What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-20 compared with 2024-02-26 · 178 added, 277 removed, 474 unchanged (49% of the section changed)

5 unchanged sentences

The Company’s growing product and services portfolio features many strong industrial brands, such as Timken®, GGB®, Philadelphia Gear®, Cone Drive®, Rollon®, Nadella®, Diamond®, Drives®, Groeneveld®, BEKA®, Des-Case®, Lovejoy® and Lagersmit®.

Timken posted $4.8 billion in sales in 2023 and employs more than 19,000 people globally, operating in 45 countries.

Timken posted $4.6 billion in sales in 2024 and employs approximately 19,000 people globally, operating in 45 countries.

The Company operates under two reportable segments:

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The Engineered Bearings portfolio features the Timken®, GGB® and Fafnir® brands and serves customers across global industries, including wind energy, agriculture, construction, food and beverage, metals and mining, automotive and truck, aerospace, rail and more.

• Timken’s Industrial Motion segment includes a diverse and growing portfolio of engineered products, including industrial drives, automatic lubrication systems, linear motion products and systems, chains, belts, couplings, filtration systems and industrial clutches and brakes that keep systems running efficiently.

• Timken’s Industrial Motion segment includes a diverse and growing portfolio of engineered products, including industrial drives, automatic lubrication systems, linear motion products and systems, chains, belts, couplings, filtration systems, seals, and industrial clutches and brakes that keep systems running efficiently.

Industrial Motion also includes industrial drivetrain services, which return equipment to like-new condition.

The Industrial Motion portfolio features many strong brands, including Philadelphia Gear®, Cone Drive®, Spinea®, Rollon®, Nadella®, Groeneveld®, BEKA®, Des-Case®, Diamond®, Drives®, Timken® Belts, Lovejoy®, PT Tech® and Lagersmit®.

Industrial Motion products are used across a broad range of industries, including solar energy, automation, construction, agriculture and turf, passenger rail, marine, aerospace, packaging and logistics, medical and more.

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Timken collaborates with OEMs to improve equipment efficiency with its engineered products and captures subsequent equipment replacement cycles by selling largely through independent channels in the aftermarket.

Timken focuses its international efforts and footprint in regions of the world where strong macroeconomic factors such as urbanization, infrastructure development and sustainability create demand for its products and services.

Timken focuses its international efforts and footprint in regions of the world where strong macroeconomic factors such as urbanization, infrastructure development, industrialization and sustainability create demand for its products and services.

The Company's strategy has three primary elements:

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Timken operates with a relentless drive for exceptional results and a passion for superior execution.

The Company embraces a continuous improvement culture that is charged with increasing efficiency, lowering costs, eliminating waste, driving organizational advancement and agility, and building greater brand equity to fuel growth.

The Company embraces a continuous improvement culture that is charged with increasing efficiency, lowering costs, eliminating waste, increasing cash flow, driving organizational advancement and agility, and building greater brand equity to fuel growth.

This requires the Company’s ongoing commitment to attract, retain and develop the best talent across the world.

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The following items highlight some of the Company's accomplishments in 2024:

• In September, Timken issued its annual CSR report, including an update on progress towards its 2030 environmental emissions target, as well as its ongoing efforts to improve the lives of individuals and communities and build a more efficient and resilient world.

• Throughout the year, the Company continued to advance its manufacturing footprint initiatives to support growth, and improve competitiveness and customer service.

Timken began construction of a new facility on its manufacturing campus in Guanajuato, Mexico.

The increased capacity will allow for the introduction of industrial motion operations, specifically belt manufacturing, to complement existing engineered bearing capabilities at the site.

The Company also began construction of a new manufacturing facility to produce spherical and cylindrical roller bearings on its Bharuch, India, campus.

Both facilities are expected to begin operations in 2025.

• Timken enhanced its industry-leading engineered bearings portfolio through the acquisitions of American Roller Bearing Company ("ARB") in January and Engineered Solutions Group ("iMECH") in November.

◦ ARB is a U.S.-based manufacturer of industrial bearings that boasts a large U.S.

installed base and strong aftermarket business.

ARB reported revenues of approximately $40 million for the full year of 2023.

◦ iMECH is a North America-based manufacturer of thrust bearings, radial bearings, specialty coatings and other components primarily used in the energy industry.

iMECH's full year 2023 revenues were approximately $25 million.

• The Company continued to scale and expand its industrial motion portfolio through the acquisitions of Leonardo Top S.a.r.l.

("Nadella") in April, Rosa Sistemi S.p.A.

("Rosa") and D-C Filtration Holdings Corp.

("Des-Case") in September, and Lagersmit Holding B.V.

("Lagersmit") in December.

◦ Nadella is a Europe-based manufacturer of linear guides, telescopic rails, actuators and systems and other specialized industrial motion solutions.

Nadella reported full year 2023 revenues of approximately $105 million.

◦ Rosa is a Europe-based designer and manufacturer of roller guideways, linear bearings, customized linear systems and actuators, commercialized ball guideways and precision ball screws.

Rosa had full year 2023 revenues of approximately $15 million.

◦ Des-Case is a U.S.-based manufacturer of specialty filtration products for industrial lubricants.

Des-Case had full year 2023 revenues of approximately $40 million.

◦ Lagersmit is a Europe-based manufacturer of highly engineered sealing solutions for marine, dredging, water, tidal energy and other industrial applications.

Lagersmit had full year 2023 revenues of approximately $40 million.

• In August, Timken issued its annual CSR report, highlighting the Company's progress towards its target to reduce aggregate Scope 1 and Scope 2 greenhouse gas (GHG) emissions intensity by 50 percent by 2030, as well as providing an update on the company's actions to improve the lives of individuals and communities, benefit the planet and strengthen its business.

• On September 9, 2024, the Company acquired CGI, Inc.

("CGI"), a Nevada-based manufacturer of precision drive systems serving a broad range of automation markets with a concentration in medical robotics.

CGI employs approximately 130 people and has its headquarters and manufacturing facilities in Carson City, Nevada.

CGI will further Timken's strategy to expand and scale its leading industrial motion product portfolio.

• Timken increased its quarterly dividend by 3% in the second quarter and paid its 410th consecutive quarterly dividend in the fourth quarter.

The Company achieved ten straight years of higher annual dividends in 2023.

Timken also repurchased 3.2 million common shares, or over 4% of its outstanding common shares, during the year.

• The Company deployed over $1.1 billion of capital in 2023 across capital expenditures, acquisitions, dividends and share repurchases to advance its strategy and create shareholder value.

The Company achieved eleven straight years of higher annual dividends in 2024.

Timken also repurchased half a million common shares during the year.

• Executed a CEO succession plan and welcomed Tarak Mehta to Timken as its new president and CEO in September.

• Throughout 2024, Timken received third-party recognition for the role it plays as a global industrial leader, responsible corporate citizen, innovator and employer of choice.

The Company was named one of America’s Best Large Employers by Forbes , one of the World's Most Ethical Companies® for the 12th time by Ethisphere, and one of America's Most Innovative Companies by Fortune magazine and market and consumer data provider Statista.

The Company was named one of the World's Most Ethical Companies® for the 13th time by Ethisphere, one of America's Most Responsible Companies for the 5th year in a row by Newsweek and Statista, one of the Best Companies to Work For by U.S.

News & World Report, and one of the World's Most Innovative Companies by Fast Company.

RESULTS OF OPERATIONS

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Average number of diluted shares 70,750,482 72,081,884 — (1.8 %)

The increase in net sales was primarily driven by the benefit of acquisitions net of divestitures and higher organic sales (favorable pricing, lower volume), partially offset by the unfavorable impact of foreign currency exchange rate changes.

The decrease in net income was primarily due to the impact of lower volume, higher operating costs, the unfavorable impact of foreign currency exchange rate changes, higher pension remeasurement charges, and an increase in net interest expense, partially offset by favorable price/mix.

The Company expects 2024 full-year revenue to be down in the range of 2.5% to 4.5% in total compared to 2023, as the benefit of acquisitions net of divestitures completed during 2023 is expected to be more than offset by lower anticipated organic revenue based on the current demand environment.

The Company's earnings are expected to be down in 2024 compared with 2023, primarily due to the impact of lower sales volume, offset partially by lower anticipated pension remeasurement and impairment charges and the favorable impact of acquisitions, including reduced acquisition related charges.

The Company expects to generate a higher amount of cash from operating activities in 2024 compared to 2023, driven by improved working capital performance and lower cash taxes.

The Company expects capital expenditures for 2024 to be similar in amount to 2023 and in the range of 4% of sales.

The decrease in net sales was primarily driven by lower demand in China and Europe, and the unfavorable impact of foreign currency exchange rate changes, partially offset by the benefit of acquisitions (net of divestitures) and favorable pricing.

The decrease in net income was primarily due to the impact of lower volume, higher manufacturing costs, the unfavorable impact of foreign currency exchange rate changes, and an increase in net interest expense, partially offset by favorable price/mix, lower impairment and pension remeasurement charges and a gain on the sale of certain real estate.

The Company expects 2025 full-year revenue to range from down 4% to 1% in total compared to 2024, primarily driven by the unfavorable impact of foreign currency exchange rates and lower demand in Europe, partially offset by the benefit of acquisitions completed during 2024 and slightly favorable pricing.

The Company's earnings are expected to be down in 2025 compared with 2024, primarily due to the impact of foreign currency exchange rate changes and lower organic sales volume, offset partially by lower operating costs and the favorable impact of acquisitions.

The Company expects to generate a higher amount of cash from operating activities in 2025 compared to 2024, driven by improved working capital performance, a lower level of capital expenditures, and lower cash taxes.

The Company expects capital expenditures in 2025 to be in the range of 3.5% of sales.

THE STATEMENTS OF INCOME

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Impairment and restructuring charges 13.4 45.5 (32.1) (70.5%)

Gain on sale of real estate (13.8) — (13.8) NM

Operating income $ 611.1 $ 657.1 (46.0) (7.0%)

Operating income % to net sales 13.4 % 13.8 % (40) bps

Net sales increased in 2023 compared to 2022 primarily due to the favorable impact of acquisitions (net of divestitures) of $246 million and higher organic sales of $50 million (favorable pricing, lower volume), partially offset by the unfavorable impact of foreign currency exchange rate changes of $23 million.

Operating income increased in 2023 compared to 2022 due to favorable impact of higher sales net of cost of products sold, partially offset by higher selling, general and administrative ("SG&A") expenses, increased amortization expense and higher impairment and restructuring charges.

• Cost of products sold increased in 2023 compared to 2022 due to the incremental cost of goods sold from recent acquisitions (net of divestitures) of $180 million and the impact of foreign currency exchange rate changes of $3 million, partially offset by lower material and logistics costs of $85 million and lower manufacturing costs, including lower volume and the impact of favorable mix, of $3 million.

• SG&A expenses increased in 2023 compared to 2022 due to the incremental SG&A expense associated with recent acquisitions (net of divestitures), higher compensation costs and increased spending to support ongoing business projects and initiatives, including acquisitions.

• Amortization of intangible assets increased in 2023 compared to 2022 due to the addition of intangible assets from the six acquisitions that were completed during 2023, as well as the GGB Bearing Technology ("GGB") acquisition, which was completed in the fourth quarter of 2022.

Net sales decreased in 2024 compared to 2023 primarily due to lower organic sales of $276 million (lower demand, favorable pricing) as well as the unfavorable impact of foreign currency exchange of $34 million, partially offset by the favorable impact of acquisitions (net of divestitures) of $114 million.

Operating income decreased in 2024 compared to 2023 due to the impact of lower sales net of cost of products sold, higher selling, general and administrative ("SG&A") expenses, and increased amortization expense, partially offset by lower impairment and restructuring charges.

• Cost of products sold decreased in 2024 compared to 2023 due to the impact of lower volume of $173 million and the impact of foreign currency exchange rate changes of $22 million, partially offset by the incremental cost of goods sold from acquisitions (net of divestitures) of $37 million, higher manufacturing costs of $28 million and unfavorable net material and logistics costs (net) of $5 million.

• SG&A expenses increased in 2024 compared to 2023 primarily due to the incremental SG&A expense associated with recent acquisitions.

Excluding acquisitions, SG&A expenses were lower in 2024 compared to 2023 primarily due to reduced discretionary spending to align with lower demand levels and the favorable impact of foreign currency, partially offset by increased accruals for potential uncollectible accounts

• Amortization of intangible assets increased in 2024 compared to 2023 due to the addition of intangible assets from the acquisitions, which were completed in 2024 and 2023.

Refer to Note 2 - Acquisitions and Divestitures in the Notes to the Consolidated Financial Statements for additional information.

• Impairment and restructuring charges were relatively unchanged in 2023 compared to 2022.

The current period included the impairment of goodwill and restructuring costs related to ongoing plant rationalization initiatives.

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

As a result of this analysis, a pretax impairment loss of $28.3 million was recorded in the first quarter of 2023.

The prior period included impairment charges of $29.3 million related to the sale of the Timken Aerospace Drives Systems, LLC ("ADS") business, which was completed in the fourth quarter of 2022, as well as restructuring costs related to ongoing plant rationalization initiatives.

• Impairment and restructuring charges decreased significantly in 2024 compared to 2023 primarily due to lower impairment charges.

During 2023, the Company recorded a pretax goodwill impairment loss for one of its reporting units in the Industrial Motion segment in the amount of $28.3 million.

• Gain on sale of real estate for 2024 was due to a gain of $13.8 million on the sale of a former bearing manufacturing plant in Gaffney, South Carolina during the quarter ended September 30, 2024.

Refer to Note 8 - Property, Plant and Equipment in the Notes to the Consolidated Financial Statements for additional information.

Interest Expense and Income:

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Interest income 14.9 9.3 5.6 60.2 %

Interest expense increased in 2023 compared to 2022, primarily due to increased debt levels and higher average interest rates.

Interest expense, net $ (110.2) $ (101.4) $ (8.8) 8.7 %

Interest expense increased in 2024 compared to 2023, primarily due to higher average debt levels during the year and higher average interest rates.

Interest income increased in 2024 compared to 2023, primarily due to higher average cash levels during the year and improved returns on invested cash.

Other Income (Expense):

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Non-service pension and other postretirement

(expense) income $ (24.0) $ 9.3 $ (33.3) (358.1 %)

Other (expense) income, net (1.2) 5.5 (6.7) (121.8 %)

The change in non-service pension and other postretirement expense and income was primarily due to higher net actuarial losses ("mark-to-market" charges) recorded in 2023 compared to 2022, as well as lower expected returns on pension assets and higher interest expense.

In 2023, $20.6 million of mark-to-market charges were recognized, compared to $2.9 million of mark-to-market charges in 2022.

expense $ (2.6) $ (24.0) $ 21.4 (89.2 %)

Other expense, net (4.1) (1.2) (2.9) 241.7 %

Total other expense, net $ (6.7) $ (25.2) $ 18.5 (73.4) %

The change in non-service pension and other postretirement expense and income was primarily due to net actuarial ("mark-to-market") gains recorded in 2024 compared to net actuarial losses in 2023.

In 2024, the Company recognized $1.3 million of net mark-to-market gains, compared to $20.6 million of net mark-to-market charges in 2023.

Refer to Note 17 - Retirement Benefit Plans and Note 18 - Other Postretirement Benefit Plans in the Notes to the Consolidated Financial Statements for more information .

The change in other (expense) income was due to net foreign currency transaction losses recognized in 2023, compared to net foreign currency transaction gains in 2022.

In addition, the current period includes a gain on the divestiture of S.E.

Setco Service Company, LLC ("SE Setco"), a 50%-owned joint venture.

The change in other expense, net was primarily due to higher foreign currency exchange losses recognized in 2024 compared to 2023.

In addition, 2023 includes a gain on the divestiture of S.E.

Setco Service Company, LLC ("SE Setco"), a formerly 50%-owned joint venture, partially offset by the non-cash impact of deconsolidating the Company's 51%-owned joint venture in Russia ("Russian JV").

Income Tax Expense:

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The effective tax rate for 2024 was 24.1%, which was unfavorable compared to the U.S.

federal statutory rate of 21%, primarily due to the unfavorable impact of earnings in foreign jurisdictions where the effective tax rate was higher than 21% and withholding taxes accrued on planned dividend distributions expected in 2024.

federal statutory rate of 21%, primarily due to the unfavorable impact of earnings in foreign jurisdictions where the effective tax rate was higher than 21% and U.S.

state and local income taxes.

This was partially offset by the release of accruals for uncertain tax positions.

The effective tax rate for 2023 was 23.1%, which was unfavorable compared to the U.S.

This was partially offset by the favorable impact of U.S.

foreign tax credit utilization from acquisition integration structuring.

The effective tax rate for 2022 was 24.3%, which was unfavorable compared to the U.S.

federal statutory rate of 21%, primarily due to the unfavorable impact of earnings in foreign jurisdictions where the effective tax rate was higher than 21%.

This was partially offset by the release of accruals for uncertain tax positions and favorable U.S.

permanent book-tax differences.

The change in the effective rate for 2023 compared with 2022 was a decrease of 1.2%.

The decrease was primarily due to the favorable impact of U.S.

foreign tax credit utilization from acquisition integration structuring which was partially offset by withholding taxes accrued on planned dividend distributions expected in 2024 and prior year discrete release of accruals for uncertain tax positions.

The change in the effective rate for 2024 compared with 2023 was an increase of 1.0%.

The increase was partially due to the unfavorable impact of earnings in foreign jurisdictions where the effective tax rate was higher than 21%.

The increase was also the result of the 2023 net discrete impact of the accrual of withholding taxes on dividend distributions and favorable U.S.

foreign tax credit utilization that did not reoccur in 2024.

Refer to Note 5 - Income Taxes in the Notes to the Consolidated Financial Statements for more information on the computation of the income tax expense in interim periods.

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The Company's reportable segments are product-based business groups that serve customers in diverse industrial markets.

The primary measurement used by management to measure the financial performance of each segment is EBITDA.

Refer to Note 4 - Segment Information in the Notes to the Consolidated Financial Statements for the reconciliation of EBITDA by segment to consolidated income before income taxes.

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

The Company operates under two reportable segments:

(1) Engineered Bearings and (2) Industrial Motion.

Segment results for 2022 and 2021 have been revised to conform to the 2023 presentation of segments.

The primary measurement used by management to measure the financial performance of each segment is adjusted EBITDA.

Refer to Note 4 - Segment Information in the Notes to the Consolidated Financial Statements for the reconciliation of adjusted EBITDA by segment to consolidated income before income taxes.

The presentation of segment results below includes a reconciliation of the changes in net sales for each segment reported in accordance with U.S.

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The following items highlight the Company ' s acquisitions and divestitures completed in 2024 and 2023:

• The Company a cquired Lagersmit during the fourth quarter of 2023.

• The Company acquired CGI during the third quarter of 2024.

Results for CGI are reported in the Industrial Motion segment.

• The Company a cquired Lagersmit Holding B.V.

("Lagersmit") during the fourth quarter of 2023.

Results for Lagersmit are reported in the Industrial Motion segment.

• The Company acquired iMECH during the fourth quarter of 2023.

• The Company acquired Engineered Solutions Group ("iMECH") during the fourth quarter of 2023.

Results for iMECH are reported in the Engineered Bearings segment.

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Results for TWB were reported in the Engineered Bearings segment.

• The Company acquired Rosa and Des-Case during the third quarter of 2023.

• The Company acquired Rosa Sistemi S.p.A.("Rosa") and D-C Filtrations Holding Corp.

("Des-Case") during the third quarter of 2023.

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

• The Company acquired Nadella during the second quarter of 2023.

• The Company acquired Leonardo Top S.a.r.l.

("Nadella") during the second quarter of 2023.

Results for Nadella are reported in the Industrial Motion segment.

• The Company acquired ARB during the first quarter of 2023.

• The Company acquired American Roller Bearing Company ("ARB") during the first quarter of 2023.

Results for ARB are reported in the Engineered Bearings segment.

• The Company acquired GGB during the fourth quarter of 2022.

Results for GGB are reported in the Engineered Bearings segment.

• The Company completed the sale of ADS during the fourth quarter of 2022.

Results for ADS were reported in the Industrial Motion segment.

• The Company completed the sale of Timken-Rus Service Company ooo ("Timken Russia") during the third quarter of 2022.

Results for Timken Russia were reported in the Engineered Bearings segment.

• The Company acquired Spinea, s.r.o.

("Spinea") during the second quarter of 2022.

Results for Spinea are reported in the Industrial Motion segment.

Engineered Bearings Segment:

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Net sales $ 3,034.3 $ 3,257.7 $ (223.4) (6.9 %)

EBITDA $ 661.7 $ 615.8 $ 45.9 7.5 %

EBITDA margin 20.3 % 19.9 % — 40 bps

2023 2022 $ Change % Change

Net sales $ 3,257.7 $ 3,092.6 $ 165.1 5.3 %

Acquisitions 196.4 — 196.4 NM

Divestitures (10.6) — (10.6) NM

Currency (24.1) — (24.1) NM

Net sales, excluding the impact of acquisitions, divestitures and currency $ 3,096.0 $ 3,092.6 $ 3.4 0.1 %

The Engineered Bearings segment's net sales, excluding the effects of acquisitions, divestitures and foreign currency exchange rate changes, increased $3.4 million or 0.1% in 2023 compared with 2022, as higher pricing across the segment was almost fully offset by lower sales volumes.

Within the sectors, sales volumes were higher in rail and heavy industries compared to 2022, relatively flat in renewable energy, and lower in distribution, off highway, on-highway auto/truck, and general industrial.

EBITDA increased in 2023 by $45.9 million or 7.5% compared with 2022, primarily due to favorable price/mix, lower material and logistics costs and the benefit of acquisitions net of divestitures, partially offset by higher manufacturing and SG&A costs, lower volume, and the unfavorable impact of foreign currency exchange rate changes.

Industrial Motion Segment:

2023 2022 $ Change Change

Net sales $ 1,511.3 $ 1,404.1 $ 107.2 7.6 %

EBITDA $ 262.0 $ 222.8 $ 39.2 17.6 %

EBITDA margin 17.3 % 15.9 % — 140 bps

2023 2022 $ Change % Change

Net sales $ 1,511.3 $ 1,404.1 $ 107.2 7.6 %

Acquisitions 99.5 — 99.5 NM

Divestitures (39.7) — (39.7) NM

Currency 1.1 — 1.1 NM

Net sales, excluding the impact of acquisitions, divestitures and currency $ 1,450.4 $ 1,404.1 $ 46.3 3.3 %

The Industrial Motion segment's net sales, excluding the effects of acquisitions, divestitures and foreign currency exchange rate changes, increased $46.3 million or 3.3% in 2023 compared with 2022.

The increase reflects higher pricing across the segments, as well as higher sales volume.

Within the segment's platforms, sales volumes were higher in drive systems and services and automatic lubrication systems, and lower in belts and chain, linear motion, and couplings, clutches and brakes.

EBITDA increased $39.2 million or 17.6% in 2023 compared with 2022 primarily due to favorable price/mix, lower material and logistics costs, partially offset by higher SG&A expenses.

Unallocated Corporate:

2023 2022 $ Change Change

Unallocated corporate expense $ (69.9) $ (50.0) $ (19.9) 39.8 %

Unallocated corporate expense % to net sales (1.5 %) (1.1 %) — (40) bps

Unallocated corporate expense increased in 2023 compared with 2022 primarily due to the unfavorable impact of foreign currency transaction gains and losses and the increased spending for professional and other services.

RESULTS OF OPERATIONS:

BUSINESS SEGMENTS

The presentation of segment results below includes a reconciliation of the changes in net sales for each segment reported in accordance with U.S.

GAAP to net sales adjusted to remove the effects of acquisitions and divestitures completed in 2022 and 2021 and foreign currency exchange rate changes.

The effects of acquisitions, divestitures and foreign currency exchange rate changes on net sales are removed to allow investors and the Company to meaningfully evaluate the percentage change in net sales on a comparable basis from period to period.

The following items highlight the Company ' s acquisitions and divestitures completed in 2022 and 2021:

• The Company acquired GGB during the fourth quarter of 2022.

R esults for GGB are reported in the Engineered Bearings segment.

• The Company completed the sale of ADS during the fourth quarter of 2022.

The results for ADS were reported in the Industrial Motion segment.

• The Company completed the sale of Timken Russia during the third quarter of 2022.

Results for Timken Russia were reported in the Engineered Bearings segment.

• The Company acquired Spinea during the second quarter of 2022.

The results for Spinea are reported in the Industrial Motion segment.

• The Company acquired Intelligent Machine Solutions (“iMS”) during the third quarter of 2021.

The results for iMS are reported in the Industrial Motion segment.

Engineered Bearings Segment:

2022 2021 $ Change Change

Net sales $ 3,092.6 $ 2,815.1 $ 277.5 9.9 %

EBITDA $ 615.8 $ 513.4 $ 102.4 19.9 %

EBITDA margin 19.9 % 18.2 % — 170 bps

Cost of products sold (2,106.9) (2,246.0) 139.1 (6.2 %)

Selling, general and administrative expenses (419.3) (425.4) 6.1 (1.4 %)

Other segment items 4.5 4.2 0.3 7.1 %

Depreciation and amortization 95.6 92.1 3.5 3.8 %

Adjusted EBITDA $ 608.2 $ 682.6 $ (74.4) (10.9 %)

Adjusted EBITDA margin 20.0 % 21.0 % — (100) bps

2024 2023 $ Change % Change

4 unchanged sentences

Net sales, excluding the impact of acquisitions, divestitures and currency $ 3,068.7 $ 3,257.7 $ (189.0) (5.8 %)

The Engineered Bearings segment's net sales, excluding the effects of acquisitions, divestitures and foreign currency exchange rate changes, increased $353.0 million or 12.5% in 2022 compared with 2021, reflecting higher demand and higher pricing across most of the segment, partially offset by lower sales volume in the aerospace sector.

EBITDA increased in 2022 by $102.4 million or 19.9% compared with 2021, primarily due to favorable price/mix and the impact of higher sales volume, partially offset by higher operating costs and higher impairment and restructuring charges.

The Engineered Bearings segment's net sales, excluding the effects of acquisitions, divestitures and foreign currency exchange rate changes, decreased $189.0 million or 5.8% in 2024 compared with 2023, primarily driven by lower demand in China and Europe, partially offset by higher demand in Latin America and India, and higher pricing.

Among market sectors, the segment experienced a significant decline in the renewable energy sector and lower demand in the off-highway and general & heavy industrial market sectors, partially offset by higher demand in the industrial distribution, rail, and aerospace sectors.

Adjusted EBITDA for the Engineered Bearings segment decreased in 2024 by $74.4 million or 10.9% compared with 2023, primarily due to the impact of lower sales net of cost of products sold, partially offset by lower SG&A expenses.

• Cost of products sold decreased in 2024 compared to 2023 due to the impact of lower volume of $116 million, the impact of foreign currency exchange rate changes of $21 million, and lower incremental cost of goods sold from acquisitions (net of divestitures) of $9 million, partially offset by unfavorable net material and logistics costs of $4 million and higher manufacturing costs of $2 million.

• SG&A expenses decreased in 2024 compared to 2023 driven primarily by lower compensation expense, reduced discretionary spending and the favorable impact of foreign currency.

• Depreciation and amortization increased slightly in 2024 compared to 2023 primarily due to the addition of property, plant and equipment assets from capital projects in China and the Americas.

Industrial Motion Segment:

1 unchanged sentence

Net sales $ 1,538.7 $ 1,511.3 $ 27.4 1.8 %

EBITDA $ 222.8 $ 233.0 $ (10.2) (4.4 %)

EBITDA margin 15.9 % 17.7 % — (180) bps

Cost of products sold (1,008.5) (979.7) (28.8) 2.9 %

Selling, general and administrative expenses (269.1) (253.0) (16.1) 6.4 %

Other segment items (0.1) (0.1) — — %

Depreciation and amortization 45.5 41.3 4.2 10.2 %

Adjusted EBITDA $ 306.5 $ 319.8 $ (13.3) (4.2 %)

Adjusted EBITDA margin 19.9 % 21.2 % — (130) bps

2024 2023 $ Change % Change

1 unchanged sentence

Acquisitions 117.4 — 117.4 NM

Divestitures (8.2) — (8.2) NM

Currency (2.8) — (2.8) NM

Net sales, excluding the impact of acquisitions, divestitures and currency $ 1,442.8 $ 1,317.8 $ 125.0 9.5 %

The Industrial Motion segment's net sales, excluding the effects of acquisitions, divestitures and foreign currency exchange rate changes, increased $125.0 million or 9.5% in 2022 compared with 2021, reflecting higher pricing and higher sales volume in the drive systems and services, coupling, clutches and brakes, linear motion, and lubrication platforms.

EBITDA decreased in 2022 by $10.2 million or 4.4% compared with 2021, primarily due to higher operating costs, higher impairment charges and the unfavorable impact of foreign currency exchange rate changes, partially offset by favorable price/mix and higher volume.

Net sales, excluding the impact of acquisitions and currency $ 1,424.1 $ 1,511.3 $ (87.2) (5.8 %)

The Industrial Motion segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, decreased $87.2 million or 5.8% in 2024 compared with 2023, driven primarily by lower end-market demand in Europe and North America, partially offset by higher pricing.

Excluding acquisitions, sales were down across most segment platforms with the largest decreases in automatic lubrication systems, linear motion solutions, and belts and chain.

Adjusted EBITDA decreased $13.3 million or 4.2% in 2024 compared with 2023 primarily due to the impact of lower sales net of cost of products sold and higher SG&A expenses.

• Cost of products sold increased in 2024 compared to 2023 due to the impact of the incremental cost of goods sold from acquisitions of $63 million and higher manufacturing costs of $26 million , partially offset by the impact of lower volume of $58 million.

• SG&A expenses increased in 2024 compared to 2023 due to the incremental SG&A expense associated with recent acquisitions.

Excluding acquisitions, SG&A expenses were lower versus 2023 driven primarily by lower discretionary spending.

• Depreciation and amortization increased in 2024 compared to 2023 primarily due to the addition of property, plant and equipment assets from acquisitions completed during 2024 and 2023.

Refer to Note 2 - Acquisitions and Divestitures in the Notes to the Consolidated Financial Statements for additional information.

Unallocated Corporate:

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Unallocated corporate expense % to net sales (1.5 %) (1.3 %) — (20) bps

Unallocated corporate expense increased in 2022 compared with 2021 primarily due to higher compensation costs (including incentive-based compensation) and other spending to support increased business activity levels, partially offset by the impact of foreign currency exchange gains in 2022 as compared with foreign currency exchange losses in the prior year.

Unallocated corporate expense increased in 2024 compared with 2023 primarily due to the unfavorable impact of foreign currency losses of $8.2 million in 2024 compared to $3.7 million in 2023.

2024 2023 $ Change

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Net cash used in investing activities (304.6) (806.5) 501.9

Net cash provided by financing activities 347.1 206.8 140.3

Net cash (used in) provided by financing activities (194.8) 347.1 (541.9)

Effect of exchange rate changes on cash (22.0) (7.2) (14.8)

Increase in cash, cash equivalents and restricted cash $ 78.6 $ 82.8 $ (4.2)

(Decrease) increase in cash, cash equivalents and restricted cash $ (45.7) $ 78.6 $ (124.3)

Operating Activities:

The increase in net cash provided by operating activities in 2023 compared with 2022 was primarily due to the favorable impact of working capital items of $161.6 million, as well as the benefit of other items, partially offset by the unfavorable impact of income taxes on cash of $132.7 million due to higher tax payments and a decrease in net income of $9.0 million.

The decrease in net cash provided by operating activities in 2024 compared with 2023 was primarily due to the unfavorable impact of working capital items of $43.7 million, a decrease in net income of $32.7 million, a decrease in impairment charges of $29.7 million, partially offset by the favorable impact of income taxes on cash of $56.5 million due to lower tax payments.

Refer to the table below for additional detail of the impact of each line on net cash provided by operating activities.

The following chart displays the impact of working capital items on cash during 2023 and 2022, respectively:

The following chart displays the impact of working capital items on cash during 2024 and 2023:

2024 2023 $ Change

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Cash used in working capital items $ (45.5) $ (1.8) $ (43.7)

The following table displays the impact of income taxes on cash during 2023 and 2022, respectively:

The following table displays the impact of income taxes on cash during 2024 and 2023:

2024 2023 $ Change

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Investing Activities:

The increase in net cash used in investing activities in 2023 compared with 2022 was primarily due to an increase in cash used for acquisitions of $185.1 million, a decrease in the proceeds from divestitures of $20.4 million, an increase in cash used for net investments in short-term marketable securities of $8.9 million, and an increase in capital expenditures of $9.4 million.

The decrease in net cash used in investing activities in 2024 compared with 2023 was primarily due to a decrease in cash used for acquisitions of $471.4 million, a decrease in capital expenditures of $17.8 million and an increase in cash from the net liquidation of short-term marketable securities of $9.5 million.

Financing Activities:

The change in net cash provided by financing activities in 2023 compared with 2022 was primarily due to cash proceeds of $284.8 million from the sale of shares of TIL, a subsidiary of the Company, in the second quarter of 2023, partially offset by a decrease in net borrowings of $105.0 million and an increase in the purchase of treasury shares of $39.3 million.

The change in net cash used in/provided by financing activities in 2024 compared with 2023 was primarily due to a decrease in net borrowings of $686.2 million and lower proceeds from the 2024 sale of shares of Timken India Limited ("TIL") as compared to the 2023 sale in the amount of $52.5 million, partially offset by a decrease in the purchase of treasury shares of $210.4 million.

LIQUIDITY AND CAPITAL RESOURCES

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On December 5, 2022 the Company entered into the Fifth Amended and Restated Credit Agreement ("Credit Agreement"), which is comprised of a $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.

The Credit Amendment amended and restated the Company's previous revolving credit agreement that was set to mature on June 25, 2024, and replaced the $350 million term loan that was set to mature on September 11, 2023 ("2023 Term Loan").

The Credit Agreement also replaced interest rates based on London Inter-Bank Offered Rate ("LIBOR") with interest rates based on the Secured Overnight Financing Rate ("SOFR").

At December 31, 2023, the Senior Credit Facility had outstanding borrowings of $247.4 million and $1.3 million of letters of credit, which reduced the availability to $501.3 million.

The Credit Agreement h as two financial covenants:

a consolidated net leverage ratio and a consolidated interest coverag e ratio.

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

At December 31, 2024, the Senior Credit Facility had no outstanding borrowings.

The Credit Agreement has two financial covenants:

a consolidated net leverage ratio and a consolidated interest coverage ratio.

The maximum consolidated net leverage ratio permitted under the Senior Credit Facility is 3.5 to 1.0.

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The interest rate under the Senior Credit Facility is variable with a spread based on the Company's debt rating.

The average rate on outstanding U.S.

dollar borrowings was 6.48% and the average rate on outstanding Euro borrowings was 4.85% as of December 31, 2023.

In addition, the Company pays a facility fee based on the applicable rate, which is variable with a spread based on the Company's debt rating, multiplied by the aggregate commitments of all of the lenders under the Senior Credit Facility.

As of December 31, 2023, the Company carried investment-grade credit ratings with Moody's (Baa2) and S&P Global (BBB-).

As of December 31, 2024, the Company carried investment-grade credit ratings with both Moody's (Baa2) and S&P Global (BBB-).

The Company renewed the Amended and Restated Asset Securitization Agreement (the "Accounts Receivable Facility") on December 6, 2023.

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These limitations reduced the availability of the Accounts Receivable Facility to $93.9 million at December 31, 2024.

As of December 31, 2023, there were $67.0 million outstanding borrowings under the Accounts Receivable Facility, which reduced the availability under this facility to $12.1 million.

As of December 31, 2024, there were no outstanding borrowings under the Accounts Receivable Facility.

Other sources of liquidity include uncommitted short-term lines of credit for certain of the Company's foreign subsidiaries, which currently allows for borrowings of up to $226.9 million.

At December 31, 2024, the Company had borrowings outstanding of $8.7 million and bank guarantees of $1.6 million, which reduced the aggregate availability under these facilities to $216.6 million.

On March 28, 2022, the Company issued the fixed-rate unsecured senior notes (the "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 repayment of borrowings under the Senior Credit Facility and the Accounts Receivable Facility outstanding at the time of issuance.

The Company has outstanding fixed-rate unsecured notes ("2024 Notes") in the aggregate principal amount of $350.0 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.

On May 23, 2024, the Company issued fixed-rate unsecured senior notes ("2034 Notes") in the aggregate principal amount of €600 million with an interest rate of 4.125%, maturing on May 23, 2034.

Proceeds from the 2034 Notes were used for the redemption of the Company's outstanding fixed-rate unsecured senior notes ("2024 Notes") in the aggregate principal amount of $350 million that were due to mature on September 1, 2024, as well as the repayment of other debt outstanding at the time of the issuance.

At December 31, 2024, the Company was in full compliance with all applicable covenants on its outstanding debt.

The Company expects to generate a higher amount of cash from operating activities in 2024 compared to 2023, driven by improved working capital performance and lower cash taxes.

The Company expects capital expenditures for 2024 to be similar in amount to 2023 and in the range of 4% of sales.

The Company expects capital expenditures in 2025 to be in the range of 3.5% of sales.

FUTURE CONTRACTUAL AND OTHER PAYMENTS

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The following paragraphs include a discussion of some critical areas that require a higher degree of judgment, estimates and complexity.

Inventories are valued at the lower of cost or market, with approximately 62% valued by the first-in, first-out ("FIFO") method and the remaining 38% valued by the last-in, first-out ("LIFO") method.

The majority of the Company’s domestic inventories are valued by the LIFO method, while substantially all of the Company’s international inventories are valued by the FIFO method.

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

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

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

The Company recognized an increase in its LIFO reserve of $3.3 million during 2023 compared to an increase in its LIFO reserve of $36.0 million during 2022.

Goodwill and Indefinite-lived Intangible Assets:

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Accounting guidance permits an entity to first assess qualitative factors to determine whether additional indefinite-lived intangible asset impairment testing, including goodwill, is required.

The Company chose to utilize this qualitative assessment in the annual goodwill impairment testing for all reporting units in the fourth quarter of 2023.

The Company chose to utilize this qualitative assessment in the annual goodwill impairment testing for all reporting units, except its Belts and Chain reporting unit, in the fourth quarter of 2024.

Based on the qualitative assessment, the Company concluded that it was more likely than not that the fair value of these reporting units exceeded their respective carrying values.

The Company chose to perform a quantitative impairment analysis in the fourth quarter of 2024 for its Belts and Chain reporting unit.

The result of this impairment analysis was to recognize an impairment loss of $1.5 million, reducing goodwill for this reporting unit to zero.

As of December 31, 2024, the Company had $96.0 million of indefinite-lived intangible assets on its Consolidated Balance Sheet.

The Company’s indefinite-lived intangible assets primarily consist of acquired trade names.

The Company chose to perform a quantitative impairment analysis in the annual impairment testing of indefinite-lived intangible assets.

The Company prepares its quantitative indefinite-lived intangible analysis by comparing the estimated fair value of each indefinite-lived intangible asset, using a relief from royalty method, with its carrying value.

The relief from royalty method requires several assumptions including future sales growth, terminal revenue growth rate, royalty rate and discount rate.

During the fourth quarter of 2023, the Company used discount rates for its indefinite-lived intangible assets in the range of 10.7% to 14.5%, royalty rates in the range of 1.0% to 6.0% and terminal growth rates in the range of 1.0% to 3.5%.

Based on the October 1, 2023 quantitative assessment of indefinite-lived intangible assets, there was one indefinite-lived intangible with a carrying value of $28.5 million in which the fair value exceeded the carrying value of this indefinite-lived intangible asset by 10% or less.

Management believes the future sales growth and EBITDA margins in the long-range plan and the discount rate used in the valuations requires use of judgment.

If any of the Company's reporting units or indefinite-lived intangible assets do not meet their long-range plan estimates or discount rates increase significantly, the Company could be required to perform an interim goodwill or indefinite-lived intangible asset impairment analysis and record impairment charges in future periods.

The assumptions used for the indefinite-lived intangibles with fair values exceeding carrying values of 10% or less are more sensitive to future performance and will be monitored accordingly.

As mentioned above, accounting guidance permits an entity to first assess qualitative factors to determine whether additional indefinite-lived intangible asset impairment testing is required.

The Company chose to utilize this qualitative assessment in the annual impairment testing for all of its indefinite-lived intangible assets in the fourth quarter of 2024.

Based on the qualitative assessment, the Company concluded that it was more likely than not that the fair value of these indefinite-lived intangible assets would exceed their respective carrying values.

Income Taxes:

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The Company records interest and penalties related to uncertain tax positions as a component of income tax expense.

In 2023, the Company recorded $4.7 million of net tax expense for uncertain tax positions, which consisted primarily of $15.4 million related to increases to current and prior year uncertain tax positions and interest.

In 2024, the Company recorded $2.4 million of net tax benefit for uncertain tax positions, which consisted primarily of $8.8 million related to increases to current and prior year uncertain tax positions and interest.

This expense was partially offset by $11.2 million of the net reversal of accruals for prior year uncertain tax positions and settlements with tax authorities.

During 2023, the Company recorded a $0.6 million increase of uncertain tax positions related to foreign currency translation adjustments and deferred tax liabilities.

During 2024, the Company recorded a $2.0 million decrease of uncertain tax positions related to foreign currency translation adjustments and deferred tax liabilities.

The Company also recorded $5.9 million of uncertain tax positions related to prior years for acquisitions made during 2024.

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The Company recognized net periodic benefit cost of $12.2 million during 2024 for defined benefit pension plans, compared to net periodic benefit cost of $33.8 million during 2023.

The Company recognized mark-to-market" charges of $21.6 million during 2023 compared to $16.0 million during 2022.

Mark-to-market charges during 2023 were primarily due to the impact of a net reduction in the discount rate used to measures the Company's defined benefit pension obligations of $17.6 million and the impact of experience losses of $10.3 million, partially offset by changes in mortality of $6.0 million primarily related to the Company's United Kingdom ("U.K.") plan obligations and other actuarial gains of $0.3 million.

The impact of the net reduction in the discount rate used to measure the Company's defined benefit pension obligations was primarily driven by a 24 basis point reduction in the weighted-average discount rate used to measure its U.S.

plan obligations, which decreased from 5.64% in 2022 to 5.40% in 2023, and a 33 basis point decrease in the discount rate used to measure its U.K.

plan obligations, which decreased from 4.81% in 2022 to 4.48% in 2023.

Returns on plan assets had no impact on actuarial losses for 2023.

Excluding mark-to-market charges, net period benefit cost was higher in 2023 due to higher interest costs and lower expected return on plan assets.

The Company recognized net mark-to-market gains of $0.7 million during 2024 compared to net mark-to-market charges of $21.6 million during 2023.

Mark-to-market gains during 2024 were primarily due to the impact of a net increase in the discount rate used to measure the Company's defined benefit pension obligations of $28.7 million, partially offset by lower than expected returns on plans assets of $26.8 million and experience losses of $1.2 million.

The impact of the net increase in the discount rate used to measure the Company's defined benefit pension obligations was primarily driven by a 95 basis point increase in the discount rate used to measure its plan obligations in the United Kingdom ("U.K."), which increased from 4.48% in 2023 to 5.43% in 2024, and a 43 basis point increase in the weighted-average discount rate used to measure its U.S.

plan obligations, which increased from 5.40% in 2023 to 5.83% in 2024.

Excluding mark-to-market gains and losses recognized in 2024 and 2023, including a curtailment gain, net period benefit cost was $13.0 million and $12.2 million, respectively.

The increase in 2024 was due to a lower expected return on pension assets.

In 2025, the Company expects net periodic benefit cost to be approximately $14 million for defined benefit pension plans, compared with net periodic benefit cost of $12.2 million in 2024.

Net periodic benefit cost for 2025 does not include mark-to-market charges that will be recognized immediately through earnings in the fourth quarter of 2025, or on an interim basis if specific events trigger a remeasurement.

Excluding the mark-to-market charges of $21.6 million recognized in 2023, net periodic benefit cost was $12.2 million in 2023.

The expected increase in net periodic benefit cost, excluding mark-to-market charges, primarily reflects a lower expected return on plan assets.

Excluding the mark-to-market gains of $0.7 million and the curtailment gain of $0.1 million, recognized in 2024, net periodic benefit cost was $13.0 million in 2024.

The expected increase in net periodic benefit cost for 2025, excluding mark-to-market gains, primarily reflects higher expected interest cost.

The Company expects to contribute to its defined benefit pension plans or pay directly to participants of defined benefit plans approximately $38 million in 2025 compared with $24.6 million of contributions and payments in 2024.

The increase is primarily due to expected contributions of $8 million to the U.K.

pension plan in 2025.

For expense purposes in 2024, the Company applied a weighted-average discount rate of 5.40% to its U.S.

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The Company recognized actuarial gains of $0.5 million during 2024 compared to $1.0 million in 2023.

Ac tuarial gains of $1.0 million during 2023 were primarily due to lower than expected benefit payments of $1.4 million and $0.1 million due to changes in other actuarial assumptions.

These actuarial gains were partially offset a $0.5 million loss due to the impact of a 20 basis point decrease in the discount rate used to measure the Company's defined benefit postretirement obligations, which decreased from 5.75% in 2022 to 5.55% in 2023.

Actuarial gains of $0.5 million during 2024 were primarily due to lower than expected benefit payments of $2.0 million, the impact of experience gains of $1.2 million and $0.6 million due to the impact of a 28 basis point increase in the discount rate used to measure the Company's defined benefit postretirement obligations.

The discount rate increased from 5.55% in 2023 to 5.83% in 2024.

These actuarial gains were partially offset by actuarial losses of $3.1 million due to the impact of an increase in the rate of Medicare Advantage plans and $0.2 million due to changes in other actuarial assumptions.

In 2025, the Company expects net periodic benefit credit of approximately $6 million for other postretirement benefit plans, compared to net periodic benefit credit of $6.9 million in 2024.

Net periodic benefit credit for 2024 does not include actuarial gains that will be recognized immediately through earnings in the fourth quarter of 2024, or on an interim basis if specific events trigger a remeasurement.

Net periodic benefit credit for 2025 does not include actuarial gains or losses that will be recognized immediately through earnings in the fourth quarter of 2025, or on an interim basis if specific events trigger a remeasurement.

Excluding the mark-to-market gains of $0.5 million recognized in 2024, the net periodic benefit credit was $6.3 million in 2024.

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Discount rate .25% $ 0.6

I n the table above, a 25 basis point decrease in the discount rate will increase the APBO by $0.6 million and decrease income before income taxes through the recognition of actuarial losses of $0.6 million.

In the table above, a 25 basis point decrease in the discount rate will increase the APBO by $0.6 million and decrease income before income taxes through the recognition of actuarial losses of $0.6 million.

A 25 basis point increase in the discount rate will decrease the APBO by $0.6 million and increase income before income taxes through the recognition of actuarial gains of $0.6 million.

For measurement purposes, the Company assumed a weighted-average annual rate of increase in the per capita cost (health care cost trend rate) for medical benefits of 7.00% for 2025, declining gradually to 5.0% in 2033 and thereafter for medical and prescription drug benefits.

For Medicare Advantage benefits, actual contract rates have been set for 2024 through 2026, and are assumed to increase by $5 for 2027 to 2028 and then 6.0% for 2028 , declining gradually to 5.0% in 2032 and thereafter .

For Medicare Advantage benefits, actual contract rates have been set for 2025 through 2026, and are assumed to increase by $10 per year for 2027 through 2029 and then 6.0% for 2029, declining gradually to 5.0% in 2033 and thereafter.

The assumed health care cost trend rate may have a significant effect on the amounts reported.

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GAAP, the Company provides information on non-GAAP financial measures.

These non-GAAP financial measures include adjusted net income, adjusted earnings per share, adjusted EBITDA and adjusted EBITDA margins, segment adjusted EBITDA and segment adjusted EBITDA margins, ratio of net debt to adjusted EBITDA (for the trailing 12 months), net debt, ratio of net debt to capital, free cash flow and return on invested capital.

These non-GAAP financial measures include adjusted net income, adjusted earnings per share, adjusted EBITDA and adjusted EBITDA margins, ratio of net debt to adjusted EBITDA (for the trailing 12 months), net debt, ratio of net debt to capital, free cash flow and return on invested capital.

This information is intended to supplement GAAP financial measures and is not intended to replace GAAP financial measures.

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Corporate pension and other postretirement

benefit related expense (income) (2)

benefit related (income) expense (2)

(1.3) 20.6 2.9 0.3 18.5

3 unchanged sentences

— — — (0.9) (11.1)

Russia-related charges (5)

8.5 15.6 — — —

Gain on divestitures and sale of certain assets (5)

2 unchanged sentences

1.2 — — — (5.5)

Brazil legal matter — — — — 1.8

Tax indemnification and related items (1.1) — 0.3 0.2 0.5

CEO succession expenses (7)

Noncontrolling interest of above adjustments (0.2) (2.1) (5.3) — (0.1)

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Diluted shares 70,750,482 72,081,884 74,323,839 77,006,589 76,401,366

Reconciliation of segment EBITDA to segment adjusted EBITDA and segment adjusted EBITDA margin:

Twelve Months Ended December 31, 2023

Engineered Bearings Industrial Motion Unallocated Corporate Total

Net Sales $ 3,257.7 $ 1,511.3 $ — $ 4,769.0

EBITDA 661.7 262.0 (90.5) 833.2

Impairment, restructuring and reorganization charges (1)

14.3 36.5 — 50.8

Corporate pension and other postretirement benefit

related expense (2)

— — 20.6 20.6

Acquisition-related charges (3)

3.6 21.0 7.2 31.8

Russia-related charges (5)

(Gain) loss on divestitures and sale of certain assets (6)

(5.5) 0.3 — (5.2)

Adjusted EBITDA $ 682.6 $ 319.8 $ (62.7) $ 939.7

Adjusted EBITDA Margin (% of net sales) 21.0 % 21.2 % NM 19.7 %

Twelve Months Ended December 31, 2022

Engineered Bearings Industrial Motion Unallocated Corporate Total

Net Sales $ 3,092.6 $ 1,404.1 $ — $ 4,496.7

EBITDA 615.8 222.8 (52.9) 785.7

Impairment, restructuring and reorganization charges (1)

4.4 35.1 — 39.5

Corporate pension and other postretirement benefit

related expense (2)

Acquisition-related charges (3)

6.2 4.9 3.7 14.8

Russia-related charges (5)

15.6 — — 15.6

(Gain) loss on divestitures and sale of certain assets (6)

(3.5) 0.6 — (2.9)

Tax indemnification and related items — 0.3 — 0.3

Adjusted EBITDA $ 638.5 $ 263.7 $ (46.3) $ 855.9

Adjusted EBITDA Margin (% of net sales) 20.7 % 18.8 % NM 19.0 %

(1) Impairment, restructuring and reorganization charges (including items recorded in cost of products sold) relate to:

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However, management believes these actions are not representative of the Company’s core operations.

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

The Company recognizes actuarial losses and (gains) in connection with the annual remeasurement in the fourth quarter, or if specific events trigger a remeasurement.

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

The Company recognizes actuarial (gains) and losses in connection with the annual remeasurement in the fourth quarter, or if specific events trigger a remeasurement.

Refer to Note 17 - Retirement Benefit Plans and Note 18 - Other Postretirement Benefit Plans for additional discussion.

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(4) The acquisition-related gain represents a bargain purchase gain on the acquisition of the assets of Aurora Bearing Company ("Aurora") that closed on November 30, 2020.

(5) Russia-related charges include impairments or allowances recorded against certain property, plant and equipment, inventory and trade receivables and write-down of a 51%-owned joint ventur e ("Russian JV") to reflect the current impact of Russia's invasion of Ukraine (and associated sanctions) on the Company's operations.

In addition to impairments and allowances recorded, the Company recorded a loss on the divestiture of its Timken Russia business during the third quarter of 2022.

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

(6) Represents the net loss (gain) resulting from divestitures and sale of certain assets.

(7) Represents property loss and related expenses during the periods presented (net of insurance recoveries received in 2020) resulting from property loss that occurred during the first quarter of 2019 at one of the Company's warehouses in Knoxville, Tennessee and during the third quarter of 2019 at one of the Company's warehouses in Yantai, China.

(5) Represents the net gain resulting from divestitures and sale of certain assets.

(6) Represents property loss and related expenses incurred during the periods presented resulting from a fire that occurred during the second quarter of 2024 at one of the Company's plants in Slovakia, as well as insurance recoveries received in 2020 resulting from property loss that occurred during the first quarter of 2019 at one of the Company's warehouses in Knoxville, Tennessee and during the third quarter of 2019 at one of the Company's warehouses in Yantai, China.

(7) On March 26, 2024, the Company announced that Richard G.

Kyle, President and Chief Executive Officer (“CEO”) of the Company would be retiring from his position as CEO and that Tarak Mehta would be appointed CEO on September 5, 2024.

CEO succession expenses include the acceleration of certain stock compensation awards for Mr.

Kyle and other one-time costs associated with the transition.

(8) Provision for income taxes includes the net tax impact on pre-tax adjustments (listed above), the impact of discrete tax items recorded during the respective periods as well as other adjustments to reflect the use of one overall effective tax rate on adjusted pre-tax income.

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$ 17.8 $ 59.3

Corporate pension and other postretirement related expense (2)

Corporate pension and other postretirement related (income) expense (2)

Acquisition-related charges (3)

Russia-related charges (4)

Property losses and related expenses (4)

Gain on divestitures and sale of certain assets (5)

CEO succession expenses (6)

Tax indemnification and related items (1.1) —

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and (iv) impairment of assets.

Impairment, restructuring and reorganization charges for the twelve months ended December 31, 2022 and December 31, 2023 included $29.3 million related to the sale of ADS.

In addition, impairment, restructuring and reorganization charges for the twelve months ended December 31, 2023 included $28.3 million related to the impairment of goodwill.

Impairment, restructuring and reorganization charges for the twelve months ended December 31, 2023 included $28.3 million related to the impairment of goodwill.

The Company re-assesses its operating footprint and cost structure periodically, and makes adjustments as needed that result in restructuring charges.

However, management believes these actions are not representative of the Company’s core operations.

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

The Company recognizes actuarial losses in connection with the annual remeasurement in the fourth quarter, or if specific events trigger a remeasurement.

The Company recognizes actuarial (gains) and losses in connection with the annual remeasurement in the fourth quarter, or if specific events trigger a remeasurement.

(3) Acquisition-related charges represent deal-related expenses associated with completed transactions and any resulting inventory step-up impact.

(4) Russia-related charges include impairments or allowances recorded against certain property, plant and equipment, inventory and trade receivables and write-down of Russian JV to reflect the current impact of Russia's invasion of Ukraine (and associated sanctions) on the Company's operations.

In addition to impairments and allowances recorded, the Company recorded a loss on the divestiture of its Timken Russia business during the third quarter of 2022.

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

(4) Represents property loss and related expenses incurred during the periods presented resulting from property loss that occurred during the second quarter of 2024 at one of the Company's plants in Slovakia.

(5) Represents the net gain resulting from divestitures and sale of certain assets.

(6) On March 26, 2024, the Company announced that Richard G.

Kyle, President and CEO of the Company would be retiring from his position as CEO and that Tarak Mehta would be appointed CEO on September 5, 2024.

CEO Succession expenses include the acceleration of certain stock compensation awards for Mr.

Kyle and other one-time costs associated with the transition.

Return on Invested Capital:

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Foreign currency gains and losses resulting from transactions are included in the Consolidated Statements of Income.

Net of related derivative activity, the Company recognized a foreign currency exchange loss resulting from transactions of $14.8 million for the year ended December 31, 2023, and recognized a gain of $15.4 million and a loss of $9.4 million for the years ended December 31, 2022 and 2021, respectively.

For the year ended December 31, 2023, the Company recorded a positive non-cash foreign currency translation adjustment of $35.3 million that increased shareholders’ equity, compared with a negative non-cash foreign currency translation adjustment of $155.4 million that decreased shareholders’ equity for the year ended December 31, 2022.

The foreign currency translation adjustments for the year ended December 31, 2023 were positively impacted by the weakening of the U.S.

Net of related derivative activity, the Company recognized a foreign currency exchange loss resulting from transactions of $9.3 million for the year ended December 31, 2024, a loss of $14.8 million and a gain of $15.4 million for the years ended December 31, 2023 and 2022, respectively.

For the year ended December 31, 2024, the Company recorded a negative non-cash foreign currency translation adjustment of $156.4 million that decreased shareholders’ equity, compared with a positive non-cash foreign currency translation adjustment of $35.3 million that increased shareholders’ equity for the year ended December 31, 2023.

The foreign currency translation adjustments for the year ended December 31, 2024 were negatively impacted by the strengthening of the U.S.

dollar relative to other currencies as of December 31, 2024 compared to December 31, 2023.

Russia Operations :

The Company had two subsidiaries in Russia prior to Russia's invasion of Ukraine in February 2022, including Timken Russia, which was 100% owned by Timken and a 51%-owned Russian JV.

As a result of Russia's invasion of Ukraine (and associated sanctions), the Company suspended operations and recorded property, plant and equipment impairment charges of $9.0 million and inventory write-downs of $4.1 million during the year ended December 31, 2022.

During 2022, the Company sold the Timken Russia business resulting in a loss of $2.7 million on the sale.

During third quarter of 2023, the Company recorded impairment charges of $3.9 million related to property, plant and equipment and operating leased assets at the Russian JV.

During the fourth quarter of 2023, after evaluating various plans for the Russian JV and the Company's ability to control and influence the Russian JV, the Company concluded it should deconsolidate its Russian JV, and it wrote-down its remaining net investment of $4.7 million to $0.

CEO Succession:

On September 5, 2024, the Board of Directors (the "Board") of the Company appointed Tarak Mehta President and CEO of the Company and appointed Richard G.

Kyle Advisor to the CEO.

Mehta is an accomplished industry veteran who most recently served as President of the Motion business and a member of the Group Executive Committee at ABB Ltd.

He succeeds Richard G.

Kyle, who has served as Timken’s President and CEO since 2014.

Trade Law Enforcement:

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This includes:

political risks associated with the potential instability of governments and legal systems in countries in which the Company or its customers or suppliers conduct business, changes in currency valuations, strained geopolitical relations between countries in which we have significant operations, and recent world events that have increased the risks posed by international trade disputes, tariffs and sanctions;

(b) negative impacts to the Company's business, results of operations, financial position or liquidity, disruption to the Company's supply chains, negative impacts to customer demand or operations, and availability and health of employees, and governmental restrictions on travel and manufacturing operations;

political risks associated with the potential instability of governments and legal systems in countries in which the Company or its customers or suppliers conduct business, changes in currency valuations, additional costs, taxes and restrictions related to repatriation of cash in international jurisdictions, strained geopolitical relations between countries in which we have significant operations, and recent world events that have increased the risks posed by international trade disputes, tariffs and sanctions;

(b) negative impacts to the Company's business, results of operations, financial position or liquidity, disruption to the Company's supply chains, and negative impacts to operations;

(c) the effects of fluctuations in customer demand on sales, product mix and prices in the industries in which the Company operates.

This includes:

the ability of the Company to respond to rapid changes in customer demand, disruptions to the Company's supply chain, logistical issues associated with port closures or congestion, delays or increased costs , the effects of customer or supplier bankruptcies or liquidations, the impact of changes in industrial business cycles, the ability of the Company to effectively adjust the prices for its products in response to changing dynamics, the effects of distributor inventory corrections reflecting de-stocking of the supply chain and whether conditions of fair trade continue in the Company's markets;

the ability of the Company to respond to rapid changes in customer demand, disruptions to the Company's supply chain, the effects of customer or supplier bankruptcies or liquidations, the impact of changes in industrial business cycles, the ability of the Company to effectively adjust the prices for its products in response to changing dynamics, the effects of distributor inventory corrections reflecting de-stocking of the supply chain and whether conditions of fair trade continue in the Company's markets;

(d) competitive factors, including changes in market penetration, increasing price competition by existing or new foreign and domestic competitors, the introduction of new products or services by existing and new competitors, competition for skilled labor and new technology that may impact the way the Company’s products are produced, sold or distributed;

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changes in costs associated with varying levels of operations and manufacturing capacity;

availability and cost of raw materials and energy;

disruptions to the Company's supply chain and logistical issues associated with port closures or congestion, delays or increased costs;

availability and cost of raw materials, energy and fuel;

changes in costs associated with the effects of tariffs;

disruptions to the Company's supply chain and logistical issues associated with port closures or delays or increased costs;

changes in the expected costs associated with product warranty claims especially in industry segments with potential high claim values;

changes in the global regulatory landscape;

changes in the global regulatory landscape (including with respect to climate change or other environmental regulations);

changes resulting from inventory management and cost reduction initiatives;

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and changes in the cost of labor and benefits;

(f) the impact of inflation on employee expenses, shipping costs, raw material costs, energy and fuel costs and other production costs;

(g) the success of the Company’s operating plans, announced programs, initiatives and capital investments;

(f) the success of the Company’s operating plans, announced programs, initiatives and capital investments;

the ability to integrate acquired companies and to address material issues both identified and not uncovered during the Company's due diligence review;

and the ability of acquired companies to achieve satisfactory operating results, including results being accretive to earnings, realization of synergies and expected cash flow generation;

(h) the Company’s ability to maintain appropriate relations with unions or works councils that represent Company employees in certain locations in order to avoid disruptions of business;

(i) the continued attraction, retention and development of management, other key employees, and other skilled personnel at all levels of the organization, the successful development and execution of succession plans and management of other human capital matters;

(j) unanticipated litigation, claims, investigations or assessments.

(g) the Company’s ability to maintain appropriate relations with unions or works councils that represent Company employees in certain locations in order to avoid disruptions of business;

(h) the continued attraction, retention and development of management, other key employees, and other skilled personnel, the successful development and execution of succession plans and management of other human capital matters;

(i) unanticipated litigation, claims, investigations, remediation or assessments.

This includes:

claims, investigations or problems related to intellectual property, product liability or warranty, foreign export, sanctions and trade laws, government procurement regulations, competition and anti-bribery laws, climate change, environmental or health and safety issues, data privacy and taxes;

(k) changes in worldwide financial and capital markets, impacting the availability of financing on satisfactory terms as a result of financial stress affecting the banking system or otherwise, and the high interest rate environment, which affect the Company’s cost of funds and/or ability to raise capital, as well as customer demand and the ability of customers to obtain financing to purchase the Company’s products or equipment that contain the Company’s products;

claims, investigations or problems related to intellectual property, product liability or warranty, foreign export, sanctions and trade laws, government procurement regulations, competition and anti-bribery laws, climate change, PTFE, PFAS, other environmental or health and safety issues, data privacy and taxes;

(j) the rapidly evolving global regulatory landscape and the corresponding heightened operational complexity and compliance risks;

(k) changes in worldwide financial and capital markets, including fluctuations in interest rates, impacting the availability of financing on satisfactory terms as a result of financial stress affecting the banking system or otherwise, which affect the Company’s cost of funds and/or ability to raise capital, as well as customer demand and the ability of customers to obtain financing to purchase the Company’s products or equipment that contain the Company’s products;

(l) the Company's ability to satisfy its obligations and comply with covenants under its debt agreements, maintain favorable credit ratings and its ability to renew or refinance borrowings on favorable terms;

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

What changed 10-K

Item 7. Management’s Discussion and Analysis