What changed in this filing

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Item 1. Financial Statements

2023-08-03 compared with 2023-05-03 · 311 added, 142 removed, 601 unchanged (43% of the section changed)

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(Dollars in millions, except per share data)

7 unchanged sentences

Interest income 1.9 1.0 3.4 1.6

Non-service pension and other postretirement income 0.1 1.3

Other income, net 3.1 0.2

Non-service pension and other postretirement (expense) income — ( 7.9 ) 0.1 ( 6.6 )

Other income (expense), net 2.3 ( 1.1 ) 5.4 ( 0.9 )

Income Before Income Taxes 176.6 149.6 344.8 309.7

10 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(Dollars in millions)

Net Income $ 129.5 $ 105.6 $ 255.2 $ 227.5

Other comprehensive income (loss), net of tax:

Other comprehensive loss, net of tax:

Foreign currency translation adjustments ( 27.9 ) ( 113.1 ) ( 0.2 ) ( 135.7 )

1 unchanged sentence

Change in fair value of derivative financial instruments ( 0.3 ) 2.2 ( 1.1 ) 4.2

Other comprehensive income (loss), net of tax 25.4 ( 22.1 )

Comprehensive income, net of tax 151.1 99.8

Other comprehensive loss, net of tax ( 29.8 ) ( 112.3 ) ( 4.4 ) ( 134.4 )

Comprehensive income (loss), net of tax 99.7 ( 6.7 ) 250.8 93.1

comprehensive income attributable to noncontrolling interest 4.0 1.7 7.7 2.8

Comprehensive income attributable to The Timken Company $ 147.4 $ 98.7

Comprehensive income (loss) attributable to The Timken Company $ 95.7 $ ( 8.4 ) $ 243.1 $ 90.3

See accompanying Notes to the Consolidated Financial Statements.

Consolidated Balance Sheets

(Dollars in millions) March 31,

(Dollars in millions) June 30,

2023 December 31,

53 unchanged sentences

Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

(Dollars in millions)

19 unchanged sentences

Other, net ( 3.0 ) ( 6.8 )

Net Cash Provided by (Used in) Operating Activities 78.6 ( 1.2 )

Net Cash Provided by Operating Activities 222.6 77.1

Investing Activities

1 unchanged sentence

Acquisitions, net of cash acquired ( 324.6 ) ( 152.3 )

Proceeds from disposal of property, plant and equipment 0.3 —

Proceeds from divestitures, net of cash divested 4.5 3.1

13 unchanged sentences

Short-term debt activity, net ( 1.4 ) 31.9

Net Cash (Used in) Provided by Financing Activities ( 17.5 ) 204.7

Proceeds from the sale of shares in Timken India Limited 284.8 —

Net Cash Provided by Financing Activities 209.0 177.4

Effect of exchange rate changes on cash ( 8.0 ) ( 7.7 )

(Decrease) Increase in Cash, Cash Equivalents and Restricted Cash ( 1.6 ) 167.3

Increase in Cash, Cash Equivalents and Restricted Cash 11.6 48.1

Cash, cash equivalents and restricted cash at beginning of year 340.7 257.9

10 unchanged sentences

Intangible asset amortization expense is now classified separately.

The 2022 presentation has been revised to conform to the 2023 presentation resulting in a reduction in the cost of products sold for the three months ended March 31, 2022.

The 2022 presentation has been revised to conform to the 2023 presentation resulting in a reduction in the cost of products sold for the three and six months ended June 30, 2022.

Note 2 - Significant Accounting Policies

10 unchanged sentences

Acquisitions:

During the first six months of 2023, the Company completed two acquisitions.

On April 4, 2023, the Company acquired Leonardo Top S.a.r.l.

("Nadella"), a leading European manufacturer of linear guides, telescopic rails, actuators and systems and other specialized industrial motion solutions, from ICG plc.

Based in Italy, Nadella employs approximately 450 people and operates manufacturing facilities in Europe and China.

Nadella reported revenue of approximately € 100 million in 2022.

Results for Nadella are reported in the Industrial Motion segment.

On January 31, 2023, the Company acquired the assets of American Roller Bearing Company ("ARB"), a North Carolina-based manufacturer of industrial bearings.

1 unchanged sentence

installed base and strong aftermarket business, operates manufacturing facilities in Hiddenite and Morganton, North Carolina.

The total purchase price for this acquisition was $ 32.0 million, including $ 0.5 million of the purchase price that was held back for the post-closing settlement of working capital.

ARB generated sales of approximately $ 35 million in 2022 and the transaction was funded with cash on hand.

ARB reported revenue of approximately $ 35 million in 2022.

Results for ARB are reported in the Engineered Bearings segment.

The following table presents the purchase price allocation at fair value for the ARB acquisition as of March 31, 2023.

The total purchase price for these acquisitions was $ 326.9 million, net of cash acquired of $ 21.0 million.

The Company incurred acquisition-related costs of $ 2.7 million to complete these acquisitions.

The following table presents the preliminary purchase price allocation at fair value for the 2023 acquisitions as of June 30, 2023.

Initial Purchase

4 unchanged sentences

Property, plant and equipment 34.1

Goodwill 121.3

Other intangible assets 136.7

Other non-current assets 4.9

Total assets acquired $ 399.9

1 unchanged sentence

Salaries, wages and benefits 4.7

Income taxes payable 4.1

Other current liabilities 6.4

Short-term debt 5.0

Long-term debt 6.0

Deferred income taxes 27.7

Other non-current liabilities 3.8

Total liabilities assumed $ 73.0

3 unchanged sentences

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

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

This purchase price allocation, including the residual amount allocated to goodwill or the recognition of a bargain purchase price gain, is based on preliminary information and is subject to change as additional information concerning final asset and liability valuations are obtained and management completes its reassessment of the measurement period procedures based on the results of the preliminary valuation.

As of March 31, 2023, no elements of the purchase price allocation have been finalized.

Note 3 - Acquisitions and Divestitures (continued)

The amounts in the table above represent the preliminary purchase price allocation for the 2023 acquisitions.

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 and management completes its reassessment of the measurement period procedures based on the results of the preliminary valuation.

As of June 30, 2023, no elements of the purchase price allocation have been finalized.

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

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

On November 4, 2022, the Company completed the acquisition of GGB Bearing Technology ("GGB"), a global technology and market leader of premium engineered metal-polymer plain bearings, for $ 302.5 million, net of cash acquired of $ 19.2 million, subject to customary post-closing adjustments.

The following table summarizes the preliminary purchase price allocation at fair value for identifiable intangible assets acquired in 2023.

Trade names $ 18.8 15 years

Technology and know-how 29.4 15 years

Customer relationships 88.4 9 years

Capitalized software 0.1 2 years

Total intangible assets $ 136.7

On November 4, 2022, the Company completed the acquisition of GGB Bearing Technology ("GGB"), a global technology and market leader of premium engineered metal-polymer plain bearings, for $ 300.2 million, net of cash acquired of $ 19.7 million.

GGB's revenue was approximately $ 200 million for the full year 2022.

6 unchanged sentences

Spinea is located in Presov, Slovakia.

The purchase price for this acquisition was $ 151.2 million, net of cash acquired of $ 0.2 million, subject to customary post-closing adjustments.

The purchase price for this acquisition was $ 151.2 million, net of cash acquired of $ 0.2 million.

Results for Spinea are reported in the Industrial Motion segment.

Note 3 - Acquisitions and Divestitures (continued)

The following table presents the updated purchase price allocation at fair value, net of cash acquired, for the 2022 acquisitions, as of March 31, 2023:

The following table presents the updated purchase price allocation at fair value, net of cash acquired, for the 2022 acquisitions, as of June 30, 2023:

Initial Purchase Price Allocation Adjustments Updated Purchase Price Allocation

17 unchanged sentences

The above 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 is obtained.

The purchase price allocation for Spinea is preliminary pending the continued evaluation of operating leases, which is expected to be finalized during the second quarter of 2023.

The purchase price allocation for GGB is preliminary pending the continued evaluation of certain working capital accounts, real estate and other intangible assets, as well the related impacts on deferred income taxes.

The purchase price allocation for Spinea was finalized during the second quarter of 2023.

The purchase price allocation for GGB is preliminary pending the continued evaluation of real estate and other property, plant and equipment assets, as well as the related impacts on deferred income taxes.

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

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

On April 4, 2023, the Company acquired Leonardo Top S.a.r.l.

("Nadella"), a leading European manufacturer of linear guides, telescopic rails, actuators and systems and other specialized industrial motion solutions, from ICG plc.

Nadella operates manufacturing facilities in Europe and China and reported revenue of approximately € 100 million in 2022.

Divestitures:

4 unchanged sentences

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

On November 1, 2022, the Company completed the divestiture of Timken Aerospace Drive Systems, LLC ("ADS").

The Company recorded proceeds of $ 33.0 million on the sale of the business.

For the first six months of 2023, the Company recorded a loss $ 1.2 million due to the payment of a working capital adjustment.

Note 4 - Segment Information

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Engineered Bearings $ 857.2 $ 798.3 $ 1,757.9 $ 1,570.7

6 unchanged sentences

Unallocated corporate expense ( 13.2 ) ( 13.4 ) ( 30.9 ) ( 26.3 )

Corporate pension and other postretirement benefit related income (expense) (1)

Corporate pension and other postretirement

benefit related income (expense) (1)

1.0 ( 11.6 ) 1.9 ( 14.2 )

Depreciation and amortization ( 51.2 ) ( 40.7 ) ( 96.8 ) ( 82.1 )

2 unchanged sentences

Income before income taxes $ 176.6 $ 149.6 $ 344.8 $ 309.7

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

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

2023 December 31, 2022

6 unchanged sentences

Note 5 - Revenue

The following table presents details deemed most relevant to the users of the financial statements about total revenue for the three months ended March 31, 2023 and 2022:

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, 2023 and 2022:

Three Months Ended Three Months Ended

March 31, 2023 March 31, 2022

June 30, 2023 June 30, 2022

Engineered Bearings Industrial Motion Total Engineered Bearings Industrial Motion Total

5 unchanged sentences

Net sales $ 857.2 $ 415.1 $ 1,272.3 $ 798.3 $ 355.4 $ 1,153.7

Six Months Ended Six Months Ended

June 30, 2023 June 30, 2022

Engineered Bearings Industrial Motion Total Engineered Bearings Industrial Motion Total

United States $ 658.5 $ 413.1 $ 1,071.6 $ 591.8 $ 396.5 $ 988.3

Americas excluding the United States 188.2 55.8 244.0 197.0 45.1 242.1

Europe / Middle East / Africa 359.5 250.4 609.9 318.3 206.5 524.8

China 314.9 39.2 354.1 262.6 43.8 306.4

Asia-Pacific excluding China 236.8 18.7 255.5 201.0 15.7 216.7

Net sales $ 1,757.9 $ 777.2 $ 2,535.1 $ 1,570.7 $ 707.6 $ 2,278.3

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 approximate percent of revenue by sales channel for the three months ended March 31, 2023 and 2022:

Three Months Ended Three Months Ended

Revenue by sales channel March 31, 2023 March 31, 2022

The following table presents the approximate percent of revenue by sales channel for the six months ended June 30, 2023 and 2022:

Six Months Ended Six Months Ended

Revenue by sales channel June 30, 2023 June 30, 2022

Original equipment manufacturers 60 % 60 %

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 three months ended March 31, 2023 and March 31, 2022, approximately 8 % and 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 % and 5 % of total net sales represented service revenue during the three months ended March 31, 2023 and March 31, 2022, respectively.

Finally, business with the United States ("U.S.") government or its contractors represented approximately 5 % and 7 % of total net sales during each of the three months ended March 31, 2023 and March 31, 2022, respectively.

During the six months ended June 30, 2023 and June 30, 2022, approximately 8 % and 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 total net sales represented service revenue during the six months ended June 30, 2023 and June 30, 2022.

Finally, business with the United States ("U.S.") government or its contractors represented approximately 6 % of total net sales during each of the six months ended June 30, 2023 and June 30, 2022.

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 $ 126.0 million a t March 31, 2023.

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 $ 216.0 million a t June 30, 2023.

Note 5 - Revenue (continued)

Unbilled Receivables:

The following table contains a rollforward of unbilled receivables for the three months ended March 31, 2023 and the twelve months ended December 31, 2022:

The following table contains a rollforward of unbilled receivables for the six months ended June 30, 2023 and the twelve months ended December 31, 2022:

2023 December 31,

4 unchanged sentences

Ending balance $ 121.8 $ 103.9

There were no impairment losses recorded on unbilled receivables for the three months ended March 31, 2023 and the twelve months ended December 31, 2022.

There were no impairment losses recorded on unbilled receivables for the six months ended June 30, 2023 and the twelve months ended December 31, 2022.

Deferred Revenue:

The following table contains a rollforward of deferred revenue for the three months ended March 31, 2023 and the twelve months ended December 31, 2022:

The following table contains a rollforward of deferred revenue for the six months ended June 30, 2023 and the twelve months ended December 31, 2022:

2023 December 31,

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Provision for income taxes $ 47.1 $ 44.0 $ 89.6 $ 82.2

Effective tax rate 26.7 % 29.4 % 26.0 % 26.5 %

Income tax expense for the three months ended March 31, 2023 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 six months ended June 30, 2023 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 25.3 % for the three months ended March 31, 2023 was higher than the effective tax rate for the three months ended March 31, 2022 primarily due to an increase in the mix of earnings in international jurisdictions with relatively higher tax rates.

federal statutory rate of 21% primarily due to the projected mix of earnings in non-U.S.

jurisdictions with relatively higher tax rates.

The effective tax rate of 26.7 % for the three months ended June 30, 2023 was lower than the effective tax rate for the three months ended June 30, 2022 primarily due to the net favorable impact of discrete tax items in comparison to the year ago period, partially offset by an increase in the mix of earnings in non-U.S.

jurisdictions with relatively higher tax rates.

The effective tax rate of 26.0 % for the six months ended June 30, 2023 was lower than the effective tax rate for the six months ended June 30, 2022 primarily due to the net favorable impact of discrete tax items in comparison to the year ago period, partially offset by an increase in the mix of earnings in non-U.S.

jurisdictions with relatively higher tax rates.

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 months ended March 31, 2023 and 2022, 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 six months ended June 30, 2023 and 2022, respectively:

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Net income attributable to The Timken Company $ 125.2 $ 105.0 $ 247.5 $ 223.2

10 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 months ended March 31, 2023 and 2022.

There were no antidilutive stock options outstanding during the three and six months ended June 30, 2023 and 2022.

Note 8 - Inventories

The components of inventories at March 31, 2023 and December 31, 2022 were as follows:

The components of inventories at June 30, 2023 and December 31, 2022 were as follows:

2023 December 31,

7 unchanged sentences

Inventories are valued at net realizable value, with approximately 61 % valued on the first-in, first-out ("FIFO") method and the remaining 39 % valued on the last-in, first-out ("LIFO") method.

The majority of the Company's domestic inventories are valued on the LIFO method.

The Company's international inventories are valued on the FIFO method.

The LIFO reserve at March 31, 2023 and December 31, 2022 was $ 234.2 million and $ 235.4 million, respectively.

The majority of the Company's U.S.

inventories are valued on the LIFO method.

The Company's non-U.S.

inventories are valued on the FIFO method.

The LIFO reserve at June 30, 2023 and December 31, 2022 was $ 236.1 million and $ 235.4 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.

6 unchanged sentences

The Engineered Bearings segment has one reporting unit and the Industrial Motion segment has six reporting units.

The changes in the carrying amount of goodwill for the three months ended March 31, 2023 were as follows:

The changes in the carrying amount of goodwill for the six months ended June 30, 2023 were as follows:

Engineered Bearings Industrial Motion Total

Beginning balance $ 679.8 $ 418.5 $ 1,098.3

Acquisitions — 121.3 121.3

Impairment loss — ( 28.3 ) ( 28.3 )

4 unchanged sentences

The Company utilized updated forecasts for the income approach as part of the goodwill impairment review.

Based on the earnings and cash flow forecasts for the Belts & Chain reporting unit within the Industrial Motion segment, the Company determined that the reporting unit could not support the carrying value of its goodwill.

Based on the earnings and cash flow forecasts for the Belts and Chain reporting unit within the Industrial Motion segment, the Company determined that the reporting unit could not support the carrying value of its goodwill.

As a result, the Company recorded a pretax impairment loss of $ 28.3 million during the first quarter of 2023, which was reported in impairment and restructuring charges on the Consolidated Statement of Income.

The following table displays intangible assets as of March 31, 2023 and December 31, 2022:

Balance at March 31, 2023 Balance at December 31, 2022

The following table displays intangible assets as of June 30, 2023 and December 31, 2022:

Balance at June 30, 2023 Balance at December 31, 2022

Amount Accumulated

15 unchanged sentences

Total intangible assets $ 1,449.7 $ ( 573.6 ) $ 876.1 $ 1,306.2 $ ( 540.9 ) $ 765.3

Amortization expense for intangible assets was $ 15.1 million and $ 12.7 million for the three months ended March 31, 2023 and 2022, respectively.

Amortization expense for intangible assets was $ 33.9 million and $ 25.3 million for the six months ended June 30, 2023 and 2022, respectively.

Amortization expense related to intangible assets acquired as part of a business combination is reported in amortization of intangible assets on the Consolidated Statement of Income, and amortization expense related to capitalized software is reported in cost of products sold or selling, general and administrative expenses on the Consolidated Statement of Income.

5 unchanged sentences

Note 10 - Other Current Liabilities

The following table displays other current liabilities as of March 31, 2023 and December 31, 2022:

(Dollars in millions) March 31,

The following table displays other current liabilities as of June 30, 2023 and December 31, 2022:

(Dollars in millions) June 30,

2023 December 31,

12 unchanged sentences

Note 11 - Financing Arrangements

Short-term debt at March 31, 2023 and December 31, 2022 was as follows:

Short-term debt at June 30, 2023 and December 31, 2022 was as follows:

2023 December 31,

Variable-rate Accounts Receivable Facility with an interest rate of 5.54 % at March 31, 2023

Borrowings under lines of credit for certain of the Company’s foreign subsidiaries with various banks with interest rates ranging from 3.42 % to 4.90 % at March 31, 2023 and 2.38 % to 5.50 % at December 31, 2022

Borrowings under lines of credit for certain of the Company’s foreign subsidiaries with various banks with interest rates ranging from 4.00 % to 10.07 % at June 30, 2023 and 2.38 % to 5.50 % at December 31, 2022

$ 49.8 $ 46.3

Short-term debt $ 49.8 $ 46.3

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

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

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

however, availability under the Accounts Receivable Facility was not reduced by any such borrowing base limitations at March 31, 2023.

As of March 31, 2023, there were $ 100.0 million in outstanding borrowings under the Accounts Receivable Facility, which reduced the availability under this facility to zero .

$ 7.1 million of the outstanding borrowings under the Accounts Receivable Facility was classified as short-term at March 31, 2023, which reflects the Company's expectations over the next 12 months relative to the minimum borrowing base.

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.

Lines of credit for certain of the Company's foreign subsidiaries provide for short-term borrowings up to $ 246.1 million in the aggregate.

Most of these lines of credit are uncommitted.

At March 31, 2023, the Company’s foreign subsidiaries had borrowings outstanding of $ 38.7 million and bank guarantees of $ 3.7 million, which reduced the aggregate availability under these facilities to $ 195.0 million.

Long-term debt at March 31, 2023 and December 31, 2022 was as follows:

At June 30, 2023, the Company’s foreign subsidiaries had borrowings outstanding of $ 49.8 million and bank guarantees of $ 2.7 million, which reduced the aggregate availability under these facilities to $ 193.6 million.

Long-term debt at June 30, 2023 and December 31, 2022 was as follows:

2023 December 31,

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

Dollar of 5.72 % and Euro of 3.46 % at March 31, 2023 and U.S.

Dollar of 6.27 % and Euro of 4.07 % at June 30, 2023 and U.S.

Dollar of 5.10 % and Euro of 2.21 % at December 31, 2022

Variable-rate Accounts Receivable Facility with an interest rate of 5.54 % at March 31, 2023 and 5.01 % at December 31, 2022

Variable-rate Term Loan (1) , maturing on December 5, 2027, with an interest rate of 5.54 % at March 31, 2023 and 5.55 % at December 31, 2022

$ 133.2 $ 8.5

Variable-rate Accounts Receivable Facility with an interest rate of 5.98 % at June 30, 2023 and 5.01 % at December 31, 2022

Variable-rate Term Loan (1) , maturing on December 5, 2027, with an interest rate of 6.33 % at June 30, 2023 and 5.55 % at December 31, 2022

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

10 unchanged sentences

Note 11 - Financing Arrangements (continued)

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

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

however, availability under the Accounts Receivable Facility was not reduced by any such borrowing base limitations at June 30, 2023.

As of June 30, 2023, there were $ 85.0 million in outstanding borrowings under the Accounts Receivable Facility, which reduced the availability under this facility to $ 15.0 million.

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 $ 400.0 million unsecured term loan facility ("2027 Term Loan") that each mature on December 5, 2027.

1 unchanged sentence

The Credit Agreement also replaced interest rates based on LIBOR with interest rates based on Secured Overnight Financing Rate ("SOFR").

At March 31, 2023, the Company had $ 63.6 million of outstanding borrowings under the Senior Credit Facility, which reduced the availability under this facility to $ 686.4 million.

At June 30, 2023, the Company had $ 133.2 million of outstanding borrowings and $ 1.8 million of letters of credit under the Senior Credit Facility, which reduced the availability under this facility to $ 615.0 million.

The Credit Agreement has two financial covenants:

1 unchanged sentence

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

Proceeds from the 2032 Notes were used for general corporate purposes, which included the repayment of borrowings under the Senior Credit Facility and the Accounts Receivable Facility outstanding at the time of issuance.

At March 31, 2023, the Company was in full compliance with all applicable covenants on its outstanding debt.

Proceeds from the 2032 Notes were used for general corporate purposes, which included the repayment of borrowings under the Company's previous senior credit facility and the Accounts Receivable Facility outstanding at the time of issuance.

At June 30, 2023, 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 March 31, 2023, outstanding letters of credit totaled $ 52.0 million, most with expiration dates within 12 months.

The maturities of long-term debt (including $ 3.5 million of finance leases) subsequent to March 31, 2023 are as follows:

At June 30, 2023, outstanding letters of credit totaled $ 59.1 million, most with expiration dates within 12 months.

The maturities of long-term debt (including $ 4.9 million of finance leases) subsequent to June 30, 2023 are as follows:

Thereafter 356.9

The table above excludes $ 11.4 million of unamortized premiums and fees that are netted against long-term debt at March 31, 2023.

The table above excludes $ 12.0 million of unamortized premiums and fees that are netted against long-term debt at June 30, 2023.

Note 12 - Supply Chain Financing

6 unchanged sentences

The supplier invoice terms under the program typically require payment in full within 90 days of the invoice date.

The following table is a rollforward of the outstanding obligations for the Company’s supplier finance program for the three months ended March 31, 2023:

The following table is a rollforward of the outstanding obligations for the Company’s supplier finance program for the six months ended June 30, 2023:

Confirmed obligations outstanding, January 1 $ 14.4

2 unchanged sentences

Confirmed obligations outstanding, ending balance $ 18.5

The obligations outstanding at March 31, 2023 were included in accounts payable, trade on the Consolidated Balance Sheet.

The obligations outstanding at June 30, 2023 were included in accounts payable, trade on the Consolidated Balance Sheet.

Note 13 - Contingencies

The Company and certain of its subsidiaries have been identified as potentially responsible parties for investigation and remediation under the Comprehensive Environmental Response, Compensation and Liability Act, known as the Superfund, or similar state laws with respect to certain sites.

Claims for investigation and remediation have been asserted against numerous other entities, which are believed to be financially solvent and are expected to fulfill their proportionate share of the obligation.

The Company is responsible for environmental remediation at various manufacturing facilities presently or formerly operated by the Company.

In addition, the Company, through one of its subsidiaries, has currently been identified as a potentially responsible party for investigation and remediation under the Comprehensive Environmental Response, Compensation and Liability Act, known as the Superfund, or similar state laws with respect to one site.

Claims for investigation and remediation have been asserted against numerous other unrelated entities, which are believed to be financially solvent and are expected to fulfill their proportionate share of the obligation.

On December 28, 2004, the United States Environmental Protection Agency (“USEPA”) sent Lovejoy, LLC.

("Lovejoy") a Special Notice Letter that identified Lovejoy as a potentially responsible party, together with at least 14 other companies, at the Ellsworth Industrial Park Site, Downers Grove, DuPage County, Illinois (the “Site”).

("Lovejoy") a Special Notice Letter that identified Lovejoy as a potentially responsible party, together with at least 14 unrelated parties, at the Ellsworth Industrial Park Site, Downers Grove, DuPage County, Illinois (the “Site”).

The Company acquired Lovejoy in 2016.

4 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 $ 4.7 million and $ 4.8 million for various known environmental matters that are probable and reasonably estimable at March 31, 2023 and December 31, 2022, respectively, which includes the Lovejoy matter described above.

The Company had total environmental accruals of $ 4.7 million and $ 4.8 million for various known environmental matters that are probable and reasonably estimable at June 30, 2023 and December 31, 2022, 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.

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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 $ 25.4 million and $ 23.5 million at March 31, 2023 and December 31, 2022, respectively.

The product warranty liability included in "Other current liabilities" on the Consolidated Balance Sheets was $ 27.1 million and $ 23.5 million at June 30, 2023 and December 31, 2022, 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 three months of 2023 primarily relates to additional accruals for certain products sold into the automotive and renewable energy sectors.

The increase in the liability for the first six months of 2023 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.

The Company is currently evaluating claims raised by certain customers with respect to the performance of bearings sold into the wind energy sector.

Management believes that the outcome of these claims will not have a material effect on the Company's consolidated financial position;

however, the effect of any such outcome may be material to the results of operations of any particular period in which costs in excess of amounts provided, if any, are recognized.

The following is a rollforward of the consolidated product warranty accrual for the three months ended March 31, 2023 and twelve months ended December 31, 2022:

Management believes that any significant change to these assumptions will not have a material effect on the Company's consolidated financial position;

however, the effect of any such change may be material to the results of operations of 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, 2023 and twelve months ended December 31, 2022:

2023 December 31,

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Note 14 - Equity

The following tables present the changes in the components of equity for the three months ended March 31, 2023 and 2022, respectively:

The following tables present the changes in the components of equity for the three and six months ended June 30, 2023 and 2022, respectively:

The Timken Company Shareholders

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Loss Treasury

Balance at March 31, 2023 $ 2,436.3 $ 40.7 $ 853.3 $ 2,030.8 $ ( 156.8 ) $ ( 420.0 ) $ 88.3

Net income 129.5 125.2 4.3

Foreign currency translation adjustment ( 27.9 ) ( 27.6 ) ( 0.3 )

Pension and other postretirement liability

adjustments (net of income tax benefit

of $ 0.5 million)

( 1.6 ) ( 1.6 )

Change in fair value of derivative financial

instruments, net of reclassifications ( 0.3 ) ( 0.3 )

Dividends declared to noncontrolling interest —

Dividends - $ 0.33 per share

( 23.8 ) ( 23.8 )

Sale of shares of Timken India Limited 229.0 194.5 8.1 26.4

Stock-based compensation expense 6.1 6.1

Stock purchased at fair market value ( 100.5 ) ( 100.5 )

Stock option exercise activity 4.5 4.5

Payments related to tax withholding for

stock-based compensation ( 1.3 ) ( 1.3 )

Balance at June 30, 2023 $ 2,650.0 $ 40.7 $ 1,058.4 $ 2,132.2 $ ( 178.2 ) $ ( 521.8 ) $ 118.7

The Timken Company Shareholders

Capital Other

Capital Retained Earnings Accumulated

Comprehensive

Loss Treasury

Balance at December 31, 2022 $ 2,352.9 $ 40.7 $ 829.6 $ 1,932.1 $ ( 181.9 ) $ ( 352.2 ) $ 84.6

9 unchanged sentences

( 47.4 ) ( 47.4 )

Sale of shares of Timken India Limited 229.0 194.5 8.1 26.4

Stock-based compensation expense 17.1 17.1

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stock-based compensation ( 15.1 ) ( 15.1 )

Balance at June 30, 2023 $ 2,650.0 $ 40.7 $ 1,058.4 $ 2,132.2 $ ( 178.2 ) $ ( 521.8 ) $ 118.7

On June 20, 2023, the Company completed the sale of 7.6 million shares of Timken India Limited (“TIL”), a subsidiary of the Company, generating net proceeds of $ 229 million after estimated income taxes of $ 55 million and transaction costs.

The sale reduced the Company’s ownership in TIL from 67.8 percent to 57.7 percent.

Note 14 - Equity (continued)

The Timken Company Shareholders

Capital Other

Capital Retained Earnings Accumulated

Comprehensive

Income (Loss) Treasury

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

Net income 105.6 105.0 0.6

Foreign currency translation adjustment ( 113.1 ) ( 114.2 ) 1.1

Pension and other postretirement liability

adjustments (net of income tax benefit of

$ 0.5 million)

( 1.4 ) ( 1.4 )

Change in fair value of derivative financial

instruments, net of reclassifications 2.2 2.2

Dividends - $ 0.31 per share

( 22.9 ) ( 22.9 )

Stock-based compensation expense 8.5 8.5

Stock purchased at fair market value ( 44.3 ) ( 44.3 )

Stock option exercise activity 0.2 0.2

Payments related to tax withholding for

stock-based compensation ( 0.6 ) ( 0.6 )

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

The Timken Company Shareholders

19 unchanged sentences

stock-based compensation ( 8.1 ) ( 8.1 )

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

Note 15 - Impairment and Restructuring Charges

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

For the three months ended March 31, 2023:

For the three months ended June 30, 2023:

Engineered Bearings Industrial Motion Total

Severance and related benefit costs $ 1.5 $ 0.8 $ 2.3

Exit costs 0.2 — 0.2

Total $ 1.7 $ 0.8 $ 2.5

For the six months ended June 30, 2023:

Engineered Bearings Industrial Motion Total

Impairment charges $ — $ 28.3 $ 28.3

Severance and related benefit costs 2.2 0.7 2.9

Exit costs 0.2 — 0.2

Total $ 2.4 $ 29.0 $ 31.4

For the three months ended March 31, 2022:

For the three months ended June 30, 2022:

Engineered Bearings Industrial Motion Total

Impairment charges $ 8.8 $ — $ 8.8

Severance and related benefit costs 0.6 0.4 1.0

1 unchanged sentence

Total $ 9.6 $ 0.4 $ 10.0

For the six months ended June 30, 2022:

Engineered Bearings Industrial Motion Total

Impairment charges $ 8.8 $ — $ 8.8

Severance and related benefit costs 1.0 0.3 1.3

Exit costs 0.8 0.1 0.9

Total $ 10.6 $ 0.4 $ 11.0

The following discussion explains the impairment and restructuring charges recorded for the periods presented;

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The Company expects to incur approximately $ 10 million to $ 12 million of pretax costs in total related to this closure.

During the three months ended March 31, 2023, the Company recorded severance and related benefits of $ 0.8 million related to this closure.

T he Company incurred cumulative pretax costs related to this closure of $ 2.0 million as of March 31, 2023, including rationalization costs recorded in cost of products sold.

During the three months and six months ended June 30, 2023, the Company recorded severance and related benefits of $ 0.9 million and $ 1.7 million, respectively, related to this closure.

The Company incurred cumulative pretax costs related to this closure of $ 6.1 million as of June 30, 2023, including rationalization costs recorded in cost of products sold.

Note 15 - Impairment and Restructuring Charges (continued)

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.

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

Refer to Russia Operations in Management's Discussion and Analysis for additional information.

On July 19, 2021, the Company announced the closure of its bearing manufacturing facility in Villa Carcina, Italy.

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The Company completed the closure of the facility on October 31, 2022, and it affected approximately 110 employees.

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

The Company incurred cumulative pretax costs related to this closure of $ 9.8 million as of March 31, 2023, including rationalization costs recorded in cost of products sold.

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 related to 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 related to this closure.

The Company incurred cumulative pretax costs related to this closure of $ 9.8 million as of June 30, 2023, including rationalization costs recorded in cost of products sold.

On November 1, 2022, the Company completed the sale of this facility.

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After evaluating the impact from the organizational changes and revising segment results through the balance of 2022, the Company concluded that it will operate under two new reportable segments, Engineered Bearings and Industrial Motion, effective January 1, 2023.

In conjunction with this change in segmented results, the Company had to reallocate goodwill to new reporting units under these two segments.

In addition, the Company had to review goodwill for impairment under these new reporting units.

In conjunction with this change in segmented results, the Company reallocated its goodwill to new reporting units under these two segments.

In addition, the Company was required to review goodwill for impairment under these new reporting units.

As a result of this goodwill impairment review, the Company recognized a pretax goodwill impairment loss of $ 28.3 million during the three months ended March 31, 2023.

Note 15 - Impairment and Restructuring Charges (continued)

On February 4, 2020, the Company announced the closure of its chain manufacturing facility in Indianapolis, Indiana.

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The Company transferred the majority of its Diamond Chain product line to its chain manufacturing facility in Fulton, Illinois.

The chain plant is expected to cease operations by the end of April 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 $ 12 million to $ 15 million of expenses related to this closure.

The Company has incurred cumulative pretax costs related to this closure of $ 14.4 million as of March 31, 2023, including rationalization costs recorded in cost of products sold.

Consolid ated Restructuring Accrual:

The following is a rollforward of the consolidated restructuring accrual for the three months ended March 31, 2023 and twelve months ended December 31, 2022:

The chain plant ceased operations on April 30, 2023 and affected approximately 240 employees at the Indianapolis facility.

The Company hired approximately 130 full-time positions in Fulton, Illinois related to this closure.

The Company incurred cumulative pretax costs related to this closure of $ 14.8 million as of June 30, 2023, including rationalization costs recorded in cost of products sold.

Consolidated Restructuring Accrual:

The following is a rollforward of the consolidated restructuring accrual for the six months ended June 30, 2023 and twelve months ended December 31, 2022:

2023 December 31,

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Ending balance $ 4.1 $ 3.1

The restructuring accrual at March 31, 2023 and December 31, 2022 was included in other current liabilities on the Consolidated Balance Sheets.

The restructuring accrual at June 30, 2023 and December 31, 2022 was included in other current liabilities on the Consolidated Balance Sheets.

Note 16 - 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 months ended March 31, 2023 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, 2023.

The amounts for the three and six months ended June 30, 2023 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, 2023.

Plans International Plans Total

Three Months Ended

March 31, Three Months Ended

June 30, Three Months Ended

2023 2022 2023 2022 2023 2022

4 unchanged sentences

Amortization of prior service cost 0.1 0.3 — 0.1 0.1 0.4

Recognition of net actuarial (gains)

losses ( 0.9 ) 2.6 — — ( 0.9 ) 2.6

Recognition of net actuarial

(gains) losses ( 1.0 ) 11.6 — — ( 1.0 ) 11.6

Net periodic benefit cost (credit) $ 1.7 $ 12.8 $ 0.6 $ ( 0.5 ) $ 2.3 $ 12.3

For the three months ended March 31, 2023, lump sum payments related to new retirees exceeded annual interest and service costs for one of the Company's U.S.

Plans International Plans Total

Six Months Ended

June 30, Six Months Ended

2023 2022 2023 2022 2023 2022

Components of net periodic benefit cost (credit):

Service cost $ 0.4 $ 3.7 $ 0.8 $ 0.8 $ 1.2 $ 4.5

Interest cost 9.0 8.2 5.3 2.9 14.3 11.1

Expected return on plan assets ( 4.2 ) ( 10.2 ) ( 5.3 ) ( 4.9 ) ( 9.5 ) ( 15.1 )

Amortization of prior service cost 0.1 0.6 0.1 0.1 0.2 0.7

Recognition of net actuarial

(gains) losses ( 1.9 ) 14.2 — — ( 1.9 ) 14.2

Net periodic benefit cost (credit) $ 3.4 $ 16.5 $ 0.9 $ ( 1.1 ) $ 4.3 $ 15.4

For the three and six months ended June 30, 2023, lump sum payments related to new retirees exceeded annual interest and service costs for one of the Company's U.S.

defined benefit pension plans, triggering a remeasurement of assets and obligations for this plan.

As a result of this remeasurement, the Company recognized a net actuarial gain ("mark-to-market charges") of $ 0.9 million during the three months ended March 31, 2023.

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

defined benefit pension plans.

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

As a result of this remeasurement, the Company recognized a net actuarial loss of $ 2.6 million during the three months ended March 31, 2022.

As a result of this remeasurement, the Company recognized net actuarial ("mark-to-market") gains of $ 1.0 million and $ 1.9 million during the three and six months ended June 30, 2023.

For the three and six months ended June 30, 2022, the Company expected to make lump sum payments related to new retirees in excess of annual interest and service costs for two of the Company's U.S.

defined pension plans.

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

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

Note 17 - 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

2023 2022 2023 2022

Net periodic benefit credit:

Service cost $ — $ 0.1 $ — $ 0.1

Interest cost 0.5 0.3 1.0 0.7

2 unchanged sentences

Note 18 - Accumulated Other Comprehensive Income (Loss)

The following tables present details about components of accumulated other comprehensive (loss) income for the three months ended March 31, 2023 and 2022, respectively:

The following tables present details about components of accumulated other comprehensive (loss) income for the three and six months ended June 30, 2023 and 2022, respectively:

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

Balance at March 31, 2023 $ ( 208.3 ) $ 49.3 $ 2.2 $ ( 156.8 )

Sale of shares of Timken India Limited 8.1 — — 8.1

Other comprehensive loss before

reclassifications and income taxes ( 27.9 ) ( 0.1 ) ( 0.9 ) ( 28.9 )

Amounts reclassified from accumulated other

comprehensive (loss) income before income

taxes — ( 2.0 ) 0.4 ( 1.6 )

Income tax benefit — 0.5 0.2 0.7

Net current period other comprehensive loss,

net of income taxes ( 27.9 ) ( 1.6 ) ( 0.3 ) ( 29.8 )

Noncontrolling interest 0.3 — — 0.3

Net current period other comprehensive loss,

net of income taxes, noncontrolling interest and

sale of shares of Timken India Limited ( 19.5 ) ( 1.6 ) ( 0.3 ) ( 21.4 )

Balance at June 30, 2023 $ ( 227.8 ) $ 47.7 $ 1.9 $ ( 178.2 )

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

Balance at December 31, 2022 $ ( 235.7 ) $ 50.8 $ 3.0 $ ( 181.9 )

Other comprehensive income (loss) before

Sale of shares of Timken India Limited 8.1 — — 8.1

Other comprehensive loss before

reclassifications and income taxes ( 0.2 ) ( 0.1 ) ( 1.7 ) ( 2.0 )

3 unchanged sentences

Income tax benefit — 1.0 0.5 1.5

Net current period other comprehensive income

(loss), net of income taxes 27.7 ( 1.5 ) ( 0.8 ) 25.4

Net current period other comprehensive loss,

net of income taxes ( 0.2 ) ( 3.1 ) ( 1.1 ) ( 4.4 )

Noncontrolling interest — — — —

Net current period other comprehensive income

(loss), net of income taxes and noncontrolling

interest 27.4 ( 1.5 ) ( 0.8 ) 25.1

(loss), net of income taxes, noncontrolling

interest and sale of shares of Timken India

Limited 7.9 ( 3.1 ) ( 1.1 ) 3.7

Balance at June 30, 2023 $ ( 227.8 ) $ 47.7 $ 1.9 $ ( 178.2 )

Note 18 - 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, 2022 $ ( 100.3 ) $ 55.1 $ 2.7 $ ( 42.5 )

Other comprehensive (loss) income before

reclassifications and income taxes ( 113.1 ) 0.2 3.9 ( 109.0 )

Amounts reclassified from accumulated other

comprehensive (loss) income before income

taxes — ( 2.1 ) ( 0.7 ) ( 2.8 )

Income tax benefit (expense) — 0.5 ( 1.0 ) ( 0.5 )

Net current period other comprehensive (loss)

income, net of income taxes ( 113.1 ) ( 1.4 ) 2.2 ( 112.3 )

Noncontrolling interest ( 1.1 ) — — ( 1.1 )

Net current period other comprehensive (loss)

income, net of income taxes and noncontrolling

interest ( 114.2 ) ( 1.4 ) 2.2 ( 113.4 )

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

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

12 unchanged sentences

interest ( 134.2 ) ( 2.9 ) 4.2 ( 132.9 )

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 reclassifications and income taxes includes the effect of foreign currency.

5 unchanged sentences

Level 3 – Unobservable inputs for the asset or liability.

The following tables present the fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022:

March 31, 2023

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, 2023 and December 31, 2022:

June 30, 2023

Total Level 1 Level 2 Level 3

3 unchanged sentences

Short-term investments 38.2 — 38.2 —

Interest rate swap contract 2.1 — 2.1 —

Interest rate swap contracts 1.0 — 1.0 —

Foreign currency forward contracts 1.7 — 1.7 —

8 unchanged sentences

Short-term investments 39.2 — 39.2 —

Interest rate swap contract 3.1 — 3.1 —

Interest rate swap contracts 3.1 — 3.1 —

Foreign currency forward contracts 4.5 — 4.5 —

2 unchanged sentences

Total liabilities $ 19.8 $ — $ 19.8 $ —

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

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

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

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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 or goodwill impairment.

No other material assets w ere measured at fair value on a nonrecurring basis during the three months ended March 31, 2023 and 2022, respectively.

No other material assets w ere measured at fair value on a nonrecurring basis during the six months ended June 30, 2023 and 2022, respectively.

Financial Instruments:

2 unchanged sentences

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 $ 1,381.7 million and $ 1,353.5 million at March 31, 2023 and December 31, 2022, respectively.

The carrying value of this debt was $ 1,420.3 million and $ 1,417.9 million at March 31, 2023 and December 31, 2022, respectively.

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

The fair value of the Company’s long-term fixed-rate debt, based on Level 2 inputs (quoted market prices), was $ 1,361.3 million and $ 1,353.5 million at June 30, 2023 and December 31, 2022, respectively.

The carrying value of this debt was $ 1,421.7 million and $ 1,417.9 million at June 30, 2023 and December 31, 2022, respectively.

The difference between fair value and carrying value primarily reflects the net impact of changes in prevailing interest rates and credit spreads since the fixed-rate debt was issued.

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

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dollar and the Euro.

The net impact for the three months ended March 31, 2023, respectively, was a loss of $ 0.7 million to accumulated comprehensive (loss) income with a corresponding offset to other income (expense) which partially offsets the impact of the foreign currency adjustment on the 2027 Notes.

The net impact for the three and six months ended June 30, 2023, respectively, was a loss of $ 0.4 million and $ 1.1 million to accumulated comprehensive (loss) income with a corresponding offset to other income (expense), which partially offsets the impact of the foreign currency adjustment on the 2027 Notes.

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.

2 unchanged sentences

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

As of March 31, 2023 and December 31, 2022, the Company had $ 674.0 million and $ 635.6 million, respectively, of outstanding foreign currency forward contracts at notional value.

As of June 30, 2023 and December 31, 2022, the Company had $ 573.1 million and $ 635.6 million, respectively, of outstanding foreign currency forward contracts at notional value.

Refer to Note 19 - Fair Value for the fair value disclosure of derivative financial instruments.

3 unchanged sentences

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

The Company hedges portions of its forecasted cash flows denominated in foreign currencies with forward contracts.

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

The Company hedges portions of its forecasted cash flows denominated in certain foreign currencies with forward contracts.

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

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

As of March 31, 2023 and December 31, 2022, the Company had $ 79.7 million and $ 82.3 million, respectively, of outstanding foreign currency forward contracts at notional value that were classified as cash flow hedges.

As of June 30, 2023 and December 31, 2022, the Company had $ 74.8 million and $ 82.3 million, respectively, of outstanding foreign currency forward contracts at notional value that were classified as cash flow hedges.

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

4 unchanged sentences

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

As of March 31, 2023 and December 31, 2022, the Company had $ 594.3 million and $ 553.3 million, respectively, of outstanding foreign currency forward contracts at notional value that were not d esignated as hedging instruments.

The following table presents the impact of derivative instruments not designated as hedging instruments for the three months ended March 31, 2023 and 2022, respectively, and the related location within the Consolidated Statements of Income:

As of June 30, 2023 and December 31, 2022, the Company had $ 498.3 million and $ 553.3 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, 2023 and 2022, 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

Derivatives not designated as hedging instruments:

Location of gain or (loss) recognized in income 2023 2022 2023 2022

Foreign currency forward contracts Other income, net $ ( 2.6 ) $ ( 1.0 )

Foreign currency forward contracts Other expense, net $ ( 13.9 ) $ ( 6.0 ) $ ( 16.5 ) $ ( 7.0 )

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