What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-04-30 compared with 2023-11-01 · 185 added, 433 removed, 553 unchanged (53% of the section changed)

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

(Dollars in millions, except per share data)

8 unchanged sentences

Non-service pension and other postretirement (expense) income ( 1.0 ) 0.1

Other income, net 0.4 2.3 5.8 1.4

Other (expense) income, net ( 0.9 ) 3.1

Income Before Income Taxes 153.3 168.2

10 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

(Dollars in millions)

Net Income $ 110.6 $ 125.7

Other comprehensive loss, net of tax:

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments ( 50.7 ) 27.7

1 unchanged sentence

Change in fair value of derivative financial instruments 1.1 ( 0.8 )

Other comprehensive loss, net of tax ( 64.5 ) ( 136.4 ) ( 68.9 ) ( 270.8 )

Comprehensive income (loss), net of tax 26.4 ( 46.0 ) 277.2 47.1

Other comprehensive (loss) income, net of tax ( 51.1 ) 25.4

Comprehensive income, net of tax 59.5 151.1

comprehensive income attributable to noncontrolling interest 6.7 3.7

Comprehensive income (loss) attributable to The Timken Company $ 25.2 $ ( 46.1 ) $ 268.3 $ 44.2

Comprehensive income attributable to The Timken Company $ 52.8 $ 147.4

See accompanying Notes to the Consolidated Financial Statements.

Consolidated Balance Sheets

(Dollars in millions) September 30,

(Dollars in millions) March 31,

2024 December 31,

11 unchanged sentences

Goodwill 1,352.9 1,369.6

Other intangible assets 935.3 765.3

Other intangible assets, net 990.1 1,031.4

Operating lease assets 122.8 119.7

39 unchanged sentences

Consolidated Statements of Cash Flows

Nine Months Ended

September 30,

Three Months Ended

(Dollars in millions)

7 unchanged sentences

Gain on divestitures — ( 4.0 )

Deferred income tax provision 3.4 4.1

Deferred income tax (benefit) provision ( 4.3 ) 2.8

Stock-based compensation expense 4.5 11.0

13 unchanged sentences

Acquisitions, net of cash acquired ( 0.2 ) ( 29.2 )

Proceeds from disposal of property, plant and equipment 1.7 3.3

Proceeds from divestitures, net of cash divested — 5.7

11 unchanged sentences

Payments on long-term debt ( 196.9 ) ( 82.7 )

Deferred financing costs ( 0.5 ) ( 3.5 )

Short-term debt activity, net 2.0 ( 8.1 )

Noncontrolling interest dividends paid ( 0.6 ) ( 0.5 )

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

Net Cash Provided by Financing Activities 235.6 88.5

Net Cash Used in Financing Activities ( 15.0 ) ( 17.5 )

Effect of exchange rate changes on cash ( 6.8 ) 1.8

Increase in Cash, Cash Equivalents and Restricted Cash 34.4 43.7

Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash 3.0 ( 1.6 )

Cash, cash equivalents and restricted cash at beginning of year 419.3 340.7

8 unchanged sentences

For further information, refer to the Consolidated Financial Statements and accompanying Notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

The Company previously classified intangible asset amortization expense within cost of products sold in the Company's Consolidated Statements of Income.

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 and nine months ended September 30, 2022.

Note 2 - Significant Accounting Policies

1 unchanged sentence

Recent Accounting Pronouncements:

New Accounting Guidance Adopted:

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

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

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

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

New Accounting Guidance Issued and Not Yet Adopted:

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 40).

ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

The amendments in this update require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold.

The amendments require that all entities disclose on an annual basis the amount of income taxes paid disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold.

For public entities, the new guidance is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted.

Refer to Note 12 - Supply Chain Financing in the Notes to the Consolidated Financial Statements for additional information.

The Company is currently evaluating the impact of adopting this guidance.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280).

ASU 2023-07 requires that a public entity disclose:

(1) on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss;

(2) on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition;

and (3) the title and position of the CODM and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources.

The other segment items category is the difference between segment revenue less the segment expenses disclosed and each reported measure of segment profit or loss.

For public entities, the new guidance is effective for annual periods beginning after December 15, 2023.

Early adoption is permitted.

The Company is currently evaluating the impact of adopting this guidance.

Note 3 - Acquisitions and Divestitures

Acquisitions:

During the first nine months of 2023, the Company completed four acquisitions.

During 2023, Timken completed six acquisitions, which enhanced the Company's capabilities and product portfolio.

On December 20, 2023, the Company completed the acquisition of 100 % of the capital stock of Lagersmit Holding B.V.

("Lagersmit"), a Netherlands-based manufacturer of highly engineered sealing solutions for marine, dredging, water, tidal energy and other industrial applications.

On November 1, 2023, the Company acquired Engineered Solutions Group ("iMECH").

The Company acquired 100 % of the capital stock in the United States and substantially all of the assets in Canada.

iMECH manufactures thrust bearings, radial bearings, specialty coatings and other components primarily used in the energy industry.

iMECH has facilities in Houston, Texas and Alberta, Canada.

On September 29, 2023, the Company acquired 100 % of the capital stock of Rosa Sistemi S.p.A.

("Rosa"), a European designer and manufacturer of roller guideways, linear bearings, customized linear systems and actuators, commercialized ball guideways and precision ball screws.

Rosa employs approximately 65 people and has its headquarters, R&D and high-precision manufacturing facility in Milan, Italy.

Rosa expects 2023 revenue to be approximately $ 15 million.

Results for Rosa will be reported in the Industrial Motion segment.

Rosa has its headquarters, R&D and high-precision manufacturing facility in Milan, Italy.

On September 1, 2023, the Company acquired 100 % of the capital stock of D-C Filtration Holdings Corp.

("Des-Case"), a Tennessee-based manufacturer of specialty filtration products for industrial lubricants.

Des-Case has manufacturing facilities in Tennessee and the Netherlands and employs approximately 120 people.

Des-Case expects 2023 revenue to be approximately $ 40 million.

Results for Des-Case are reported in the Industrial Motion segment.

Des-Case has manufacturing facilities in Tennessee and the Netherlands.

On April 4, 2023, the Company acquired 100 % of the capital stock of 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.

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

Nadella reported revenue of approximately $ 107 million in 2022.

Results for Nadella are reported in the Industrial Motion segment.

Based in Italy, Nadella operates manufacturing facilities in Europe and China.

On January 31, 2023, the Company acquired substantially all of 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.

ARB employs approximately 190 people and reported revenue of approximately $ 35 million in 2022.

Results for ARB are reported in the Engineered Bearings segment.

The total purchase price for these acquisitions was $ 466.9 million, net of cash acquired of $ 24.3 million.

The Company also assumed $ 11.7 million of long-term debt in conjunction with the acquisition of Nadella.

The Company incurred acquisition-related costs of $ 3.7 million to complete these acquisitions.

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

Initial Purchase

Price Allocation

The total purchase price for these six acquisitions was $ 641.2 million (including working capital adjustments paid in 2024), net of cash acquired of $ 30.6 million.

Results for Lagersmit, Rosa, Des-Case and Nadella are reported in the Industrial Motion segment, and results for iMECH and ARB are reported in the Engineered Bearings segment.

The Company incurred acquisition-related costs of $ 6.5 million in total to complete these six acquisitions in 2023.

Note 3 - Acquisitions and Divestitures (continued)

The following table presents the updated purchase price allocation at fair value, net of cash acquired, for the 2023 acquisitions, as of December 31, 2023 and March 31, 2024:

Purchase Price Allocation at December 31, 2023 2024

Adjustments Updated Purchase Price Allocation at March 31, 2024

Accounts receivable $ 44.7 $ ( 0.2 ) $ 44.5

5 unchanged sentences

Other intangible assets 306.7 ( 6.3 ) 300.4

Other non-current assets 6.3

Other assets 6.7 — 6.7

Total assets acquired $ 815.5 $ ( 1.9 ) $ 813.6

5 unchanged sentences

Long-term debt 6.0 — 6.0

Accrued pension benefits 3.6 — 3.6

Long-term operating lease liabilities 7.0 — 7.0

2 unchanged sentences

Total liabilities assumed $ 169.3 $ ( 2.1 ) $ 167.2

Noncontrolling interest acquired 5.2 — 5.2

Net assets acquired $ 641.0 $ 0.2 $ 641.2

Note 3 - Acquisitions and Divestitures (continued)

In determining the fair value of the amounts above related to Des-Case and Rosa, the Company utilized a benchmarking approach based on the Company’s prior acquisitions and similar industry acquisitions to determine the preliminary fair values for identified intangible assets.

Upon completion of the final fair value assessment, the fair values of the assets acquired, liabilities assumed and resulting goodwill may differ materially from the preliminary assessment.

Any changes to the initial estimates of the fair value of the assets acquired and liabilities assumed will be recorded to those assets and liabilities and residual amounts will be allocated to goodwill.

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

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

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

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

The purchase price allocation for Rosa and Des-Case are preliminary due to the proximity of the acquisition date to September 30, 2023, and as a result no elements of the purchase price allocation have been finalized.

The purchase price allocation for Nadella is preliminary with respect to most assets acquired and liabilities assumed.

The purchase price allocation for ARB is substantially complete.

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.

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

2 unchanged sentences

Customer relationships 202.7 14 years

Non-compete agreements 1.0 3 years

Capitalized software 0.6 2 years

Total intangible assets $ 300.4

On November 4, 2022, the Company completed the acquisition of GGB Bearing Technology ("GGB"), a global leader in premium engineered metal-polymer plain bearings, for $ 300.3 million, net of cash acquired of $ 19.8 million.

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

GGB's products are used mainly in industrial applications, including pumps and compressors, HVAC, off-highway, energy, material handling and aerospace.

With manufacturing facilities across the United States, Europe and China, GGB employs approximately 900 people and has a global engineering, distribution and sales footprint.

Results for GGB are reported in the Engineered Bearings segment.

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

("Spinea"), a European technology leader and manufacturer of highly engineered cycloidal reduction gears and actuators, with 2022 sales of approximately $ 40 million.

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

Spinea is located in Presov, Slovakia.

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 September 30, 2023:

Initial Purchase Price Allocation Adjustments Updated Purchase Price Allocation

Accounts receivable $ 30.6 $ 0.1 $ 30.7

Inventories 52.3 — 52.3

Other current assets 7.6 0.4 8.0

Property, plant and equipment 153.6 ( 4.9 ) 148.7

Goodwill 106.9 0.7 107.6

Other intangible assets 182.6 ( 0.6 ) 182.0

Other assets 12.1 ( 4.8 ) 7.3

Total assets acquired $ 545.7 $ ( 9.1 ) $ 536.6

Accounts payable, trade $ 16.8 $ ( 0.6 ) $ 16.2

Salaries, wages and benefits 11.8 0.1 11.9

Income taxes payable 3.2 — 3.2

Other current liabilities 7.0 ( 1.0 ) 6.0

Accrued pension benefits 3.2 0.3 3.5

Deferred income taxes 30.0 ( 6.0 ) 24.0

Other non-current liabilities 20.0 0.3 20.3

Total liabilities assumed $ 92.0 $ ( 6.9 ) $ 85.1

Net assets acquired $ 453.7 $ ( 2.2 ) $ 451.5

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

The purchase price allocation for GGB is substantially complete with only minor adjustments expected.

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.

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

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

As a result, the Company utilized third-party valuation specialists to assist in determining the fair value of certain assets.

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 purchase price allocation for the 2023 acquisitions as of the dates noted above.

This purchase price allocation, including the residual amount allocated to goodwill, is based on preliminary information in most cases 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.

The purchase price allocations for Lagersmit, iMECH, Rosa and Des-Case are preliminary.

The purchase price allocation for Nadella is substantially complete.

The purchase price allocation for ARB is complete.

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.

Divestitures:

On September 20, 2023, the Company entered into a definitive agreement to sell Jiangsu TWB Bearings Co., Ltd.

During the third quarter of 2023, the business met the held for sale criteria, and the Company reclassified its assets and liabilities accordingly.

Assets held for sale of $ 16.6 million are included in other current assets, and liabilities held for sale of $ 7.3 million are included in other current liabilities, on the Consolidated Balance Sheet.

As a result of the carrying value of the legal entity exceeding the estimated sales price less costs to sell, the Company recorded an impairment charge of $ 1.0 million for the three months ended September 30, 2023.

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

The sale of TWB was completed on October 16, 2023.

Operating results of this legal entity are included the Engineered Bearings segment.

Note 3 - Acquisitions and Divestitures (continued)

On February 28, 2023, the Company completed the sale of all of its membership interests in S.E.

3 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 of $ 1.2 million due to the payment of a working capital adjustment.

During the three months ended September 30, 2022, the ADS business met the held for sale criteria, and the Company recorded impairment charges of $ 29.3 million in advance of the sale as a result of the carrying value of the business exceeding the estimated sales price less costs to sell.

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

Timken Russia had net sales of $ 4.8 million in 2022.

The results of operations of Timken Russia were reported in the Engineered Bearings segment.

The Company recorded proceeds of $ 1.0 million, net of cash divested of $ 5.3 million, and recognized a loss of $ 2.1 million on the sale of the business during the three months ending September 30, 2022.

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

Note 4 - Segment Information

The primary measurement used by management to measure the financial performance of each segment is earnings before interest, taxes, depreciation and amortization ("EBITDA").

Effective January 1, 2023, the Company began operating under new reportable segments.

The Company’s two reportable segments are Engineered Bearings and Industrial Motion.

Segment results for 2022 have been revised to conform to the 2023 presentation of segments.

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Engineered Bearings $ 802.5 $ 900.7

6 unchanged sentences

Unallocated corporate expense ( 18.0 ) ( 17.7 )

Corporate pension and other postretirement benefit

related (expense) income (1)

( 0.2 ) ( 1.0 ) 1.7 ( 15.2 )

Corporate pension and other postretirement benefit related income (1)

Depreciation and amortization ( 55.3 ) ( 45.6 )

2 unchanged sentences

Income before income taxes $ 153.3 $ 168.2

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

September 30,

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

2024 December 31, 2023

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 and nine months ended September 30, 2023 and 2022:

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, 2024 and 2023:

Three Months Ended Three Months Ended

September 30, 2023 September 30, 2022

Engineered Bearings Industrial Motion Total Engineered Bearings Industrial Motion Total

United States $ 307.4 $ 190.6 $ 498.0 $ 310.4 $ 205.3 $ 515.7

Americas excluding the United States 96.1 26.5 122.6 98.4 25.3 123.7

Europe / Middle East / Africa 158.6 125.9 284.5 129.1 100.9 230.0

China 110.7 18.3 129.0 143.0 16.8 159.8

Asia-Pacific excluding China 102.8 5.8 108.6 98.8 8.4 107.2

Net sales $ 775.6 $ 367.1 $ 1,142.7 $ 779.7 $ 356.7 $ 1,136.4

Nine Months Ended Nine Months Ended

September 30, 2023 September 30, 2022

March 31, 2024 March 31, 2023

Engineered Bearings Industrial Motion Total Engineered Bearings Industrial Motion Total

6 unchanged sentences

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

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

Nine Months Ended Nine Months Ended

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

The following table presents the approximate percent of revenue by sales channel for the three months ended March 31, 2024 and 2023:

Three Months Ended Three Months Ended

Revenue by sales channel March 31, 2024 March 31, 2023

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 nine months ended September 30, 2023 and September 30, 2022, approximately 9 % of total net sales were recognized on an over-time basis because of the continuous transfer of control to the customer, with the remainder recognized as of a point in time.

Approximately 4 % of total net sales represented service revenue during the nine months ended September 30, 2023 and September 30, 2022.

Finally, business with the United States ("U.S.") government or its contractors represented approximately 6 % and 7 % of total net sales during the nine months ended September 30, 2023 and September 30, 2022, respectively.

During the three months ended March 31, 2024 and March 31, 2023, approximately 7 % and 8 %, respectively of total net sales were recognized on an over-time basis because of the continuous transfer of control to the customer, with the remainder recognized as of a point in time.

Approximately 5 % and 4 % of total net sales represented service revenue during the three months ended March 31, 2024 and March 31, 2023, respectively.

Finally, business with the United States ("U.S.") government or its contractors represented approximately 6 % and 5 % of total net sales during the three months ended March 31, 2024 and March 31, 2023, respectively.

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 $ 202.0 million at September 30, 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 $ 153.0 million at March 31, 2024.

Note 5 - Revenue (continued)

Unbilled Receivables:

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

September 30,

The following table contains a rollforward of unbilled receivables for the three months ended March 31, 2024 and the twelve months ended December 31, 2023:

2024 December 31,

2 unchanged sentences

amounts billed to customers ( 88.4 ) ( 383.5 )

unbilled receivables reclassified to assets held for sale — ( 26.3 )

Ending balance $ 134.8 $ 144.5

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

There were no impairment losses recorded on unbilled receivables for the three months ended March 31, 2024 and the twelve months ended December 31, 2023.

Deferred Revenue:

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

September 30,

The following table contains a rollforward of deferred revenue for the three months ended March 31, 2024 and the twelve months ended December 31, 2023:

2024 December 31,

Beginning balance, January 1 $ 45.4 $ 54.3

Acquisitions — 1.4

Revenue (cash) received in advance 36.2 165.2

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Provision for income taxes $ 42.7 $ 42.5

Effective tax rate 27.9 % 25.3 %

Income tax expense for the three and nine months ended September 30, 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 months ended March 31, 2024 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.

1 unchanged sentence

jurisdictions with relatively higher tax rates.

The effective tax rate of 26.8 % for the three months ended September 30, 2023 was higher than the effective tax rate for the three months ended September 30, 2022 primarily due to an increase in the mix of earnings in non-U.S.

jurisdictions with relatively higher tax rates and the net unfavorable impact of discrete tax items in comparison to the year ago period.

The effective tax rate of 26.2 % for the nine months ended September 30, 2023 was higher than the effective tax rate for the nine months ended September 30, 2022 primarily due to an increase in the mix of earnings in non-U.S.

jurisdictions with relatively higher tax rates, partially offset by the net favorable impact of discrete tax items in comparison to the year ago period.

The effective tax rate of 27.9 % for the three months ended March 31, 2024 was higher than the effective tax rate for the three months ended March 31, 2023 primarily due to an increase in the mix of earnings in non-U.S.

jurisdictions with relatively higher tax rates and the net favorable impact of discrete items in the year ago period.

On December 20, 2021, the Organization for Economic Co-operation and Development (“OECD”) released Pillar Two model rules defining the global minimum tax, which calls for the taxation of large corporations at a minimum rate of 15%.

Certain jurisdictions, in which the Company operates, enacted, or announced their intention to enact, legislation consistent with one or more OECD Pillar Two model rules.

The model rules include minimum domestic top-up taxes, income inclusion rules, and undertaxed profit rules all aimed to ensure that multinational companies pay a minimum effective corporate tax rate of 15% in each jurisdiction in which they operate, with some rules effective in 2024.

Management does not expect Pillar Two legislation to materially impact the Company's annual effective tax rate in 2024.

Note 7 - Earnings Per Share

The following table sets forth the reconciliation of the numerator and the denominator of basic earnings per share and diluted earnings per share for the three and nine months ended September 30, 2023 and 2022:

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, 2024 and 2023:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net income attributable to The Timken Company $ 103.5 $ 122.3

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 and nine months ended September 30, 2023 and 2022.

There were no antidilutive stock options outstanding during the three months ended March 31, 2024 and 2023.

Note 8 - Inventories

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

September 30,

The components of inventories at March 31, 2024 and December 31, 2023 were as follows:

2024 December 31,

11 unchanged sentences

inventories are valued on the FIFO method.

The LIFO reserve at September 30, 2023 and December 31, 2022 was $ 231.9 million and $ 235.4 million, respectively.

The LIFO reserve at March 31, 2024 and December 31, 2023 was $ 234.7 million and $ 232.1 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.

4 unchanged sentences

Furthermore, goodwill and indefinite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

In connection with the adoption of new reportable segments, goodwill was reallocated to new reporting units based on relative fair value at the reporting unit level.

The Company reviews goodwill for impairment at the reporting unit level.

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 nine months ended September 30, 2023 were as follows:

During the first three months of 2023, the Company reviewed goodwill for impairment for its reporting units due to the change in reporting segments that went into effect January 1, 2023.

The Company utilized both an income approach and a market approach in testing goodwill for impairment.

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.

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

The changes in the carrying amount of goodwill for the three months ended March 31, 2024 were as follows:

Engineered Bearings Industrial Motion Total

Beginning balance $ 692.3 $ 677.3 $ 1,369.6

Acquisitions 0.1 207.4 207.5

Impairment loss — ( 28.3 ) ( 28.3 )

Foreign currency translation adjustments and other changes 3.5 ( 20.2 ) ( 16.7 )

Ending balance $ 695.8 $ 657.1 $ 1,352.9

During the first quarter of 2023, the Company reviewed goodwill for impairment for its reporting units due to the change in reporting segments that went into effect January 1, 2023.

The Company utilizes both an income approach and a market approach in testing goodwill for impairment.

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 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 September 30, 2023 and December 31, 2022:

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

The following table displays intangible assets as of March 31, 2024 and December 31, 2023:

Balance at March 31, 2024 Balance at December 31, 2023

Amount Accumulated

15 unchanged sentences

Total intangible assets $ 1,622.0 $ ( 631.9 ) $ 990.1 $ 1,647.8 $ ( 616.4 ) $ 1,031.4

Amortization expense for intangible assets was $ 53.1 million and $ 37.4 million for the nine months ended September 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.

Amortization expense for intangible assets was $ 21.6 million and $ 15.1 million for the three months ended March 31, 2024 and 2023, respectively.

Amortization expense for intangible assets is projected to be approximately $ 80 million in 2024;

4 unchanged sentences

Note 10 - Other Current Liabilities

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

(Dollars in millions) September 30,

The following table displays other current liabilities as of March 31, 2024 and December 31, 2023:

(Dollars in millions) March 31,

2024 December 31,

1 unchanged sentence

Deferred revenue 51.1 45.4

Product warranty 22.0 23.5

Operating lease liabilities 25.8 25.9

Current derivative liability 24.1 19.8

Taxes other than income and payroll taxes 24.3 17.8

Freight and duties 14.9 21.7

Interest 17.7 16.4

Product warranty 16.3 15.2

Freight and duties 15.4 13.4

Professional fees 13.2 12.5

Current derivative liability 10.2 11.4

Restructuring 3.5 5.8

2 unchanged sentences

Note 11 - Financing Arrangements

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

September 30,

Short-term debt at March 31, 2024 and December 31, 2023 was as follows:

2024 December 31,

Variable-rate Term Loan (1) , maturing on August 16, 2024, with an interest rate of 4.95 % at September 30, 2023

Borrowings under lines of credit for certain of the Company’s foreign subsidiaries with various banks with interest rates ranging from 4.45 % to 7.33 % at September 30, 2023 and 2.38 % to 5.50 % at December 31, 2022

Variable-rate Term Loan (1) , maturing on August 16, 2024, with an interest rate of 5.10 % at March 31, 2024 and 5.11 % at December 31, 2023

$ 215.8 $ 220.8

Borrowings under lines of credit for certain of the Company’s foreign subsidiaries with various banks with interest rates ranging from 4.51 % to 5.51 % at March 31, 2024 and 4.35 % to 7.33 % at December 31, 2023

Short-term debt $ 242.6 $ 246.2

On August 16, 2023, the Company entered into a € 200 million variable-rate term loan ("2024 Term Loan"), maturing on August 16, 2024.

Proceeds from the 2024 Term Loan were used to repay borrowings on the Senior Credit Facility and Accounts Receivable Facility, as well as for general corporate purposes.

Lines of credit for certain of the Company's foreign subsidiaries provide for short-term borrowings up to $ 226.9 million in the aggregate.

The Company currently intends to refinance the 2024 Term Loan prior to its maturity.

Lines of credit for certain of the Company's foreign subsidiaries provide for short-term borrowings.

Most of these lines of credit are uncommitted.

At September 30, 2023, the Company’s foreign subsidiaries had borrowings outstanding of $ 30.1 million and bank guarantees of $ 2.3 million, which reduced the aggregate availability under these facilities to $ 194.5 million.

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

September 30,

At March 31, 2024, the Company’s foreign subsidiaries had borrowings outstanding of $ 26.8 million and bank guarantees of $ 1.7 million.

Long-term debt at March 31, 2024 and December 31, 2023 was as follows:

2024 December 31,

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

Dollar of 6.42 % and Euro of 4.51 % at September 30, 2023 and U.S.

Dollar of 6.43 % and Euro of 4.86 % at March 31, 2024 and U.S.

Dollar of 6.48 % and Euro of 4.85 % at December 31, 2023

Variable-rate Accounts Receivable Facility with an interest rate of 6.29 % at September 30, 2023 and 5.01 % at December 31, 2022

Variable-rate Term Loan (1) , maturing on December 5, 2027, with an interest rate of 6.54 % at September 30, 2023 and 5.55 % at December 31, 2022

$ 251.1 $ 247.4

Variable-rate Accounts Receivable Facility with an interest rate of 6.30 % at March 31, 2024 and 6.42 % at December 31, 2023

Variable-rate Term Loan (1) , maturing on December 5, 2027, with an interest rate of 6.56 % at March 31, 2024 and 6.58 % at December 31, 2023

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

13 unchanged sentences

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

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

As of September 30, 2023, there were $ 78.0 million in outstanding borrowings under the Accounts Receivable Facility, which reduced the availability under this facility to $ 22.0 million.

however, availability under the Accounts Receivable Facility was not reduced by any such borrowing base limitations at March 31, 2024.

As of March 31, 2024, there were $ 75.0 million in outstanding borrowings under the Accounts Receivable Facility, which reduced the availability under this facility to $ 25.0 million.

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.

On December 5, 2022, the Company entered into the Fifth Amended and Restated Credit Agreement ("Credit Agreement"), which is comprised of a $ 750 million unsecured revolving credit facility ("Senior Credit Facility") and a $ 400 million unsecured term loan facility ("2027 Term Loan") that each mature on December 5, 2027.

The Credit Agreement amended and restated the Company's previous revolving credit agreement that was set to mature on June 25, 2024, and replaced the $ 350.0 million term loan that was set to mature on September 11, 2023 ("2023 Term Loan").

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

At September 30, 2023, the Company had $ 49.1 million of outstanding borrowings and $ 2.0 million of letters of credit under the Senior Credit Facility, which reduced the availability under this facility to $ 698.9 million.

The interest rates under the Credit Agreement are based on Secured Overnight Financing Rate ("SOFR").

At March 31, 2024, the Company had $ 251.1 million of outstanding borrowings and $ 0.1 million of letters of credit under the Senior Credit Facility, which reduced the availability under this facility to $ 498.8 million.

The Credit Agreement has two financial covenants:

a consolidated leverage ratio and a consolidated interest coverage ratio.

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 Company's previous senior credit facility and the Accounts Receivable Facility outstanding at the time of issuance.

At September 30, 2023, the Company was in full compliance with all applicable covenants on its outstanding debt.

The Company has outstanding fixed-rate unsecured notes ("2024 Notes") in the aggregate principal amount of $ 350 million with an interest rate of 3.875 %, maturing on September 1, 2024.

The Company currently intends to refinance the 2024 Notes prior to their maturity.

At March 31, 2024, 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 and certain indirect taxes.

At September 30, 2023, outstanding letters of credit totaled $ 56.6 million, most with expiration dates within 12 months.

The maturities of long-term debt (including $ 7.9 million of finance leases) subsequent to September 30, 2023 are as follows:

At March 31, 2024, outstanding letters of credit totaled $ 59.5 million, most with expiration dates within 12 months.

The maturities of long-term debt (including $ 6.0 million of finance leases) subsequent to March 31, 2024 are as follows:

Thereafter 355.1

The table above excludes $ 10.1 million of unamortized premiums and fees that are netted against long-term debt at September 30, 2023.

The table above excludes $ 8.9 million of unamortized premiums and fees that are netted against long-term debt at March 31, 2024.

Note 12 - Supply Chain Financing

The Company offers a supplier finance program with two different financial institutions where suppliers may receive early payment from the financial institutions on invoices issued to the Company.

The Company and each financial institution entered into arrangements providing for the Company to pay the financial institution per the terms of any supplier invoice paid early under the program and to pay an annual fee for the supplier finance platform subscription and related support.

The Company and each financial institution entered into arrangements whereby the Company pays the financial institution per the terms of any supplier invoice paid early under the program and pays an annual fee for the supplier finance platform subscription and related support.

The Company or the financial institutions may terminate participation in the program with 90 days’ written notice.

3 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 nine months ended September 30, 2023:

September 30,

The following table is a rollforward of the outstanding obligations for the Company’s supplier finance program for the three months ended March 31, 2024 and twelve months ended December 31, 2023:

2024 December 31,

Confirmed obligations outstanding, January 1 $ 21.3 $ 14.4

2 unchanged sentences

Confirmed obligations outstanding, ending balance $ 25.8 $ 21.3

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

The obligations outstanding at March 31, 2024 and December 31, 2023 were included in accounts payable, trade on the Consolidated Balance Sheet.

Note 13 - Contingencies

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

Governmental authorities in the United States and the European Union are increasingly focused on regulating per- and polyfluoroalkyl substances (“PFAS”).

PFAS regulations are applicable to portions of the Company's products, and future conditions may develop, arise or be discovered that create environmental compliance or remediation liabilities at certain of its facilities.

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.

8 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 September 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.

The Company had total environmental accruals of $ 4.6 million and $ 4.7 million for various known environmental matters that are probable and reasonably estimable at March 31, 2024 and December 31, 2023, respectively, which includes the Lovejoy matter described above.

These accruals were recorded based upon the best estimate of costs to be incurred considering 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.

The ultimate resolution of these matters could result in actual costs that exceed amounts accrued.

Product Warranties:

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 $ 22.0 million and $ 23.5 million at September 30, 2023 and December 31, 2022, respectively.

The product warranty liability included in "Other current liabilities" on the Consolidated Balance Sheets was $ 16.3 million and $ 15.2 million at March 31, 2024 and December 31, 2023, respectively.

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

1 unchanged sentence

Accrual estimates are based on actual claims and expected trends that continue to mature.

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

The Company continues to evaluate claims raised by certain customers with respect to the performance of bearings sold into the automotive and wind energy sectors.

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 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 nine months ended September 30, 2023 and twelve months ended December 31, 2022:

September 30,

The following is a rollforward of the consolidated product warranty accrual for the three months ended March 31, 2024 and twelve months ended December 31, 2023:

2024 December 31,

4 unchanged sentences

Note 14 - Equity

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

The Timken Company Shareholders

Capital Other

Capital Retained Earnings Accumulated

Comprehensive

Loss Treasury

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

Net income 90.9 87.9 3.0

Foreign currency translation adjustment ( 65.1 ) ( 63.3 ) ( 1.8 )

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 2.0 2.0

Dividends declared to noncontrolling interest ( 0.6 ) ( 0.6 )

Dividends - $ 0.33 per share

( 23.4 ) ( 23.4 )

Stock-based compensation expense 5.8 5.8

Stock purchased at fair market value ( 63.9 ) ( 63.9 )

Stock option exercise activity 4.1 4.1

Payments related to tax withholding for

stock-based compensation ( 1.3 ) ( 1.3 )

Balance at September 30, 2023 $ 2,597.1 $ 40.7 $ 1,068.3 $ 2,196.7 $ ( 240.9 ) $ ( 587.0 ) $ 119.3

The following tables present the changes in the components of equity for the three months ended March 31, 2024 and 2023, respectively:

The Timken Company Shareholders

14 unchanged sentences

( 24.5 ) ( 24.5 )

Dividends declared to noncontrolling interest ( 0.6 ) ( 0.6 )

Sale of shares of Timken India Limited 229.0 194.5 8.1 26.4

Stock-based compensation expense 4.5 4.5

Stock purchased at fair market value ( 218.4 ) ( 218.4 )

Stock option exercise activity 2.0 2.0

1 unchanged sentence

stock-based compensation ( 8.9 ) ( 8.9 )

Balance at September 30, 2023 $ 2,597.1 $ 40.7 $ 1,068.3 $ 2,196.7 $ ( 240.9 ) $ ( 587.0 ) $ 119.3

On June 20, 2023, the Company completed the sale of 7.6 million shares of Timken India Limited (“TIL”), a publicly-traded 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)

Balance at March 31, 2024 $ 2,735.0 $ 40.7 $ 1,083.0 $ 2,311.2 $ ( 197.6 ) $ ( 629.0 ) $ 126.7

The Timken Company Shareholders

3 unchanged sentences

Loss Treasury

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

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

Net income 125.7 122.3 3.4

6 unchanged sentences

instruments, net of reclassifications ( 0.8 ) ( 0.8 )

Dividends paid to noncontrolling interest ( 0.5 ) ( 0.5 )

Dividends - $ 0.31 per share

3 unchanged sentences

Stock option exercise activity 12.7 12.7

Restricted share activity — 3.8 ( 3.8 )

Payments related to tax withholding for

stock-based compensation ( 13.8 ) ( 13.8 )

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

The Timken Company Shareholders

Capital Other

Capital Retained Earnings Accumulated

Comprehensive Loss Treasury

Balance at December 31, 2021 $ 2,377.7 $ 40.7 $ 786.9 $ 1,616.4 $ ( 23.0 ) $ ( 126.1 ) $ 82.8

Net income 317.9 310.2 7.7

Foreign currency translation adjustment ( 272.5 ) ( 267.7 ) ( 4.8 )

Pension and other postretirement liability

adjustments (net of income tax benefit

of $ 1.5 million)

( 4.3 ) ( 4.3 )

Change in fair value of derivative financial

instruments, net of reclassifications 6.0 6.0

Dividends paid to noncontrolling interest ( 0.5 ) ( 0.5 )

Dividends - $ 0.92 per share

( 69.2 ) ( 69.2 )

Stock-based compensation expense 22.3 22.3

Stock purchased at fair market value ( 193.3 ) ( 193.3 )

Stock option exercise activity 4.2 4.2

Restricted share activity — 3.8 ( 3.8 )

Payments related to tax withholding for

stock-based compensation ( 9.5 ) ( 9.5 )

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

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

Note 15 - Impairment and Restructuring Charges

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

For the three months ended September 30, 2023:

Engineered Bearings Industrial Motion Total

Impairment charges $ 4.9 $ — $ 4.9

Severance and related benefit costs 1.6 1.8 3.4

Exit costs 0.4 0.2 0.6

Total $ 6.9 $ 2.0 $ 8.9

For the nine months ended September 30, 2023:

Engineered Bearings Industrial Motion Total

Impairment charges $ 4.9 $ 28.3 $ 33.2

Severance and related benefit costs 3.8 2.5 6.3

Exit costs 0.6 0.2 0.8

Total $ 9.3 $ 31.0 $ 40.3

For the three months ended September 30, 2022:

For the three months ended March 31, 2024:

Engineered Bearings Industrial Motion Total

Impairment charges $ 0.2 $ 29.3 $ 29.5

Severance and related benefit costs $ 0.7 $ 1.3 $ 2.0

1 unchanged sentence

Total $ 1.0 $ 1.3 $ 2.3

For the nine months ended September 30, 2022:

For the three months ended March 31, 2023:

Engineered Bearings Industrial Motion Total

1 unchanged sentence

Severance and related benefit costs 0.7 ( 0.1 ) 0.6

Exit costs 1.1 0.1 1.2

Total $ 0.7 $ 28.2 $ 28.9

3 unchanged sentences

On January 16, 2023, the Company announced the closure of its bearing plant in Gaffney, South Carolina.

The Company expects to transfer its remaining operations to other bearing manufacturing facilities.

The closure of this facility is expected to occur by the end of the fourth quarter of 2023 and is expected to affect approximately 225 employees.

The Company has transferred its remaining operations to other bearing manufacturing facilities.

The facility ceased operations at the end of the fourth quarter of 2023, which affected approximately 225 employees.

The Company expects to incur approximately $ 12 million to $ 14 million of pretax costs in total related to this closure.

During the three and nine months ended September 30, 2023, the Company recorded severance and related benefits of $ 1.4 million and $ 3.1 million, respectively, related to this closure.

The Company has incurred cumulative pretax costs related to this closure of $ 10.2 million as of September 30, 2023, including rationalization costs recorded in cost of products sold.

Note 15 - Impairment and Restructuring Charges (continued)

As a result of Russia's invasion of Ukraine (and associated sanctions), the Company suspended its operations in Russia in 2022.

During the three and nine months ended September 30, 2023, the Company recorded impairment charges of $ 3.9 million related to certain assets of its joint venture in Russia.

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

The Company continues to evaluate strategic options for its joint venture stake.

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

During the three months ended September 30, 2023, the Company classified TWB as assets held for sale and recorded impairment charges of $ 1.0 million.

The Company completed the sale of TWB on October 16, 2023.

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

The Company transferred its remaining operations to other bearing manufacturing facilities.

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

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

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

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

During the three months ended March 31, 2024, the Company recorded exit costs of $ 0.3 million, 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.

The Company has incurred cumulative pretax costs related to this closure of $ 12.7 million as of March 31, 2024, including rationalization costs recorded in cost of products sold.

In addition, during the three months ended March 31, 2024, the Company recorded severance and related benefits of $ 0.6 million related to one of its bearing facilities in Europe.

Industrial Motion:

During the third quarter of 2022, the Company announced certain organizational changes, which included the appointment of executive leaders for its Engineered Bearings and Industrial Motion product groups.

After evaluating the impact from the organizational changes and related segmentation implications through the balance of 2022, the Company concluded that it would begin operating under two new reportable segments, Engineered Bearings and Industrial Motion, effective January 1, 2023.

On November 30, 2023, the Company announced the closure of its belts manufacturing facility in Fort Scott, Kansas.

The Company expects to transfer its operations to other belts manufacturing facilities.

The closure of this facility is expected to occur by the end of the fourth quarter of 2024 and is expected to affect approximately 155 employees.

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, 2024, the Company recorded severance and related benefits of $ 0.8 million, related to this closure.

The Company has incurred cumulative pretax costs related to this closure of $ 2.5 million as of March 31, 2024, including rationalization costs recorded in cost of products sold.

Effective January 1, 2023, the Company began operating under two new reportable segments, Engineered Bearings and Industrial Motion.

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

1 unchanged sentence

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.

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

The Company subsequently completed the sale of the ADS business on November 1, 2022.

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

This facility was part of the Diamond Chain Company ("Diamond Chain") acquisition completed on April 1, 2019.

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

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 $ 14.5 million as of September 30, 2023, including rationalization costs recorded in cost of products sold.

In addition, during the three and nine months ended September 30, 2023, the Company recorded severance and related benefits of $ 0.8 million and $ 1.1 million, respectively, related to one of its automatic lubrication systems facilities in Europe.

Note 15 - Impairment and Restructuring Charges (continued)

Consolidated Restructuring Accrual:

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

September 30,

The following is a rollforward of the consolidated restructuring accrual for the three months ended March 31, 2024 and twelve months ended December 31, 2023:

2024 December 31,

3 unchanged sentences

Ending balance $ 3.5 $ 5.8

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

The restructuring accrual at March 31, 2024 and December 31, 2023 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 and nine months ended September 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.

The amounts for the three months ended March 31, 2024 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, 2024.

Plans International Plans Total

Three Months Ended

September 30, Three Months Ended

September 30,

2023 2022 2023 2022 2023 2022

Components of net periodic benefit cost (credit):

Service cost $ 0.2 $ 1.6 $ 0.3 $ 0.4 $ 0.5 $ 2.0

Interest cost 4.4 4.7 2.4 1.4 6.8 6.1

Expected return on plan assets ( 2.1 ) ( 4.3 ) ( 2.5 ) ( 2.2 ) ( 4.6 ) ( 6.5 )

Amortization of prior service cost 0.1 0.3 — — 0.1 0.3

Recognition of net actuarial losses 0.2 1.0 — — 0.2 1.0

Net periodic benefit cost (credit) $ 2.8 $ 3.3 $ 0.2 $ ( 0.4 ) $ 3.0 $ 2.9

Plans International Plans Total

Nine Months Ended

September 30, Nine Months Ended

September 30,

March 31, Three Months Ended

2024 2023 2024 2023 2024 2023

4 unchanged sentences

Amortization of prior service cost — — 0.1 0.1 0.1 0.1

Recognition of net actuarial

(gains) losses ( 1.7 ) 15.2 — — ( 1.7 ) 15.2

Recognition of net actuarial gains — ( 0.9 ) — — — ( 0.9 )

Net periodic benefit cost (credit) $ 2.5 $ 1.7 $ 0.7 $ 0.3 $ 3.2 $ 2.0

For the three and nine months ended September 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 ("mark-to-market") loss of $ 0.2 million during the three months ended September 30, 2023 and a mark-to-market gain of $ 1.7 million during the nine months ended September 30, 2023.

For the three and nine months ended September 30, 2022, the Company expected full-year lump sum payments related to new retirees to exceed 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 mark-to-market losses of $ 1.0 million and $ 15.2 million during the three and nine months ended September 30, 2022, respectively.

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

defined 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.

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

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net periodic benefit credit:

Service cost $ 0.1 $ — $ 0.1 $ 0.1

Interest cost $ 0.5 $ 0.5

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 and nine months ended September 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 June 30, 2023 $ ( 227.8 ) $ 47.7 $ 1.9 $ ( 178.2 )

Other comprehensive loss (income) before

reclassifications and income taxes ( 65.1 ) — 2.1 ( 63.0 )

Amounts reclassified from accumulated other

comprehensive (loss) income before income

taxes — ( 1.9 ) 0.8 ( 1.1 )

Income tax benefit (expense) — 0.5 ( 0.9 ) ( 0.4 )

Net current period other comprehensive (loss)

income, net of income taxes ( 65.1 ) ( 1.4 ) 2.0 ( 64.5 )

Noncontrolling interest 1.8 — — 1.8

Net current period other comprehensive (loss)

income, net of income taxes, noncontrolling

interest and sale of shares of Timken India

Limited ( 63.3 ) ( 1.4 ) 2.0 ( 62.7 )

Balance at September 30, 2023 $ ( 291.1 ) $ 46.3 $ 3.9 $ ( 240.9 )

The following tables present details about components of accumulated other comprehensive (loss) income for the three months ended March 31, 2024 and 2023, respectively:

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

Balance at December 31, 2023 $ ( 193.8 ) $ 44.7 $ 2.2 $ ( 146.9 )

Sale of shares of Timken India Limited 8.1 — — 8.1

Other comprehensive loss (income) before

1 unchanged sentence

Amounts reclassified from accumulated other

comprehensive (loss) income before income

taxes — ( 5.9 ) 0.9 ( 5.0 )

Income tax benefit (expense) — 1.5 ( 0.4 ) 1.1

Net current period other comprehensive (loss)

income, net of income taxes ( 65.3 ) ( 4.5 ) 0.9 ( 68.9 )

Noncontrolling interest 1.8 — — 1.8

Net current period other comprehensive (loss)

income, net of income taxes, noncontrolling

interest and sale of shares of Timken India

Limited ( 55.4 ) ( 4.5 ) 0.9 ( 59.0 )

Balance at September 30, 2023 $ ( 291.1 ) $ 46.3 $ 3.9 $ ( 240.9 )

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

Other comprehensive (loss) income before

reclassifications and income taxes ( 136.8 ) 0.3 3.3 ( 133.2 )

Amounts reclassified from accumulated other

comprehensive (loss) income before income

taxes — ( 2.3 ) ( 0.8 ) ( 3.1 )

comprehensive loss before income taxes — ( 2.0 ) ( 0.2 ) ( 2.2 )

Income tax benefit (expense) — 0.5 ( 0.4 ) 0.1

5 unchanged sentences

interest ( 50.3 ) ( 1.5 ) 1.1 ( 50.7 )

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

Balance at March 31, 2024 $ ( 244.1 ) $ 43.2 $ 3.3 $ ( 197.6 )

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 (loss) income before

Other comprehensive income (loss) before

reclassifications and income taxes 27.7 — ( 0.8 ) 26.9

Amounts reclassified from accumulated other

comprehensive (loss) income before income

taxes — ( 6.6 ) ( 2.4 ) ( 9.0 )

Income tax benefit (expense) — 1.5 ( 2.0 ) ( 0.5 )

Net current period other comprehensive (loss)

income, net of income taxes ( 272.5 ) ( 4.3 ) 6.0 ( 270.8 )

comprehensive loss before income taxes — ( 2.0 ) ( 0.3 ) ( 2.3 )

Income tax benefit — 0.5 0.3 0.8

Net current period other comprehensive income

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

Noncontrolling interest ( 0.3 ) — — ( 0.3 )

Net current period other comprehensive (loss)

income, net of income taxes and noncontrolling

Net current period other comprehensive income

(loss), net of income taxes and noncontrolling

interest 27.4 ( 1.5 ) ( 0.8 ) 25.1

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

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

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 September 30, 2023 and December 31, 2022:

September 30, 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 March 31, 2024 and December 31, 2023:

March 31, 2024

Total Level 1 Level 2 Level 3

25 unchanged sentences

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.

During the third quarter of 2023, TWB was reclassified to assets held for sale.

In conjunction with this reclassification, the legal entity, with a carrying value of $ 10.3 million, was written down to $ 9.3 million, which represents its estimated fair value less the cost to sell, resulting in an impairment charge of $ 1.0 million.

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

See Note 3 - Acquisitions and Divestitures for further discussion.

During the third quarter of 2023, property, plant and equipment and leased assets at the Company's joint venture in Russia, with a carrying value of $ 3.9 million, were written down to their estimated fair value, resulting in an impairment charge of $ 3.9 million.

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

No other material assets were measured at fair value on a nonrecurring basis during the nine months ended September 30, 2023 and 2022, respectively.

No other material assets were measured at fair value on a nonrecurring basis during the three months ended March 31, 2024 and 2023, respectively.

Financial Instruments:

2 unchanged sentences

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

The fair value of the Company’s long-term fixed-rate debt, based on Level 2 inputs (quoted market prices), was $ 1,328.3 million and $ 1,353.5 million at September 30, 2023 and December 31, 2022, respectively.

The carrying value of this debt was $ 1,416.5 million and $ 1,417.9 million at September 30, 2023 and December 31, 2022, respectively.

The fair value of the Company’s long-term fixed-rate debt, based on Level 2 inputs (quoted market prices), was $ 1,386.5 million and $ 1,387.7 million at March 31, 2024 and December 31, 2023, respectively.

The carrying value of this debt was $ 1,420.4 million and $ 1,424.3 million at March 31, 2024 and December 31, 2023, 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.

6 unchanged sentences

The Company designates certain foreign currency forward contracts as cash flow hedges of forecasted revenues and certain interest rate hedges as cash flow hedges of fixed-rate borrowings.

On September 8, 2020, the Company entered into a $ 100 million floating-to-fixed rate swap on the 2023 Term Loan, which hedges the change in the 1-month LIBOR rate between October 30, 2020 and September 11, 2023 to a fixed rate.

The Company repaid the LIBOR-based 2023 Term Loan on December 5, 2022 and replaced it with the SOFR-based 2027 Term Loan.

The Company amended the interest rate for the swap from LIBOR to SOFR commencing January 2023.

The Company’s risk management objective is to hedge the risk of changes in the monthly interest expense attributable to changes in the benchmark interest rate.

The swap matured on September 11, 2023.

On September 15, 2020, the Company designated € 54.5 million of its € 150.0 million fixed-rate senior unsecured notes, maturing on September 7, 2027 (the "2027 Notes"), as a hedge against its net investment in one of its European subsidiaries.

1 unchanged sentence

dollar and the Euro.

The net impact for the three and nine months ended September 30, 2023, respectively, was a gain of $ 1.8 million and $ 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 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.

This fixed the 10-year Treasury yield and settled at pricing of the 2032 Notes, resulting in $ 6.5 million of cash proceeds received by the Company.

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

The net impact for the three months ended March 31, 2024 was a gain of $ 1.4 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 does not purchase or hold any derivative financial instruments for trading purposes.

As of September 30, 2023 and December 31, 2022, the Company had $ 699.5 million and $ 635.6 million, respectively, of outstanding foreign currency forward contracts at notional value.

As of March 31, 2024 and December 31, 2023, the Company had $ 579.4 million and $ 591.8 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.

5 unchanged sentences

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

As of September 30, 2023 and December 31, 2022, the Company had $ 67.2 million and $ 82.3 million, respectively, of outstanding foreign currency forward contracts at notional value that were classified as cash flow hedges.

As of March 31, 2024 and December 31, 2023, the Company had $ 69.7 million and $ 73.8 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.

5 unchanged sentences

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

As of September 30, 2023 and December 31, 2022, the Company had $ 632.3 million and $ 553.3 million, respectively, of outstanding foreign currency forward contracts at notional value that were not designated as hedging instruments.

The following table presents the impact of derivative instruments not designated as hedging instruments for the three and nine months ended September 30, 2023 and 2022, respectively, and the related location within the Consolidated Statements of Income:

As of March 31, 2024 and December 31, 2023, the Company had $ 509.7 million and $ 518.0 million, respectively, of outstanding foreign currency forward contracts at notional value that were not designated as hedging instruments.

The following table presents the impact of derivative instruments not designated as hedging instruments for the three months ended March 31, 2024 and 2023, respectively, and the related location within the Consolidated Statements of Income:

Amount of gain or (loss) recognized in income

Three Months Ended

September 30, Nine Months Ended

September 30,

Derivatives not designated as hedging instruments:

1 unchanged sentence

Foreign currency forward contracts Other expense, net $ ( 6.1 ) $ ( 2.6 )

Note 21 - Subsequent Events

On October 12, 2023, the Company reached an agreement to acquire Engineered Solutions Group, also known as Innovative Mechanical Solutions ("iMECH").

iMECH manufactures thrust bearings, radial bearings, specialty coatings and other components primarily used in the energy industry.

iMECH is expected to have revenue of approximately $ 30 million for the full year of 2023.

The business employs approximately 70 people and is based in Houston, Texas.

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

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

What changed 10-Q

Item 1. Financial Statements