2 unchanged sentences
Introduction:
−Removed: The Timken Company designs and manufactures a growing portfolio of engineered bearings and power transmission products.
+Added: The Timken Company designs and manufactures a growing portfolio of engineered bearings and industrial motion products, and provides related services.
With more than a century of knowledge and innovation, the Company continuously improves the reliability and efficiency of global machinery and equipment to move the world forward.
Timken posted $4.5 billion in sales in 2022 and employs more than 19,000 people globally, operating in 46 countries.
−Removed: The Company operates under two reportable segments:
+Added: The Company has historically operated under two reportable segments:
(1) Mobile Industries and (2) Process Industries.
22 unchanged sentences
Profitable Growth.
−Removed: The Company intends to expand into new and existing markets by leveraging its collective knowledge of metallurgy, friction management and power transmission to create value for Timken customers.
+Added: The Company intends to expand into new and existing markets by leveraging its collective knowledge of metallurgy, friction management and industrial motion to create value for Timken customers.
Using a highly collaborative technical selling approach, the Company places particular emphasis on creating unique solutions for challenging and/or demanding applications.
8 unchanged sentences
(1) investing in the core business through capital expenditures, research and development and initiatives to drive profitable organic growth;
−Removed: (2) pursuing strategic acquisitions to broaden its portfolio and capabilities across diverse markets, with a focus on bearings, adjacent power transmission products and related services;
+Added: (2) pursuing strategic acquisitions to broaden its portfolio and capabilities across diverse markets, with a focus on bearings, adjacent industrial motion products and related services;
(3) returning capital to shareholders through dividends and share repurchases;
1 unchanged sentence
As part of this framework, the Company may also restructure, reposition or divest underperforming product lines or assets.
+Added: The following items highlight certain of the Company's more significant strategic accomplishments in 2022:
+Added: • On November 4, 2022, the Company completed the acquisition of GGB Bearing Technology ("GGB"), a global supplier of highly engineered and customized plain bearings and a leader in metal polymer bearings.
+Added: With expected annual sales of approximately $200 million at the time of acquisition, GGB will bolster the Company's engineered bearings portfolio.
+Added: • On May 31, 2022, the Company completed the acquisition of Spinea, s.r.o.
+Added: ("Spinea"), which e xpanded its robotics and automation offering in attractive end market sectors.
+Added: Spinea is a technology leader in highly engineered cycloidal reduction gears and actuators.
+Added: • On November 1, 2022, the Company completed the divestiture of Timken Aerospace Drives Systems, LLC ("ADS").
+Added: ADS is a supplier of drive system components and sub-assemblies for military and civil rotorcraft applications.
+Added: At the time of the divestiture, ADS had revenue of approximately $40 million in 2022.
+Added: • On September 1, 2022, the Company completed the divestiture of Timken-Rus Service Company ooo ("Timken Russia").
+Added: Refer to Russia operations in Management's Discussion and Analysis for additional information.
+Added: • The Company repurchased 3.25 million common shares, or over 4 percent of its outstanding common shares, and increased its quarterly dividend in the second quarter.
+Added: In addition, the Company achieved 100 years of paying quarterly dividends and marked its ninth consecutive year of higher annual dividends.
+Added: In total, the Company returned $303 million to shareholders during the year through dividends and share repurchases.
RESULTS OF OPERATIONS
6 unchanged sentences
Average number of diluted shares 74,323,839 77,006,589 — (3.5 %)
−Removed: The increase in net sales was primarily driven by higher organic volume revenue across most market sectors, including positive pricing, the favorable impact of foreign currency exchange rate changes and the benefit of acquisitions.
−Removed: The increase in net income was primarily due to the favorable impact of higher volume and related manufacturing utilization, lower restructuring charges and a lower tax rate, partially offset by higher material, logistics and other operating costs.
−Removed: In addition, the impact of foreign currency exchange rate changes was favorable versus the same period a year-ago.
−Removed: The world continues to be impacted by the COVID-19 pandemic.
−Removed: Timken has implemented plans across the enterprise to operate in a safe manner, while protecting employees and adhering to mandates and other guidance from local governments and health authorities.
−Removed: The Company's main priority continues to be the health of its employees and others in the communities where it does business.
−Removed: With pandemic conditions generally improving across the globe, industrial markets have strengthened in most parts of the world, and the Company has experienced supply chain disruptions, inflation and staffing issues related to serving the increased customer demand.
−Removed: During 2021, Timken was able to serve customers and meet demand levels across most markets, although at higher costs than anticipated.
−Removed: Timken's outlook assumes that COVID-19 conditions will continue to improve, but that supply chain disruptions and inflationary pressures will largely persist throughout 2022.
−Removed: The Company expects 2022 full-year revenue to be up approximately 10% compared to 2021, primarily due to higher demand across most end markets, positive pricing and the execution of outgrowth initiatives.
−Removed: The Company's earnings are expected to be up in 2022 compared with 2021, primarily due to the favorable impact of higher volume and price/mix, partially offset by higher material, logistics and other operating costs.
−Removed: The Company expects to generate cash from operating activities in 2022 above 2021 levels driven by higher earnings and lower pension and other postretirement contributions and payments.
−Removed: The Company expects capital expenditures to be approximately 4% of sales in 2022, compared with 3.6% of sales ($148 million) in 2021.
+Added: The increase in net sales was primarily driven by strong organic growth (including pricing) and the net benefit of acquisitions and divestitures, partially offset by the unfavorable impact of foreign currency exchange rate changes.
+Added: The increase in net income was primarily due to favorable price/mix and the impact of higher volume, partially offset by higher material, logistics and other operating costs, an increase in impairment, restructuring and acquisition-related charges, an increase in net interest expense, and a higher tax rate.
+Added: The Company expects 2023 full-year revenue to be up approximately 6% at the midpoint compared to 2022, driven by modest organic growth and the net benefit of acquisitions and divestitures, partially offset by the net unfavorable impact of foreign currency exchange rates.
+Added: The Company's earnings are expected to be up in 2023 compared with 2022, primarily due to the favorable impact of price/mix and lower material and logistics costs, partially offset by higher manufacturing costs and selling, general and administrative expenses, and higher interest expense.
+Added: The Company expects to generate a higher amount of cash from operating activities in 2023 compared to 2022, driven by higher earnings and improved working capital performance.
+Added: The Company expects higher capital expenditures in 2023 compared to 2022, but relatively in line with 2022 spending as a percentage of sales (4.0%).
THE STATEMENTS OF INCOME
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Net sales $ 4,496.7 $ 4,132.9 $ 363.8 8.8 %
−Removed: Net sales increased in 2021 compared with 2020, primarily due to higher organic revenue of $513 million, the favorable impact of foreign currency exchange rate changes of $78 million, and the benefit of acquisitions of $29 million.
−Removed: The higher organic revenue was driven by higher demand across most market sectors in the Mobile Industries and Process Industries segments, plus the benefit of outgrowth initiatives and positive pricing.
+Added: Net sales increased in 2022 compared with 2021, primarily due to strong organic growth of $478 million and the net benefit of acquisitions and divestitures of $28 million, partially offset by the unfavorable impact of foreign currency exchange rate changes of $142 million.
+Added: The higher organic revenue was driven by higher demand across both segments, and higher net pricing.
Gross Profit:
2 unchanged sentences
Gross profit % to net sales 28.6 % 26.7 % — 190 bps
−Removed: Gross profit increased in 2021 compared with 2020, primarily due to the impact of higher volume of $196 million, the favorable impact of foreign currency exchange rate changes of $23 million, favorable net manufacturing performance of $20 million, favorable price/mix of $15 million, and the favorable impact of acquisitions of $8 million.
−Removed: These increases were partially offset by higher material and logistics costs of $171 million.
+Added: Gross profit increased in 2022 compared with 2021, primarily due to favorable price/mix of $305 million and the impact of higher volume of $102 million, partially offset by higher material and logistics costs of $126 million, unfavorable manufacturing performance of $67 million, the unfavorable impact of foreign currency exchange rate changes of $17 million and the inventory step-up impact from acquisitions of $8 million.
Selling, General and Administrative ("SG&A") Expenses:
3 unchanged sentences
14.2 % 14.0 % — 20 bps
−Removed: The increase in SG&A expenses in 2021 compared with 2020 was primarily due to higher spending to support the higher sales levels, the favorable impact of temporary cost reduction actions implemented in 2020 in response to the COVID-19 pandemic that did not repeat in 2021, and the addition of SG&A from recent acquisitions.
+Added: The increase in SG&A expenses in 2022 compared with 2021 was primarily due to higher compensation costs (including incentive-based compensation) and increased spending to support the higher sales and business activity levels.
Impairment and Restructuring Charges:
4 unchanged sentences
Total $ 44.1 $ 8.9 $ 35.2
+Added: Impairment and restructuring charges of $44.1 million in 2022 were primarily due to impairment charges recorded in advance of the ADS divestiture, which was completed in the fourth quarter, and impairment charges recorded against property, plant and equipment at the Company's joint venture in Russia.
+Added: In addition, the Company incurred severance and related benefits, and exit costs associated with the closure of the Company's Villa Carcina, Italy bearing plant.
Impairment and restructuring charges of $8.9 million in 2021 were comprised primarily of severance and related benefits associated with the planned closures of the Company's Villa Carcina, Italy bearing plant and Indianapolis, Indiana chain plant.
−Removed: These initiatives are expected to reduce headcount and right-size the Company's manufacturing footprint.
+Added: These initiatives were undertaken to reduce headcount and right-size the Company's manufacturing footprint.
In addition, impairment and restructuring during 2021 included impairment charges related to certain engineering-related assets used in the business.
−Removed: Management concluded no further investment would be made in the engineering-related assets and, as a result, reduced the value to zero.
−Removed: Impairment and restructuring charges of $21.2 million in 2020 were comprised primarily of severance and related benefits associated with initiatives to reduce headcount and right-size the Company's manufacturing footprint, including the planned closure of the Company's Indianapolis, Indiana chain plant and the reorganization of the Company's Canton, Ohio and Gaffney, South Carolina bearing facilities.
−Removed: In addition, the Company recognized severance and related benefits as it began to accelerate and expand cost reduction initiatives.
+Added: Management concluded no further investment would be made in the engineering-related assets and, as a result, reduced to value to zero.
Interest Expense and Income:
2 unchanged sentences
Interest income 3.8 2.3 1.5 65.2 %
−Removed: Interest expense decreased in 2021 compared to 2020 primarily due to lower average outstanding debt during the year.
+Added: Interest expense increased in 2022 compared to 2021, primarily due to higher average debt outstanding and rising interest rates.
+Added: During the year, the Company issued $350 million of 10-year fixed-rate unsecured senior notes ("2032 Notes").
+Added: Proceeds from the 2032 Notes were used for general corporate purposes, which included repayment of other borrowings outstanding at the time of issuance.
+Added: In addition, a portion of the proceeds from the 2032 Notes was used to fund the Spinea acquisition, which closed in the second quarter of 2022.
Other Income (Expense):
2022 2021 $ Change % Change
−Removed: Non-service pension and other postretirement
−Removed: income (expense) $ 18.3 $ (4.7) $ 23.0 (489.4 %)
+Added: Non-service pension and other postretirement income $ 9.3 $ 18.3 $ (9.0) (49.2 %)
Other income, net 5.5 0.8 4.7 587.5 %
−Removed: The Company recognized non-service pension and other postretirement income in 2021 primarily due to the recognition of lower net actuarial losses ("Mark-to-Market Charges") in 2021 compared to 2020.
−Removed: In 2020, the Company recognized Mark-to-Market Charges totaling $18.5 million.
−Removed: In 2021, the Company recognized Mark-to-Market Charges of $0.3 million.
−Removed: R efer to Note 16 - Retirement Benefit Plans and Note 17 - Other Postretirement Benefit Plans in the Notes to the Consolidated Financial Statements for more information .
−Removed: The change in other income in 2021, compared to 2020, was primarily due to the acquisition-related gain in 2020.
−Removed: The acquisition-related gain represents a bargain purchase price gain on the acquisition of the assets of Aurora Bearing Company ("Aurora") acquired on November 30, 2020.
−Removed: Refer to Note 3 - Acquisitions for more information.
+Added: The decrease in non-service pension and other postretirement income was primarily due to lower expected returns on pension assets, as well as higher net actuarial losses in 2022 compared to 2021.
+Added: In 2022, $2.9 million of net actuarial losses were recognized, compared to $0.3 million of net actuarial losses in 2021.
+Added: Refer to Note 16 - Retirement Benefit Plans and Note 17 - Other Postretirement Benefit Plans in the Notes to the Consolidated Financial Statements for more information .
+Added: The increase in other income is primarily due to sale of the Company's Villa Carcina, Italy bearing plant upon its closure in 2022.
+Added: Refer to Note 15 - Impairment and Restructuring Charges in the Notes to the Consolidated Financial Statements for more information .
Income Tax Expense:
2 unchanged sentences
Effective tax rate 24.3 % 20.0 % — 430 bps
+Added: The effective tax rate for 2022 was 24.3%, which was unfavorable compared to the U.S.
+Added: federal statutory rate of 21%, primarily due to the unfavorable impact of earnings in foreign jurisdictions where the effective tax rate was higher than 21%.
+Added: This was partially offset by the release of accruals for uncertain tax positions and favorable U.S.
+Added: permanent book-tax differences.
The effective tax rate for 2021 was 20.0%, which was favorable compared to the U.S.
federal statutory rate of 21%, primarily due to the release of accruals for uncertain tax positions, favorable U.S.
−Removed: permanent differences and the release of a valuation allowance on certain non-U.S.
−Removed: deferred tax assets.
−Removed: These amounts were partially offset by the unfavorable effect of earnings in foreign jurisdictions where the effective tax rate was higher than 21%.
−Removed: The effective tax rate for 2020 was 26.2%, which was unfavorable compared to the U.S.
−Removed: federal statutory rate of 21%, primarily due to earnings in certain foreign jurisdictions where the effective tax rate was higher than 21%, unfavorable U.S.
−Removed: permanent differences and U.S.
−Removed: state and local income taxes.
−Removed: The change in the effective rate for 2021 compared with 2020 was a decrease of 6.2%.
−Removed: The decrease was primarily due to the release of accruals for uncertain tax positions, favorable U.S.
−Removed: permanent differences, including the tax impact from stock-based compensation awards and the new elective GILTI high tax exemption rules, and the release of a valuation allowance on certain non-U.S.
+Added: permanent book-tax differences and the release of a valuation allowance on certain non-U.S.
deferred tax assets.
+Added: This was partially offset by the unfavorable impact of earnings in foreign jurisdictions where the effective tax rate was higher than 21%.
+Added: The change in the effective rate for 2022 compared with 2021 was an increase of 4.3%.
+Added: The increase was primarily due to the unfavorable impact of earnings in foreign jurisdictions with relatively higher tax rates and the net unfavorable impact of discrete tax items, including discrete tax benefits in the prior year related to the release of valuation allowance on certain non-U.S.
+Added: deferred tax assets and lower U.S.
+Added: permanent book-tax differences.
Refer to Note 5 - Income Taxes in the Notes to the Consolidated Financial Statements for more information on the computation of the income tax expense in interim periods.
5 unchanged sentences
Refer to Note 4 - Segment Information in the Notes to the Consolidated Financial Statements for the reconciliation of EBITDA by segment to consolidated income before income taxes.
+Added: The Company has historically operated under two reportable segments:
+Added: (1) Mobile Industries and (2) Process Industries.
+Added: During 2022, the Company announced certain organizational changes, which included the appointment of executive leaders for its Engineered Bearings and Industrial Motion product groups.
+Added: After evaluation of the organizational changes and other factors, the Company has concluded that it will operate under two new reportable segments, Engineered Bearings and Industrial Motion, beginning with the first quarter of 2023.
The presentation of segment results below includes a reconciliation of the changes in net sales for each segment reported in accordance with U.S.
−Removed: GAAP to net sales adjusted to remove the effects of acquisitions completed in 2021 and 2020 and foreign currency exchange rate changes.
−Removed: The effects of acquisitions and foreign currency exchange rate changes on net sales are removed to allow investors and the Company to meaningfully evaluate the percentage change in net sales on a comparable basis from period to period.
−Removed: The following items highlight the Company ' s acquisitions completed in 2021 and 2020 by segment based on the customers and underlying markets served:
−Removed: • The Company acquired Intelligent Machine Solutions (“iMS”) during the third quarter of 2021.
−Removed: The majority of the results for iMS are reported in the Process Industries segment.
−Removed: • The Company acquired Aurora during the fourth quarter of 2020.
−Removed: Results for Aurora are reported in the Mobile Industries and Process Industries segments based on customers and underlying market sectors served.
+Added: GAAP to net sales adjusted to remove the effects of acquisitions and divestitures completed in 2022 and 2021 and foreign currency exchange rate changes.
+Added: The effects of acquisitions, divestitures and foreign currency exchange rate changes on net sales are removed to allow investors and the Company to meaningfully evaluate the percentage change in net sales on a comparable basis from period to period.
+Added: The following items highlight the Company ' s acquisitions and divestitures completed in 2022 and 2021 by segment based on the customers and underlying markets served:
+Added: • The Company acquired GGB during the fourth quarter of 2022.
+Added: R esults for GGB were reported in the Mobile Industries and Process Industries segments based on customers and underlying market sectors served.
+Added: • The Company completed the sale of ADS during the fourth quarter of 2022.
+Added: The majority of the results for ADS are reported in the Mobile Industries segment.
+Added: • The Company completed the sale of Timken Russia during the third quarter of 2022.
+Added: Results for Timken Russia were reported in the Mobile Industries and Process Industries segments based on customers and underlying market sectors served.
+Added: • The Company acquired Spinea during the second quarter of 2022.
+Added: The majority of the results for Spinea are reported in the Process Industries segment.
+Added: • The Company acquired Intelligent Machine Solutions (“iMS”) during the third quarter of 2021.The majority of the results for iMS are reported in the Process Industries segment.
Mobile Industries Segment:
6 unchanged sentences
Acquisitions 12.7 — 12.7 NM
+Added: Divestitures (10.4) — (10.4) NM
Currency (62.6) — (62.6) NM
−Removed: Net sales, excluding the impact of acquisitions and currency $ 1,927.4 $ 1,671.6 $ 255.8 15.3 %
−Removed: The Mobile Industries segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, increased $255.8 million or 15.3% in 2021 compared with 2020, reflecting organic growth in the off-highway, automotive and heavy truck sectors.
−Removed: These increases were partially offset by lower revenue in the aerospace sector.
−Removed: EBITDA increased in 2021 by $7.6 million or 3.3% compared with 2020, primarily due to the impact of higher volume and related manufacturing utilization, and positive price/mix, partially offset by higher material, logistics and other operating costs.
+Added: Net sales, excluding the impact of acquisitions, divestitures and currency $ 2,166.8 $ 1,965.7 $ 201.1 10.2 %
+Added: The Mobile Industries segment's net sales, excluding the effects of acquisitions, divestitures and foreign currency exchange rate changes, increased $201.1 million or 10.2% in 2022 compared with 2021, reflecting increased shipments in the off-highway, rail, heavy truck and automotive sectors, as well as higher net pricing.
+Added: EBITDA decreased in 2022 by $23.0 million or 9.6% compared with 2021, primarily due to higher operating costs, as well as higher impairment and restructuring charges, partially offset by favorable price/mix and the impact of higher volume.
Process Industries Segment:
6 unchanged sentences
Acquisitions 31.2 — 31.2 NM
+Added: Divestitures (5.3) — (5.3) NM
Currency (79.8) — (79.8) NM
−Removed: Net sales, excluding the impact of acquisitions and currency
−Removed: $ 2,099.2 $ 1,841.6 $ 257.6 14.0 %
−Removed: The Process Industries segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, increased $257.6 million or 14.0% in 2021 compared with 2020.
−Removed: The increase was primarily driven by organic growth in the distribution, renewable energy and general industrial sectors.
−Removed: EBITDA increased $63.4 million or 14.3% in 2021 compared with 2020 primarily due to the impact of higher volume and related manufacturing utilization, the impact of favorable foreign currency exchange rate changes, and positive price/mix, partially offset by higher material, logistics and other operating costs.
+Added: Net sales, excluding the impact of acquisitions, divestitures and currency $ 2,444.1 $ 2,167.2 $ 276.9 12.8 %
+Added: The Process Industries segment's net sales, excluding the effects of acquisitions, divestitures and foreign currency exchange rate changes, increased $276.9 million or 12.8% in 2022 compared with 2021.
+Added: The increase was primarily driven by increased demand in the distribution, general and heavy industrial, marine and service sectors, as well as higher net pricing, partially offset by lower revenue in the renewable energy sector.
+Added: EBITDA increased $115.2 million or 22.8% in 2022 compared with 2021 primarily due to favorable price/mix and the impact of higher volume, partially offset by higher operating costs and acquisition-related expenses.
Unallocated Corporate:
2 unchanged sentences
Unallocated corporate expense % to net sales (1.1 %) (1.1 %) — — bps
−Removed: Unallocated corporate expense increased in 2021 compared with 2020 primarily due to the favorable impact of COVID-19 related temporary cost reduction initiatives in 2020, which did not repeat in 2021.
+Added: Unallocated corporate expense increased in 2022 compared with 2021 primarily due to higher compensation costs (including incentive-based compensation) and other spending to support increased business activity levels, partially offset by the impact of foreign currency exchange gains in 2022 as compared with foreign currency exchange losses in the prior year.
2022 2021 $ Change
1 unchanged sentence
Net cash used in investing activities (573.3) (173.8) (399.5)
−Removed: Net cash used in financing activities (269.3) (331.1) 61.8
+Added: Net cash provided by (used in) financing activities 206.8 (269.3) 476.1
Effect of exchange rate changes on cash (14.5) (7.4) (7.1)
−Removed: (Decrease) increase in cash and cash equivalents $ (63.2) $ 104.9 $ (168.1)
+Added: Increase (decrease) in cash, cash equivalents and restricted cash $ 82.8 $ (63.2) $ 146.0
Operating Activities:
−Removed: The decrease in net cash provided by operating activities in 2021 compared with 2020 was primarily due to an increase in cash used for working capital items of $236.4 million, an increase in pension and other postretirement benefit contributions and payments of $3.9 million and an increase in other items.
−Removed: The decrease was partially offset by higher net income of $89.1 million and the favorable impact of income taxes of $8.1 million.
+Added: The increase in net cash provided by operating activities in 2022 compared with 2021 was primarily due to higher net income of $35.5 million, a net increase in non-cash charges of $44.0 million included in net income, including impairment charges and stock-based compensation expense, and the favorable impact of income taxes of $19.3 million, partially offset by an increase in the cash used for working capital items of $29.9 million.
Refer to the table below for additional detail of the impact of each line on net cash provided by operating activities.
7 unchanged sentences
Other accrued expenses 91.9 55.2 36.7
−Removed: Cash (used in) provided by working capital items $ (133.5) $ 102.9 $ (236.4)
−Removed: The large cash outflow for inventories in 2021 was driven by higher demand levels and longer supply chain lead times, which resulted in increased levels of inventory.
+Added: Cash used in working capital items $ (163.4) $ (133.5) $ (29.9)
The following table displays the impact of income taxes on cash during 2022 and 2021, respectively:
5 unchanged sentences
Investing Activities:
−Removed: The increase in net cash used in i nvesting activities in 2021 compared with 2020 was primarily due to an increase of capital expenditures of $26.7 million.
+Added: The increase in net cash used in investing activities in 2022 compared with 2021 was primarily due to an increase in cash used for acquisitions of $446.2 million, partially offset by proceeds from divestitures of $33.9 million.
Financing Activities:
−Removed: The change in net cash used by financing activities in 2021 compared with 2020 was primarily due to a decrease in net payments of $111.8 million on outstanding debt, partially offset by an increase in the purchase of treasury shares of $43.7 million.
+Added: The change in net cash provided by financing activities in 2022 compared with 2021 was primarily due to a decrease in net payments of $598.7 million on outstanding debt, partially offset by an increase in the purchase of treasury shares of $118.6 million.
LIQUIDITY AND CAPITAL RESOURCES
8 unchanged sentences
Total equity 2,352.9 2,377.7
−Removed: Capital (net debt + total equity) $ 3,585.5 $ 3,469.5
+Added: Net debt plus total equity (capital) $ 3,984.5 $ 3,585.5
Ratio of net debt to capital 40.9 % 33.7 %
The Company presents net debt because it believes net debt is more representative of the Company's financial position than total debt due to the amount of cash and cash equivalents held by the Company and the ability to utilize such cash and cash equivalents to reduce debt if needed.
−Removed: At December 31, 2021, the Company had strong liquidity with $257.1 million of cash and cash equivalents on the Consolidated Balance Sheet, as well as $733 million of available resources of committed credit lines.
−Removed: Of the $257.1 million of cash and cash equivalents, $240.5 million resided in jurisdictions outside the U.S.
+Added: At December 31, 2022, the Company had strong liquidity with $331.6 million of cash and cash equivalents on the Consolidated Balance Sheet, as well as $828.2 million available under committed credit lines.
+Added: Of the $331.6 million of cash and cash equivalents, $305.7 million resided in jurisdictions outside the United States.
Repatriation of non-U.S.
cash could be subject to taxes and some portion may be subject to governmental restrictions.
−Removed: Part of the Company's strategy is to grow in attractive market sectors, many of which are outside the U.S.
+Added: Part of the Company's strategy is to grow in attractive market sectors, many of which are outside the United States.
This strategy includes making investments in facilities, equipment and potential new acquisitions.
The Company plans to fund these investments, as well as meet working capital requirements, with cash and cash equivalents and unused lines of credit within the geographic location of these investments where feasible.
−Removed: On June 25, 2019, the Company entered into the Fourth Amended and Restated Credit Agreement ("Senior Credit Facility"), which is a $650.0 million unsecured revolving credit facility that matures on June 25, 2024.
+Added: On December 5, 2022 the Company entered into the Fifth Amended and Restated Credit Agreement ("Credit Agreement"), which is comprised of the $750.0 million unsecured revolving credit facility ("Senior Credit Facility") and a $400 million unsecured term loan facility ("2027 Term Loan") that mature on December 5, 2027.
+Added: The Credit Amendment amended and restated the Company's previous revolving credit agreement, dated as of June 25, 2019, and replaced the $350 million term loan that was set to mature on September 11, 2023 ("2023 Term Loan").
+Added: The Credit Agreement also replaced interest rates based on LIBOR with interest rates based on Secured Overnight Financing Rate ("SOFR").
At December 31, 2022, the Senior Credit Facility had outstanding borrowings of $8.5 million, which reduced the availability to $741.5 million.
−Removed: The Senior Credit Facility h as two financial covenants:
−Removed: a consolidated leverage ratio and a consolidated interest coverage ratio.
−Removed: The maximum consolidated leverage ratio permitted under the Senior Credit Facility is 3.5 to 1.0.
−Removed: As of December 31, 2021, the Company's consolidated leverage ratio was 2.05 to 1.0 (based on total debt discussed further below).
+Added: The Credit Agreement h as two financial covenants:
+Added: a consolidated leverage ratio and a consolidated interest coverag e ratio.
+Added: The maximum consolidated leverage ratio permitted under the Senior Credit Facility is 4.0 to 1.0 for the next four fiscal quarters as there was a leverage increase period following a qualified acquisition, after which it reverts to 3.5 to 1.0.
+Added: As of December 31, 2022, the Company's consolidated leverage ratio was 1.85 to 1.0.
The minimum consolidated interest coverage ratio permitted under the Senior Credit Facility is 3.0 to 1.0.
As of December 31, 2022, the Company's consolidated interest coverage ratio was 12.02 to 1.0.
−Removed: On May 27, 2020, both the Senior Credit Facility and the $350 million variable-rate term loan that matures on September 11, 2023 (the "2023 Term Loan") were amended to, among other things, effectively increase the limit with respect to the consolidated leverage ratio.
−Removed: As amended, the consolidated leverage ratio under both the Senior Credit Facility and the 2023 Term Loan was calculated using a net debt construct, netting unrestricted cash in excess of $25 million, instead of total debt.
−Removed: This change to the consolidated leverage ratio calculation was effective through June 30, 2021.
−Removed: In the third quarter of 2021, the calculation of the consolidated leverage ratio under the Senior Credit Facility and the 2023 Term Loan reverted back to a total debt construct.
The interest rate under the Senior Credit Facility is variable with a spread based on the Company's debt rating.
2 unchanged sentences
In addition, the Company pays a facility fee based on the applicable rate, which is variable with a spread based on the Company's debt rating, multiplied by the aggregate commitments of all of the lenders under the Senior Credit Facility.
−Removed: As of December 31, 2021, the Company carried investment-grade credit ratings with Moody's (Baa2), S&P Global (BBB-) and Fitch (BBB-).
−Removed: The Company renewed the Amended and Restated Asset Securitization Agreement (the "Accounts Receivable Facility") on November 30, 2021.
−Removed: The $100.0 million facility matures on November 30, 2024.
+Added: As of December 31, 2022, the Company carried investment-grade credit ratings with Moody's (Baa2) and S&P Global (BBB-).
+Added: The Company has a $100.0 million Amended and Restated Asset Securitization Agreement (the "Accounts Receivable Facility"), which matures on November 30, 2024.
The Accounts Receivable Facility is subject to certain borrowing base limitations and is secured by certain domestic trade accounts receivable of the Company.
These limitations reduced the availability of the Accounts Receivable Facility to $86.7 million at December 31, 2022.
−Removed: As of December 31, 2021, there were no outstanding borrowings under the Accounts Receivable Facility.
+Added: As of December 31, 2022, there were $85.0 million outstanding borrowings under the Accounts Receivable Facility, which reduced the availability under this facility to $1.7 million.
Other sources of liquidity include uncommitted short-term lines of credit for certain of the Company's foreign subsidiaries, which provide for borrowings of up to approximately $234.2 million.
At December 31, 2022, the Company had borrowings outstanding of $46.3 million and bank guarantees of $2.8 million, which reduced the aggregate availability under these facilities to approximately $185.1 million.
−Removed: At December 31, 2021, the Company was in full compliance with all applicable covenants on its outstanding debt, and expects to remain in full compliance with its debt covenants.
−Removed: The Company expects to generate cash from operating activities in 2022 above 2021 levels driven by higher earnings and lower pension and other postretirement contributions and payments.
−Removed: The Company expects capital expenditures to be approximately 4% of sales in 2022, compared with 3.6% of sales ($148 million) in 2021.
−Removed: FUTURE CONTRACTUAL PAYMENTS
−Removed: The Company’s contractual debt obligations and contractual commitments outstanding as of December 31, 2021 were as follows:
+Added: On March 28, 2022, the Company issued the 2032 Notes in the aggregate principal amount of $350 million with an interest rate of 4.125%, maturing on April 1, 2032.
+Added: Proceeds from the 2032 Notes were used for general corporate purposes, which included repayment of borrowings under the Senior Credit Facility and the Accounts Receivable Facility outstanding at the time of issuance.
+Added: In addition, a portion of the proceeds from the 2032 Notes was used to fund the Spinea acquisition, which closed in the second quarter of 2022.
+Added: At December 31, 2022, the Company was in full compliance with all applicable covenants on its outstanding debt.
+Added: Timken expects higher net interest expense in 2023 compared to 2022, due to higher average debt balances and increased interest rates.
+Added: The Company expects to generate a higher amount of cash from operating activities in 2023 compared to 2022, driven by higher earnings and improved working capital performance.
+Added: The Company expects higher capital expenditures in 2023 compared to 2022, but relatively in line with 2022 spending as a percentage of sales (4.0%).
+Added: FUTURE CONTRACTUAL AND OTHER PAYMENTS
+Added: The Company’s material cash requirements for contractual debt obligations and other contractual commitments outstanding as of December 31, 2022 were as follows:
Payments due by period:
−Removed: Future Contractual Payments Total Less than
+Added: Future Contractual and Other Payments Total Less than
1 Year 1-5 Years More than
28 unchanged sentences
Because these 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.
−Removed: The Company recognized an increase in its LIFO reserve of $27.3 million during 2021 compared to a decrease in its LIFO reserve of $3.2 million during 2020.
+Added: The Company recognized an increase in its LIFO reserve of $36.0 million during 2022 compared to an increase in its LIFO reserve of $27.3 million during 2021.
Goodwill and Indefinite-lived Intangible Assets:
5 unchanged sentences
The Company reviews goodwill for impairment at the reporting unit level.
−Removed: The Mobile Industries segment has four reporting units and the Process Industries segment has two reporting units.
−Removed: The reporting units within the Mobile Industries segment are Mobile Industries, Lubrication Systems, Aerospace Drive Systems and Aerospace Bearing Inspection.
+Added: The Mobile Industries segment has three reporting units and the Process Industries segment has two reporting units.
+Added: The reporting units within the Mobile Industries segment are Mobile Industries, Lubrication Systems and Aerospace Bearing Inspection.
The reporting units within the Process Industries segment are Process Industries and Industrial Services.
Accounting guidance permits an entity to first assess qualitative factors to determine whether additional indefinite-lived intangible asset impairment testing, including goodwill, is required.
−Removed: The Company chose to utilize this qualitative assessment in the annual goodwill impairment testing (excluding the indefinite-lived intangible asset impairment testing) for the Mobile Industries, Aerospace Bearing Inspection, Process Industries and Industrial Services reporting units.
+Added: The Company chose to utilize this qualitative assessment in the annual goodwill impairment testing for all reporting units.
Based on the qualitative assessment, the Company concluded that it was more likely than not that the fair value of these reporting units exceeded their respective carrying values.
−Removed: The Company chose to perform a quantitative goodwill impairment analysis in the annual goodwill impairment testing of the Lubrication systems reporting unit.
−Removed: The quantitative goodwill impairment analysis compares the carrying value of the reporting unit to its estimated fair value.
−Removed: To the extent that the carrying value of the reporting unit exceeds its estimated fair value, a goodwill impairment loss would be recorded.
−Removed: The Company prepares its quantitative goodwill impairment analysis by comparing the estimated fair value of each reporting unit, using an income approach (a discounted cash flow model), as well as a market approach, with its carrying value.
−Removed: The income approach and market approach are weighted in arriving at fair value based on the relative merits of the methods used and the quantity and quality of collected data to arrive at the indicated fair value.
−Removed: The income approach requires several assumptions including future sales growth, EBITDA margins and capital expenditures.
−Removed: The Company’s reporting units provided their forecast of results for the next five years.
−Removed: These forecasts form the basis for the information used in the discounted cash flow model.
−Removed: The discounted cash flow model also requires the use of a discount rate and a terminal revenue growth rate (the revenue growth rate for the period beyond the five years forecast by the reporting units), as well as projections of future operating margins (for the period beyond the forecast five years).
−Removed: During the fourth quarter of 2021, the Company used a discount rate of 9.5% for the Lubrication reporting unit and a terminal revenue growth rate of 2.5%.
−Removed: The market approach requires several assumptions including sales and EBITDA multiples for comparable companies that operate in the same markets as the Company’s reporting units.
−Removed: During the fourth quarter of 2021, the Company used a sales multiple of 1.6 and a EBITDA multiple of 9.25 for the Lubrication reporting unit.
−Removed: Based on the October 1, 2021 quantitative assessment for the Lubrication Systems reporting unit, the fair value of this reporting unit exceeds the current carrying value by more than 10%.
As of December 31, 2022, the Company had $161.5 million of indefinite-lived intangible assets on its Consolidated Balance Sheet.
4 unchanged sentences
During the fourth quarter of 2022, the Company used discount rates for its indefinite-lived intangible assets in the range of 11.5% to 14.8%, royalty rates in the range of 1.0% to 6.0% and terminal growth rates in the range of 1.0% to 3.5%.
−Removed: Based on the October 1, 2021 quantitative assessment of indefinite-lived intangible assets, t here were three indefinite-lived intangibles with carrying values totaling $67.1 million in which the fair value exceeded the carrying value of the assets by 10% or less.
+Added: Based on the October 1, 2022 quantitative assessment of indefinite-lived intangible assets, there were four indefinite-lived intangibles with carrying values totaling $78.1 million in which the fair value exceeded the carrying value of the assets by 10% or less.
Management believes the future sales growth and EBITDA margins in the long-range plan and the discount rate used in the valuations requires significant use of judgment.
17 unchanged sentences
This benefit was partially offset by $5.7 million of interest and increases to current and prior year uncertain tax positions.
−Removed: The Company also recorded $1.3 million of uncertain tax positions related to foreign currency translation adjustments and deferred tax liabilities.
+Added: During 2022, the Company recorded a $3.1 million decrease of uncertain tax positions related to foreign currency translation adjustments and deferred tax liabilities.
+Added: The Company also recorded $1.9 million of uncertain tax positions related to prior years for acquisitions made during 2022.
Purchase accounting and business combinations:
2 unchanged sentences
The Company used a discounted cash flow model to measure the trade names, customer relationship, and technology and know-how-related intangible assets.
−Removed: The estimation of fair value required significant judgment related to future net cash flows based on assumptions related to revenue and EBITDA growth rates, discount rates, and royalty rates.
+Added: The estimation of fair value required significant judgment related to future net cash flows based on assumptions related to revenue and EBITDA growth rates and discount rates.
Inputs were generally determined by taking into account competitive trends, market comparisons, independent appraisals, and historical data, among other factors, and were supplemented by current and anticipated market conditions.
24 unchanged sentences
Defined Benefit Pension Plans:
−Removed: The Company recognized net periodic benefit cost of $5.9 million during 2021 for defined benefit pension plans, compared to net periodic benefit cost of $23.9 million during 2020 The Company recognized mark-to-market charges of $4.4 million during 2021 compared to $16.2 million during 2020.
−Removed: Mark-to-market charges during 2021 were primarily a result of the impact of lower than expected returns on plan assets of $28.4 million, the impact of experience losses of $9.3 million, the impact of inflation of $8.5 million and other changes in actuarial assumptions of $3.2 million, partially offset by the net increase in the discount rate used to measure its defined benefit pension obligations of $45.0 million.
−Removed: The impact of the increase in the discount rate used to measure the Company's defined benefit pension obligations was primarily driven by a 55 basis point increase in the discount rate used to measure its U.K.
−Removed: plan obligations, which increased from 1.25% in 2020 to 1.80% in 2021, and a 23 basis point increase in the weighted-average discount rate used to measure its U.S.
+Added: The Company recognized net periodic benefit cost of $21.0 million during 2022 for defined benefit pension plans, compared to net periodic benefit cost of $5.9 million during 2021.
+Added: The Company recognized mark-to-market charges of $16.0 million during 2022 compared to $4.4 million during 2021.
+Added: Mark-to-market charges during 2022 were primarily a result of the impact of lower than expected returns on plan assets of $220.6 million, the impact of experience losses of $33.0 million, the impact of inflation of $5.4 million and other actuarial losses of $0.2 million, partially offset by the net increase in the discount rate used to measure its defined benefit pension obligations of $243.2 million.
+Added: The impact of the net increase in the discount rate used to measure the Company's defined benefit pension obligations was primarily driven by a 257 basis point increase in the weighted-average discount rate used to measure its U.S.
+Added: plan obligations, which increased from 3.07% in 2021 to 5.64% in 2022.and a 301 basis point increase in the discount rate used to measure its U.K.
plan obligations, which increased from 1.80% in 2021 to 4.81% in 2022.
2 unchanged sentences
Excluding the mark-to-market charges of $16.0 million recognized in 2022, net periodic benefit cost was $5.0 million in 2022.
+Added: The expected increase in net periodic benefit cost, excluding mark-to-market charges, primarily reflects a lower expected return on plan assets..
The Company expects to contribute to its defined benefit pension plans or pay directly to participants of defined benefit plans approximately $25 million in 2023 compared with $11.2 million of contributions and payments in 2022.
−Removed: The 2021 contributions and payments included a $10 million payout of deferred compensation to a former executive officer of the Company.
For expense purposes in 2022, the Company applied a weighted-average discount rate of 3.07% to its U.S.
5 unchanged sentences
For expense purposes in 2023, the Company will apply an expected weighted-average rate of return on plan assets of 4.43%.
−Removed: The following table presents the sensitivity of the Company's U.S.
−Removed: projected pension benefit obligation ("PBO") to the indicated increase/decrease in key assumptions:
+Added: The following table presents the sensitivity of the Company's global projected pension benefit obligation ("PBO") to the indicated increase/decrease in key assumptions:
+ / - Change at December 31, 2022
2 unchanged sentences
A 25 basis point increase in the discount rate will decrease the PBO by $14.9 million and increase income before income taxes through the recognition of actuarial gains of $14.9 million.
−Removed: Defined benefit pension plans in the U.S.
−Removed: represent 62% of the Company's benefit obligation.
Other Postretirement Benefit Plans:
The Company recognized net periodic benefit credit of $21.6 million during 2022 for other postretirement benefit plans, compared to net periodic benefit credit of $12.5 million during 2021.
−Removed: The Company recognized mark-to-market gains of $4.1 million during 2021 compared to mark-to-market charges of $1.4 million during 2020 .
+Added: The Company recognized mark-to-market gains of $13.1 million during 2022 compared to mark-to-market gains of $4.1 million during 2021 .
Mark-to-market gains in 2022 were primarily due to the impact of a 276 basis point increase in the discount rate used to measure the Company's defined benefit postretirement obligations, which increased from 2.99% in 2021 to 5.75% in 2022 .
The increase in the discount rate resulted in a $8.4 million gain.
−Removed: In addition to the gain from the discount rate increases, the Company recognized actuarial gains of $1.1 million due to lower than expected benefit payments, $1.0 million due to the impact of a reduction in the rate for Medicare Advantage plans and $0.4 million due to changes in other actuarial assumptions .
+Added: In addition to the gain from the discount rate increases, the Company recognized actuarial gains of $3.0 million due to the impact of a reduction in the rate for Medicare Advantage plans and $1.9 million due to lower than expected benefit payments.
+Added: These actuarial gains were offset by $0.2 million of changes to other assumptions .
In 2023, the Company expects net periodic benefit credit of approximately $6 million for other postretirement benefit plans, compared to net periodic benefit credit of $21.6 million in 2022.
Net periodic benefit credit f or 2023 does not include mark-to-market charges that will be recognized immediately through earnings in the fourth quarter of 2023, or on an interim basis if specific events trigger a remeasurement.
−Removed: Excluding the mark-to-market gains of $4.1 million recognized in 2021, the net periodic benefit credit was $8.4 million in 2021, which is relatively consistent with the outlook for 2022.
−Removed: In January 2020, the Company established a second Voluntary Employee Beneficiary Association ("VEBA") trust for certain active employees’ medical benefits.
−Removed: The Company transferred $50 million from the existing VEBA trust to fund the second VEBA trust.
−Removed: The $50 million that was transferred was primarily classified as other current assets based on the portfolio of the assets in the trust.
−Removed: In January 2021, the Company transferred the remaining $11.1 million in the existing VEBA trust to the second VEBA trust.
−Removed: The Company utilized all of the assets of the second VEBA trust in 2021 and 2020 for the payment of certain active employees’ medical benefits.
−Removed: As a result of the transfer, the Company expects to fund 2022 payments for other postretirement benefit plans, which are expected to be approximately $5 million, from the general funds of the Company.
+Added: Excluding the mark-to-market gains of $13.1 million recognized in 2022, the net periodic benefit credit was $8.5 million i n 2022.
For expense purposes in 2022, the Company applied a discount rate of 2.99% to its other postretirement benefit plans.
6 unchanged sentences
For measurement purposes, the Company assumed a weighted-average annual rate of increase in the per capita cost (health care cost trend rate) for medical benefits of 6.5% for 2023, declining gradually to 5.0% in 2029 and thereafter for medical and prescription drug benefits.
−Removed: For Medicare Advantage benefits, actual contract rates have been set for 2022, and are assumed to increase by 7.25% for 2022, declining gradually to 5.0% in 2031 and thereafter.
+Added: For Medicare Advantage benefits, actual contract rates have been set for 2023, and are assumed to increase by $5 for 2026 to 2028 and then 6.0% for 2028 , declining gradually to 5.0% in 2032 and thereafter.
The assumed health care cost trend rate may have a significant effect on the amounts reported.
2 unchanged sentences
Other loss reserves:
−Removed: The Company has a number of loss exposures that are incurred in the ordinary course of business such as environmental clean-up, product liability, product warranty, litigation and accounts receivable reserves.
+Added: The Company has a number of loss exposures that are incurred in the ordinary course of business such as environmental clean-up, product liability, product warranty, litigation, compliance and accounts receivable reserves.
Establishing loss reserves for these matters requires management’s judgment with regards to estimating risk exposure and ultimate liability or realization.
21 unchanged sentences
39.5 15.1 29.0 9.8 7.1
−Removed: Corporate pension and other
−Removed: postretirement benefit related expense
+Added: Corporate pension and other postretirement
+Added: benefit related expense (income) (2)
2.9 0.3 18.5 (4.1) 12.8
3 unchanged sentences
— (0.9) (11.1) — —
−Removed: Property recoveries and related expenses (5)
+Added: Russia-related charges (5)
+Added: (Gain) loss on divestitures and sale of real
(2.9) — (0.4) (4.5) 0.8
−Removed: Gain (loss) on sale of real estate — (0.4) (4.5) 0.8 (3.6)
+Added: Property losses (recoveries) and related
+Added: — — (5.5) 7.6 —
Brazil legal matter — — — 1.8 —
Tax indemnification and related items 0.3 0.2 0.5 0.7 1.5
−Removed: Health care plan modification costs — — — — (0.7)
Noncontrolling interest of above adjustments (5.3) — (0.1) (0.5) (1.3)
31 unchanged sentences
3.1 8.0 3.7 14.8
−Removed: Acquisition-related gain (4)
+Added: Russia-related charges (5)
16.8 (1.2) — 15.6
+Added: Gain on divestitures and sale of real estate (6)
+Added: (2.7) (0.2) — (2.9)
Tax indemnification and related items 0.3 — — 0.3
9 unchanged sentences
benefit related expense (2)
−Removed: — — 18.5 18.5
Acquisition-related charges (3)
2 unchanged sentences
— — (0.9) (0.9)
−Removed: Property losses (recoveries) and related expenses (5)
−Removed: (5.5) — — (5.5)
−Removed: Gain on sale of real estate (0.4) — — (0.4)
Tax indemnification and related items 0.2 — — 0.2
4 unchanged sentences
(ii) the rationalization of certain plants;
−Removed: and (iii) severance related to cost reduction initiatives.
+Added: (iii) severance related to cost reduction initiatives;
+Added: (iv) impairment of assets held for sale;
+Added: and (v) related depreciation and amortization.
+Added: Impairment, restructuring and reorganization charges for 2022 included $29.3 million related to the sale of ADS.
The Company re-assesses its operating footprint and cost structure periodically, and makes adjustments as needed that result in restructuring charges.
However, management believes these actions are not representative of the Company’s core operations.
−Removed: (2) Corporate pension and other postretirement benefit related expense represents actuarial losses and (gains) that resulted from the remeasurement of plan assets and obligations as a result of changes in assumptions or experience.
+Added: (2) Corporate pension and other postretirement benefit related (expense) income represents actuarial losses and (gains) that resulted from the remeasurement of plan assets and obligations as a result of changes in assumptions or experience.
The Company recognizes actuarial losses and (gains) in connection with the annual remeasurement in the fourth quarter, or if specific events trigger a remeasurement.
Refer to Note 16 - Retirement Benefit Plans and Note 17 - Other Postretirement Benefit Plans for additional discussion.
−Removed: (3) Acquisition-related charges represent deal-related expenses associated with completed and certain unsuccessful transactions, as well as any resulting inventory step-up impact.
−Removed: (4) The acquisition-related gain represents a bargain purchase gain on the acquisition of the assets of Aurora that closed on November 30, 2020.
+Added: (3) Acquisition-related charges represent deal-related expenses associated with completed transactions and certain unsuccessful transactions, as well as any resulting inventory step-up impact.
+Added: (4) The acquisition-related gain represents a bargain purchase gain on the acquisition of the assets of Aurora Bearing Company ("Aurora") that closed on November 30, 2020.
+Added: (5) Russia-related charges include impairments or allowances recorded against certain property, plant and equipment, inventory and trade receivables to reflect the current impact of Russia's invasion of Ukraine (and associated sanctions) on the Company's operations.
+Added: In addition to impairments and allowances recorded, the Company recorded a loss on the divestiture of its Timken Russia business during the third quarter of 2022.
+Added: Refer to Russia Operations in Management Discussion and Analysis within the Company's annual report on Form 10-K for additional information .
+Added: (6) Represents the net gain resulting from divestitures and the sale of real estate.
(7) Represents property loss and related expenses during the periods presented (net of insurance recoveries received in 2020) resulting from property loss that occurred during the first quarter of 2019 at one of the Company's warehouses in Knoxville, Tennessee and during the third quarter of 2019 at one of the Company's warehouses in Yantai, China.
25 unchanged sentences
$ 39.5 $ 14.3
−Removed: Corporate pension and other postretirement benefit related (expense) income (2)
+Added: Corporate pension and other postretirement benefit related expense (2)
Acquisition-related charges (3)
Acquisition-related gain (4)
−Removed: Property recoveries and related expenses (5)
−Removed: Gain (loss) on sale of real estate — (0.4)
+Added: Russia-related charges (5)
+Added: Gain on divestitures and the sale of real estate, net (6)
Tax indemnification and related items 0.3 0.2
5 unchanged sentences
(i) plant closures;
−Removed: (ii) the rationalization of certain plants and (iii) severance related to cost reduction initiatives.
+Added: (ii) the rationalization of certain plants;
+Added: (iii) severance related to cost reduction initiatives;
+Added: and (iv) impairment of assets held for sale.
+Added: Impairment, restructuring and reorganization charges for 2022 included $29.3 million related to the sale of ADS.
The Company re-assesses its operating footprint and cost structure periodically, and makes adjustments as needed that result in restructuring charges.
2 unchanged sentences
The Company recognizes actuarial losses and (gains) in connection with the annual remeasurement in the fourth quarter, or if specific events trigger a remeasurement.
−Removed: (3) Acquisition-related charges represent deal-related expenses associated with completed and certain unsuccessful transactions, as well as any resulting inventory step-up impact.
+Added: Refer to Note 16 - Retirement Benefit Plans and Note 17 - Other Postretirement Benefit Plans for additional discussion.
+Added: (3) Acquisition-related charges represent deal-related expenses associated with completed transactions and certain unsuccessful transactions, as well as any resulting inventory step-up impact.
(4) The acquisition-related gain represents a bargain purchase gain on the acquisition of the assets of Aurora that closed on November 30, 2020.
−Removed: (5) Represents property loss and related expenses during the periods presented (net of insurance recoveries received in 2020) resulting from property loss that occurred during the first quarter of 2019 at one of the Company's warehouses in Knoxville, Tennessee and during the third quarter of 2019 at one of the Company's warehouses in Yantai, China.
+Added: (5) Russia-related charges include impairments or allowances recorded against certain property, plant and equipment, inventory and trade receivables to reflect the current impact of Russia's invasion of Ukraine (and associated sanctions) on the Company's operations.
+Added: In addition to impairments and allowances recorded, the Company recorded a loss on the divestiture of its Timken Russia business during the third quarter of 2022.
+Added: Refer to Russia Operations in Management Discussion and Analysis within the Company's annual report on Form 10-K for additional information .
+Added: (6) Represents the net gain resulting from divestitures and the sale of real estate.
Return on Invested Capital:
35 unchanged sentences
Foreign currency gains and losses resulting from transactions are included in the Consolidated Statements of Income.
−Removed: Net of related derivative activity, the Company recognized foreign currency exchange losses resulting from transactions of $9.4 million and $10.0 million for the years ended December 31, 2021 and 2020, respectively, and recognized a gain of $6.1 million for the year ended December 31, 2019.
−Removed: For the year ended December 31, 2021, the Company recorded a negative non-cash foreign currency translation adjustment of $62.3 million that decreased shareholders’ equity, compared with a positive non-cash foreign currency translation adjustment of $97.3 million that increased shareholders’ equity for the year ended December 31, 2020.
−Removed: The foreign currency translation adjustments for the year ended December 31, 2021 were favorably impacted by the weakening of t he U.S.
+Added: Net of related derivative activity, the Company recognized a foreign currency exchange gain resulting from transactions of $15.4 million for the year ended December 31, 2022, and recognized losses of $9.4 million and $10.0 million for the years ended December 31, 2021 and 2020, respectively.
+Added: For the year ended December 31, 2022, the Company recorded a negative non-cash foreign currency translation adjustment of $155.4 million that decreased shareholders’ equity, compared with a negative non-cash foreign currency translation adjustment of $62.3 million that decreased shareholders’ equity for the year ended December 31, 2021.
+Added: The foreign currency translation adjustments for the year ended December 31, 2022 were negatively impacted by the strengthening of the U.S.
dollar relative to other currencies as of December 31, 2022 compared to December 31, 2021.
+Added: Russia Operations :
+Added: At the beginning of 2022, the Company had two subsidiaries in Russia, Timken Russia, which was 100% owned by Timken, and a 51%-owned joint venture company to serve the Russian rail market ("Rail JV").
+Added: As a result of Russia's invasion of Ukraine (and associated sanctions), the Company suspended operations and recorded property, plant and equipment impairment charges of $9.0 million and inventory write-downs of $4.1 million during the year ended December 31, 2022.
+Added: During the third quarter of 2022, the Company sold its Timken Russia business resulting in a loss of $2.7 million on the sale.
+Added: After giving effect to these impairments and write-downs, as well as the sale of Timken Russia, as of December 31, 2022, the Company has net assets (net of noncontrolling interest of $5.9 million), totaling $7.7 million on its Consolidated Balance Sheet related to its Rail JV.
+Added: Net assets related to the Company's Russia operations include $8.5 million of cash and cash equivalents that the Company has classified as restricted as the Company is presently unable to repatriate these funds to one of its subsidiaries outside of Russia.
+Added: The Company will continue to monitor the events in Russia and Ukraine and may record additional asset impairments or write-offs in the future.
Trade Law Enforcement:
4 unchanged sentences
The quarterly dividend will be paid on March 6, 2023 to shareholders of record as of February 21, 2023.
−Removed: This will be the 399 th consecutive quarterly dividend paid on the common shares of the Company.
+Added: This will be the 403 rd consecutive quarterly dividend paid on the common shares of the Company.
Forward-Looking Statements
4 unchanged sentences
The Company cautions readers that actual results may differ materially from those expressed or implied in forward-looking statements made by or on behalf of the Company due to a variety of factors, such as:
−Removed: (a) deterioration in world economic conditions, or in economic conditions in any of the geographic regions in which the Company or its customers or suppliers conduct business, including adverse effects from a global economic slowdown, terrorism, or hostilities.
+Added: (a) deterioration in world economic conditions, or in economic conditions in any of the geographic regions in which the Company or its customers or suppliers conduct business, including adverse effects from a global economic slowdown or recession, terrorism, or hostilities.
This includes:
14 unchanged sentences
the effects of unplanned plant shutdowns;
−Removed: the effects of government-imposed restrictions and commercial requirements meant to address climate change;
+Added: the effects of government-imposed restrictions, commercial requirements and Company goals associated with climate change and emissions or other waste reduction initiatives;
and changes in the cost of labor and benefits;
1 unchanged sentence
(g) the success of the Company’s operating plans, announced programs, initiatives and capital investments;
−Removed: the ability to integrate acquired companies and to address material issues not uncovered during the Company's due diligence review;
+Added: the ability to integrate acquired companies and to address material issues both identified and not uncovered during the Company's due diligence review;
and the ability of acquired companies to achieve satisfactory operating results, including results being accretive to earnings, realization of synergies and expected cash flow generation;
−Removed: (h) the Company’s ability to maintain appropriate relations with unions or works councils that represent Company associates in certain locations in order to avoid disruptions of business and to maintain the continued service of our management and other key employees;
+Added: (h) the Company’s ability to maintain appropriate relations with unions or works councils that represent Company associates in certain locations in order to avoid disruptions of business;
+Added: the continued attraction, retention and development of management and other key employees, the successful development and execution of succession plans and management of other human capital matters;
(i) unanticipated litigation, claims, investigations or assessments.
This includes:
−Removed: claims, investigations or problems related to intellectual property, product liability or warranty, foreign export and trade laws, government procurement regulations, competition and anti-bribery laws, environmental or health and safety issues, data privacy and taxes;
−Removed: (j) changes in worldwide financial and capital markets, including availability of financing and interest rates on satisfactory terms, which affect the Company’s cost of funds and/or ability to raise capital, as well as customer demand and the ability of customers to obtain financing to purchase the Company’s products or equipment that contain the Company’s products;
+Added: claims, investigations or problems related to intellectual property, product liability or warranty, foreign export and trade laws, government procurement regulations, competition and anti-bribery laws, climate change, environmental or health and safety issues, data privacy and taxes;
+Added: (j) changes in worldwide financial and capital markets, including availability of financing and interest rates on satisfactory terms in a rising interest rate environment, which affect the Company’s cost of funds and/or ability to raise capital, as well as customer demand and the ability of customers to obtain financing to purchase the Company’s products or equipment that contain the Company’s products;
(k) the Company's ability to satisfy its obligations and comply with covenants under its debt agreements, maintain favorable credit ratings and its ability to renew or refinance borrowings on favorable terms;
7 unchanged sentences
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.