5 unchanged sentences

Note 10 - Other Current Liabilities

The following table displays other current liabilities as of June 30, 2022 and December 31, 2021:

June 30, December 31,

(Dollars in millions) 2022 2021

The following table displays other current liabilities as of September 30, 2022 and December 31, 2021:

(Dollars in millions) September 30,

2022 December 31,

Sales rebates $ 67.7 $ 70.3

9 unchanged sentences

Note 11 - Financing Arrangements

Short-term debt at June 30, 2022 and December 31, 2021 was as follows:

Short-term debt at September 30, 2022 and December 31, 2021 was as follows:

September 30,

2022 December 31,

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 June 30, 2022 and 0.50 % to 2.00 % at December 31, 2021

Borrowings under lines of credit for certain of the Company’s foreign subsidiaries with various banks with interest rates ranging from 1.18 % to 2.75 % at September 30, 2022 and 0.50 % to 2.00 % at December 31, 2021

$ 50.9 $ 42.6

2 unchanged sentences

Most of these lines of credit are uncommitted.

At June 30, 2022, the Company’s foreign subsidiaries had borrowings outstanding of $ 70.3 million and bank guarantees of $ 0.2 million, which reduced the aggregate availability under these facilities to $ 183.9 million.

Long-term debt at June 30, 2022 and December 31, 2021 was as follows:

At September 30, 2022, the Company’s foreign subsidiaries had borrowings outstanding of $ 50.9 million and bank guarantees of $ 2.6 million, which reduced the aggregate availability under these facilities to $ 182.3 million.

Long-term debt at September 30, 2022 and December 31, 2021 was as follows:

September 30,

2022 December 31,

Variable-rate Senior Credit Facility with an average interest rate on Euro of 1.00 % at June 30, 2022 and U.S.

Variable-rate Senior Credit Facility with an average interest rate on Euro of 1.00 % at September 30, 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 2.79 % at June 30, 2022 and 1.23 % at December 31, 2021

Variable-rate Accounts Receivable Facility — —

Variable-rate Term Loan (1) , maturing on September 11, 2023, with an interest rate of 4.24 % at September 30, 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 %

12 unchanged sentences

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 June 30, 2022.

As of June 30, 2022, there were no outstanding borrowings under the Accounts Receivable Facility, and the entire $ 100 million was available .

however, availability under the Accounts Receivable Facility was not reduced by any such borrowing base limitations at September 30, 2022.

As of September 30, 2022, there were no outstanding borrowings under the Accounts Receivable Facility, and the entire $ 100 million was available .

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.

2 unchanged sentences

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

At June 30, 2022, the Company had $ 8.3 million of outstanding borrowings under the Senior Credit Facility, which reduced the availability under this facility to $ 641.7 million.

At September 30, 2022, the Company had $ 7.8 million of outstanding borrowings under the Senior Credit Facility, which reduced the availability under this facility to $ 642.2 million.

The Senior Credit Facility has two financial covenants:

5 unchanged sentences

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.

At June 30, 2022, the Company was in full compliance with all applicable covenants on its outstanding debt.

At September 30, 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 June 30, 2022, outstanding letters of credit totaled $ 43.7 million, most with expiration dates within 12 months.

The maturities of long-term debt (including $ 3.4 million of finance leases) subsequent to June 30, 2022 are as follows:

At September 30, 2022, outstanding letters of credit totaled $ 43.5 million, most with expiration dates within 12 months.

The maturities of long-term debt (including $ 3.1 million of finance leases) subsequent to September 30, 2022 are as follows:

Thereafter 865.1

10 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 $ 5.5 million and $ 6.0 million for various known environmental matters that are probable and reasonably estimable at June 30, 2022 and December 31, 2021, respectively, which includes the Lovejoy matter described above.

The Company had total environmental accruals of $ 5.0 million and $ 6.0 million for various known environmental matters that are probable and reasonably estimable at September 30, 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 $ 17.2 million and $ 11.7 million at June 30, 2022 and December 31, 2021, respectively.

The product warranty liability included in "Other current liabilities" on the Consolidated Balance Sheets was $ 19.6 million and $ 11.7 million at September 30, 2022 and December 31, 2021, respectively.

The balances at the end of each respective period represent the best estimates of costs for future claims for products that are still under warranty.

The increase in the liability for the first six months of 2022 primarily relates to additional accruals for product sold into the automotive and renewable energy sectors.

The increase in the liability for the first nine months of 2022 primarily relates to additional accruals for certain products sold into the automotive and renewable energy sectors.

Accrual estimates are based on actual 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 such change occurs.

The following is a rollforward of the consolidated product warranty accrual for the six months ended June 30, 2022 and twelve months ended December 31, 2021:

The following is a rollforward of the consolidated product warranty accrual for the nine months ended September 30, 2022 and twelve months ended December 31, 2021:

September 30,

2022 December 31,

4 unchanged sentences

Note 13 - Equity

The following tables present the changes in the components of equity for the three and six months ended June 30, 2022 and 2021, respectively:

The following tables present the changes in the components of equity for the three and nine months ended September 30, 2022 and 2021, respectively:

The Timken Company Shareholders

3 unchanged sentences

Loss Treasury

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

Balance at June 30, 2022 $ 2,289.2 $ 40.7 $ 804.1 $ 1,793.2 $ ( 155.9 ) $ ( 278.5 ) $ 85.6

Net income 90.4 87.0 3.4

6 unchanged sentences

instruments, net of reclassifications 1.8 1.8

Dividends declared to noncontrolling interest ( 0.5 ) ( 0.5 )

Dividends – $ 0.31 per share

3 unchanged sentences

Stock option exercise activity 2.6 2.6

Shares surrendered for stock option activity — 3.8 ( 3.8 )

Payments related to tax withholding for

stock-based compensation ( 1.4 ) ( 1.4 )

Balance at June 30, 2022 $ 2,289.2 $ 40.7 $ 804.1 $ 1,793.2 $ ( 155.9 ) $ ( 278.5 ) $ 85.6

Balance at September 30, 2022 $ 2,178.8 $ 40.7 $ 817.2 $ 1,857.4 $ ( 289.0 ) $ ( 332.7 ) $ 85.2

The Timken Company Shareholders

14 unchanged sentences

( 69.2 ) ( 69.2 )

Dividends declared to noncontrolling interest ( 0.5 ) ( 0.5 )

Stock-based compensation expense 22.3 22.3

1 unchanged sentence

Stock option exercise activity 4.2 4.2

Shares surrendered for stock option activity — 3.8 ( 3.8 )

Payments related to tax withholding for

stock-based compensation ( 9.5 ) ( 9.5 )

Balance at June 30, 2022 $ 2,289.2 $ 40.7 $ 804.1 $ 1,793.2 $ ( 155.9 ) $ ( 278.5 ) $ 85.6

Balance at September 30, 2022 $ 2,178.8 $ 40.7 $ 817.2 $ 1,857.4 $ ( 289.0 ) $ ( 332.7 ) $ 85.2

Note 13 - Equity (continued)

4 unchanged sentences

Income (Loss) Treasury

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

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

6 unchanged sentences

instruments, net of reclassifications 2.5 2.5

Dividends paid to noncontrolling interest ( 0.6 ) ( 0.6 )

Dividends - $ 0.30 per share

1 unchanged sentence

Stock-based compensation expense 3.1 3.1

Stock option exercise activity 11.3 11.3

Payments related to tax withholding for

stock-based compensation ( 5.7 ) ( 5.7 )

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

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 Timken Company Shareholders

12 unchanged sentences

instruments, net of reclassifications 4.5 4.5

Dividends paid to noncontrolling interest ( 0.6 ) ( 0.6 )

Dividends - $ 0.89 per share

5 unchanged sentences

stock-based compensation ( 23.5 ) ( 23.5 )

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

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

Note 14 - Impairment and Restructuring Charges

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

For the three months ended June 30, 2022:

For the three months ended September 30, 2022:

Mobile Industries Process Industries Total

3 unchanged sentences

Total $ 31.1 $ 0.2 $ 31.3

For the six months ended June 30, 2022:

For the nine months ended September 30, 2022:

Mobile Industries Process Industries Total

3 unchanged sentences

Total $ 41.8 $ 0.5 $ 42.3

For the three months ended June 30, 2021:

For the three months ended September 30, 2021:

Mobile Industries Process Industries Total

Impairment charges $ 1.0 $ 0.1 $ 1.1

Severance and related benefit costs $ 2.2 $ 0.3 $ 2.5

1 unchanged sentence

Total $ 2.6 $ 0.3 $ 2.9

For the six months ended June 30, 2021:

For the nine months ended September 30, 2021:

Mobile Industries Process Industries Total

6 unchanged sentences

Mobile Industries:

During the three months ended June 30, 2022, the Company recorded impairment charges of $ 8.8 million related to certain assets of its joint venture in Russia.

During the three months ended September 30, 2022, the Company classified the ADS business as assets held for sale and recorded an impairment charges of $ 29.3 million.

The Company anticipates the sale of ADS business to be completed during the fourth quarter of 2022.

During the nine months ended September 30, 2022, the Company recorded impairment charges of $ 9.0 million related to certain assets of its joint venture in Russia.

As a result of Russia's invasion of Ukraine (and associated sanctions), the Company suspended its operations in Russia.

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The Company will be transferring the manufacturing of its single-row tapered roller bearing production to other bearing facilities in Europe, Asia and the United States.

The Company expects to complete the closure of the facility by October of 2022 and is expected to affect approximately 110 employees.

The Company expects to complete the closure of the facility by the end of October 2022 and is expected to affect approximately 110 employees.

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

During the three months ended June 30, 2022, the Company recorded severance and related benefits of $ 0.4 million and exit costs of $ 0.4 million associated with this closure.

During the six months ended June 30, 2022, the Company recorded severance and related benefits of $ 0.8 million and exit costs of $ 1.0 million associated with this closure.

During the three months ended June 30, 2021, the Company recorded impairment charges of $ 1.0 million.

T he Company has incurred cumulative pretax costs related to this closure of $ 8.3 million as of June 30, 2022, including rationalization costs recorded in cost of products sold.

During the three months ended September 30, 2022, the Company recorded severance and related benefits of $ 0.4 million and exit costs of $ 0.3 million associated with this closure, and during the nine months ended September 30, 2022, the Company recorded severance and related benefits of $ 1.2 million and exit costs of $ 1.3 million associated with this closure.

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

In addition to the severance and related benefits, the Company recorded impairment charges of $ 1.0 million during the nine months ended September 30, 2021.

T he Company has incurred cumulative pretax costs related to this closure of $ 9.1 million as of September 30, 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.

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The Company will be transferring the manufacturing of its Diamond Chain product line to its chain facility in Fulton, Illinois.

The chain plant is expected to cease operations by the end of the fourth quarter of 2022 and is expected to affect approximately 240 employees.

The chain plant is expected to cease operations by the end of the first quarter of 2023 and is expected to affect approximately 240 employees.

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 and six months ended June 30, 2021, the Company recorded severance and related benefit costs of $ 0.3 million and $ 0.6 million, respectively, related to this closure.

The Company has incurred cumulative pretax costs related to this closure of $ 12.0 million as of June 30, 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 six months ended June 30, 2021 .

During the three months and nine months ended September 30, 2021, the Company recorded severance and related benefit costs of $ 0.3 million and $ 0.9 million, respectively, related to this closure.

The Company has incurred cumulative pretax costs related to this closure of $ 12.9 million as of September 30, 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 nine months ended September 30, 2021 .

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

Consolid ated Restructuring Accrual:

The following is a rollforward of the consolidated restructuring accrual for the six months ended June 30, 2022 and twelve months ended December 31, 2021:

The following is a rollforward of the consolidated restructuring accrual for the nine months ended September 30, 2022 and twelve months ended December 31, 2021:

September 30,

2022 December 31,

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Ending balance $ 4.1 $ 7.0

The restructuring accrual at June 30, 2022 and December 31, 2021 was included in other current liabilities on the Consolidated Balance Sheets.

The restructuring accrual at September 30, 2022 and December 31, 2021 was included in other current liabilities on the Consolidated Balance Sheets.

Note 15 - 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 six months ended June 30, 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.

The amounts for the three and nine months ended September 30, 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

June 30, Three Months Ended

September 30, Three Months Ended

September 30,

2022 2021 2022 2021 2022 2021

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Plans International Plans Total

Six Months Ended

June 30, Six Months Ended

Nine Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021 2022 2021

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

During the three months ended March 31, 2022, the Company only expected to make lump sum payments related to new retirees in excess of annual interest and service costs for one of its U.S.

defined benefit pension plans resulting in only one plan being remeasured.

As a result of these remeasurements, the Company recognized net actuarial losses ("mark-to-market charges") of $ 11.6 million and $ 14.2 million during the three and six months ended June 30, 2022, respectively.

For the three and six months ended June 30, 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.

As a result of these remeasurements, the Company recognized net actuarial losses ("mark-to-market charges") of $ 1.0 million and $ 15.2 million during the three and nine months ended September 30, 2022, respectively.

For the three and nine months ended September 30, 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, along with the payout of deferred compensation to a former executive officer of the Company in June 2021, triggered a remeasurement of assets and obligations for these plans.

As a result of this remeasurement, the Company recognized net actuarial losses of $ 3.5 million and $ 4.4 million during the three and six months ended June 30, 2021, respectively.

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

Note 16 - 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

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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Note 17 - Accumulated Other Comprehensive Income (Loss)

The following tables present details about components of accumulated other comprehensive (loss) income for the three and six months ended June 30, 2022 and 2021, respectively:

The following tables present details about components of accumulated other comprehensive (loss) income for the three and nine months ended September 30, 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 March 31, 2022 $ ( 100.3 ) $ 55.1 $ 2.7 $ ( 42.5 )

Balance at June 30, 2022 $ ( 214.5 ) $ 53.7 $ 4.9 $ ( 155.9 )

Other comprehensive (loss) income before

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interest ( 133.5 ) ( 1.4 ) 1.8 ( 133.1 )

Balance at June 30, 2022 $ ( 214.5 ) $ 53.7 $ 4.9 $ ( 155.9 )

Balance at September 30, 2022 $ ( 348.0 ) $ 52.3 $ 6.7 $ ( 289.0 )

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

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interest ( 267.7 ) ( 4.3 ) 6.0 ( 266.0 )

Balance at June 30, 2022 $ ( 214.5 ) $ 53.7 $ 4.9 $ ( 155.9 )

Balance at September 30, 2022 $ ( 348.0 ) $ 52.3 $ 6.7 $ ( 289.0 )

Note 17 - Accumulated Other Comprehensive Income (Loss) (continued)

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

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

Other comprehensive income (loss) before

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

Other comprehensive (loss) income before

reclassifications and income taxes ( 32.9 ) 0.2 2.7 ( 30.0 )

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taxes — ( 2.2 ) 0.9 ( 1.3 )

Income tax benefit — 0.5 0.2 0.7

Net current period other comprehensive income

(loss), net of income taxes 23.2 ( 1.7 ) ( 0.2 ) 21.3

Income tax benefit (expense) — 0.5 ( 1.1 ) ( 0.6 )

Net current period other comprehensive (loss)

income, net of income taxes ( 32.9 ) ( 1.5 ) 2.5 ( 31.9 )

Noncontrolling interest ( 0.2 ) — — ( 0.2 )

Net current period comprehensive income (loss),

Net current period comprehensive (loss) income,

net of income taxes and noncontrolling interest ( 33.1 ) ( 1.5 ) 2.5 ( 32.1 )

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

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

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

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net of income taxes and noncontrolling interest ( 53.3 ) ( 4.8 ) 4.5 ( 53.6 )

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

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

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

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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 June 30, 2022 and December 31, 2021:

June 30, 2022

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, 2022 and December 31, 2021:

September 30, 2022

Total Level 1 Level 2 Level 3

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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.

During the three months ended June 30, 2022, property, plant and equipment at the Company's joint venture in Russia, with a carrying value of $ 15.9 million, were written down to their fair value of $ 7.1 million, resulting in an impairment charge of $ 8.8 million.

The fair value for these assets was determined based on the best price that would be received in a current transaction to sell the assets to a third party.

No other material assets w ere measured at fair value on a nonrecurring basis during the six months ended June 30, 2022 and 2021, respectively.

During the three months ended September 30, 2022, the Company's ADS business.

located in Manchester, Connecticut, was reclassified to assets held for sale.

In conjunction with this reclassification, the ADS business with a carrying value of $ 62.1 million, was written down to its estimated fair value less cost to sell of $ 32.8 million, resulting in an impairment charge of $ 29.3 million.

The fair value for these net assets was determined based on an estimate of the value expected to be received upon the sale of this business.

Refer to Note 3 - Acquisitions and Divestitures for more information on the expected sale of ADS.

During the nine months ended September 30, 2022, property, plant and equipment at the Company's joint venture in Russia, with a carrying value of $ 16.1 million, were written down to their fair value of $ 7.1 million, resulting in an impairment charge of $ 9.0 million.

The fair value for these assets was determined based on an estimate of the best price that would be received in a current transaction to sell the assets to a third party.

No other material assets w ere measured at fair value on a nonrecurring basis during the nine months ended September 30, 2022 and 2021, respectively.

Financial Instruments:

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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 $ 1,386.6 million and $ 1,171.1 million at June 30, 2022 and December 31, 2021, respectively.

The carrying value of this debt was $ 1,414.1 million and $ 1,087.5 million at June 30, 2022 and December 31, 2021, respectively.

The fair value of the Company’s long-term fixed-rate debt, based on quoted market prices, was $ 1,320.6 million and $ 1,171.1 million at September 30, 2022 and December 31, 2021, respectively.

The carrying value of this debt was $ 1,402.8 million and $ 1,087.5 million at September 30, 2022 and December 31, 2021, respectively.

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

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dollar and the Euro.

The net impact for the three and six months ended June 30, 2022, respectively, was a gain of $ 3.2 million and a gain of $ 4.8 million to accumulated comprehensive (loss) income with a corresponding offset to other expense, which partially offsets the impact of the foreign currency adjustment on the 2027 Notes.

The net impact for the three and nine months ended September 30, 2022, respectively, was a gain of $ 3.7 million and a gain of $ 8.5 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.

Note 19 - Derivative Instruments and Hedging Activities (continued)

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

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

As of June 30, 2022 and December 31, 2021, the Company had $ 434.4 million and $ 300.8 million, respectively, of outstanding foreign currency forward contracts at notional value.

As of September 30, 2022 and December 31, 2021, the Company had $ 419.4 million and $ 300.8 million, respectively, of outstanding foreign currency forward contracts at notional value.

Refer to Note 18 - Fair Value for the fair value disclosure of derivative financial instruments.

Note 19 - Derivative Instruments and Hedging Activities (continued)

Cash Flow Hedging Strategy:

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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 June 30, 2022 and December 31, 2021, the Company had $ 76.7 million and $ 80.0 million, respectively, of outstanding foreign currency forward contracts at notional value that were classified as cash flow hedges.

As of September 30, 2022 and December 31, 2021, the Company had $ 71.6 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.

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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 June 30, 2022 and December 31, 2021, the Company had $ 357.7 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 and six months ended June 30, 2022 and 2021, respectively, and the related location within the Consolidated Statements of Income:

As of September 30, 2022 and December 31, 2021, the Company had $ 347.8 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 and nine months ended September 30, 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

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Derivatives not designated as hedging instruments:

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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