What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-13 compared with 2025-02-20 · 179 added, 194 removed, 458 unchanged (45% of the section changed)

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Introduction:

The Timken Company designs and manufactures a growing portfolio of engineered bearings and industrial motion products, and related services.

The Timken Company designs and manufactures a growing portfolio of engineered bearings and industrial motion products, and provides related services.

With more than a century of knowledge and innovation, the Company continuously improves the reliability and efficiency of global machinery and equipment to move the world forward.

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®.

The Company’s growing portfolio features many strong brands, such as Timken®, GGB®, PT Tech®, Torsion Control Products®, Philadelphia Gear®, Cone Drive®, CGI®, Rollon®, Nadella®, Rosa Sistemi®, Diamond®, Drives®, Groeneveld®, BEKA®, Des-Case®, Lovejoy®, PT Tech®, Torsion Control Products® and Lagersmit®.

Timken posted $4.6 billion in sales in 2025 and employs approximately 19,000 people globally, operating in 44 countries.

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The following further describes these business segments:

• Timken’s Engineered Bearings segment features a broad range of product designs serving original equipment manufacturers (OEMs) and end-users worldwide.

• Timken’s Engineered Bearings segment features a broad range of product designs serving OEMs and end-users worldwide.

Timken is a leading authority on tapered roller bearings and leverages its position by applying engineering know-how and technology across its entire bearing portfolio, which includes tapered, spherical and cylindrical roller bearings;

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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®, Lagersmit® and CGI.

The Industrial Motion portfolio features many strong brands, including Philadelphia Gear®, Cone Drive®, CGI®, Spinea®, Rollon®, Nadella®, Rosa Sistemi®, Groeneveld®, BEKA®, Des-Case®, Diamond®, Drives®, Timken® Belts, Lovejoy®, PT Tech®, Torsion Control Products® 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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The Company intends to expand into new and existing markets by leveraging its collective knowledge of materials science, friction management and power transmission to create value for Timken customers.

Using a highly collaborative technical selling approach, the Company places particular emphasis on creating unique solutions for challenging and/or demanding applications.

Using a customer-centric and highly collaborative technical selling approach, the Company places particular emphasis on creating unique solutions for challenging and/or demanding applications.

The Company intends to grow in attractive market sectors around the world, emphasizing those spaces that are highly fragmented, demand high service and value the reliability and efficiency offered by Timken products.

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The following items highlight some of the Company's accomplishments in 2025:

• 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.

• In August, Timken issued its annual CSR report, highlighting advances in environmental sustainability, social impact and product innovation.

The report details Timken's progress toward its target to reduce aggregate Scope 1 and Scope 2 greenhouse gas (GHG) emissions intensity by 50 percent by 2030.

From its 2018 baseline year through the end of 2024, Timken decreased emissions intensity by about 42 percent, demonstrating the company's dedication to climate action and responsible operations.

• Timken increased its quarterly dividend by 3% in the second quarter and paid its 414th consecutive quarterly dividend in the fourth quarter.

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 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.

The Company achieved twelve straight years of higher annual dividends in 2025.

Timken also repurchased 779,300 common shares during the year.

• The Company strengthened its balance sheet by reducing total debt by $141 million and net debt by $132 million during the year.

• Timken welcomed Lucian Boldea to Timken as its new President and Chief Executive Officer ("CEO") in September.

• Throughout 2025, Timken received third-party recognition for the role it plays as a global industrial leader and responsible corporate citizen.

The Company was named one of the World's Most Ethical Companies® for the 14th time by Ethisphere, and one of America's Most Responsible Companies for the 6th year in a row by Newsweek and Statista.

RESULTS OF OPERATIONS

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Average number of diluted shares 70,231,706 70,750,482 — (0.7 %)

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 increase in net sales was primarily driven by favorable pricing, the benefit of acquisitions and the favorable impact of foreign currency exchange rate changes, partially offset by lower demand across both segments.

The decrease in net income was primarily due to incremental tariff costs, the impact of lower volume, unfavorable mix and higher impairment and pension remeasurement charges, partially offset by favorable pricing, lower material and logistics costs, reduced selling, general and administrative ("SG&A") and lower income tax expense.

The Company expects 2026 full-year revenue to be up in the range of 2% to 4% in total compared to 2025, primarily driven by higher demand across most market sectors, higher pricing and the favorable impact of foreign currency exchange rates.

The Company's earnings are expected to be up in 2026 compared to 2025, primarily due to higher pricing, the impact of higher volume, favorable mix, the impact of foreign currency exchange rate changes and lower material costs, partially offset by incremental tariff costs and higher SG&A expenses.

The Company expects to generate approximately $515 million of cash from operating activities in 2026 compared to $554.3 million in 2025, driven by higher working capital to support increased demand and higher cash taxes, partially offset by higher net income.

The Company expects capital expenditures in 2026 to be approximately 3.5% of sales.

THE STATEMENTS OF INCOME

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Operating income % to net sales 11.8 % 13.4 % (160) bps

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 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.

Net sales increased in 2025 compared to 2024 primarily due to the favorable impact of acquisitions of $38 million as well as the favorable impact of foreign currency exchange of $17 million, partially offset by lower organic sales of $46 million (lower demand, favorable pricing).

Operating income decreased in 2025 compared to 2024 due to incremental tariff costs and the impact of lower sales net of cost of products sold, partially offset by favorable pricing and lower SG&A expenses.

• Cost of products sold increased in 2025 compared to 2024 due to the incremental cost of tariffs of $65 million, the impact of foreign currency exchange rate changes of $16 million, and the incremental cost of goods sold from acquisitions of $15 million, partially offset by favorable material and logistics costs of $19 million and the impact of lower volume of $17 million.

• SG&A expenses decreased in 2025 compared to 2024 primarily due to reduced discretionary spending to align with lower demand, decreased accruals for potential uncollectible accounts, and reduced employee compensation, partially offset by the incremental expense associated with acquisitions and the unfavorable impact of foreign currency.

• Impairment and restructuring charges increased in 2025 compared to 2024 primarily due to severance expense related to the CEO transition, and restructuring charges related to the announced closure of the Company's bearing manufacturing facility in Heilbronn, Germany.

• 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.

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Interest expense, net $ (100.0) $ (110.2) $ 10.2 (9.3 %)

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.

Interest expense decreased in 2025 compared to 2024, primarily due to lower average debt levels during the year and lower average interest rates.

Interest income decreased in 2025 compared to 2024, primarily due to lower average cash levels during the year.

Other Income (Expense):

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Total other expense, net $ (24.6) $ (6.7) $ (17.9) 267.2 %

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.

The increase in non-service pension and other postretirement expense was primarily due to net actuarial ("mark-to-market") losses recorded in 2025 compared to net actuarial gains in 2024.

In 2025, the Company recognized $10.8 million of net mark-to-market losses, compared to $1.3 million of net mark-to-market gains in 2024.

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, 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").

The increase in other expense, net was primarily due to higher foreign currency exchange losses, net of derivative activity, recognized in 2025 compared to 2024.

Income Tax Expense:

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state and local income taxes.

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

This was partially offset by the release of valuation allowances on certain non-U.S.

deferred tax assets and release of accruals for uncertain tax positions.

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 in 2024.

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

foreign tax credit utilization from acquisition integration structuring.

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.

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 change in the effective tax rate for 2025 compared to 2024 was a decrease of 0.4%.

The decrease was primarily due to the release of valuation allowances on certain non-U.S.

deferred tax assets and the release of accruals for uncertain tax positions.

This was partially offset by the unfavorable impact of earnings in foreign jurisdictions where the effective tax rate was higher than 21%.

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

For a discussion of changes in consolidated results from 2024 to 2023, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.

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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 adjusted EBITDA.

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

Refer to Note 3 - 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.

GAAP to net sales adjusted to remove the effects of acquisitions and divestitures completed in 2024 and 2023 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 2024 and 2023:

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

GAAP to net sales adjusted to remove the effects of acquisitions completed in 2024 and foreign currency exchange rate changes.

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

The following item highlights the Company ' s acquisition completed in 2024:

• The Company acquired CGI, Inc.

("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 Engineered Solutions Group ("iMECH") during the fourth quarter of 2023.

Results for iMECH are reported in the Engineered Bearings segment.

• The Company completed the sale of Jiangsu TWB Bearings Co., Ltd.

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

Results for TWB were reported in the Engineered Bearings segment.

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

Results for ARB are reported in the Engineered Bearings segment.

Engineered Bearings Segment:

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Net sales $ 3,018.1 $ 3,034.3 $ (16.2) (0.5 %)

Acquisitions 19.0 — 19.0 NM

Divestitures (22.7) — (22.7) NM

Currency (0.9) — (0.9) NM

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, 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.

Net sales, excluding the impact of currency $ 3,019.0 $ 3,034.3 $ (15.3) (0.5 %)

The Engineered Bearings segment's net sales, excluding the effects of foreign currency exchange rate changes, decreased $15.3 million or 0.5% in 2025 compared to 2024, primarily driven by lower demand in the Americas and Europe, partially offset by higher demand in China, and higher pricing.

The segment experienced lower demand across most market sectors, with the auto/truck and heavy industries posting the largest declines, partially offset by higher demand in the renewable energy sector.

Adjusted EBITDA for the Engineered Bearings segment decreased in 2025 by $36.5 million or 6.0% compared to 2024, primarily due to incremental tariff costs and the impact of lower volume, partially offset by favorable price/mix, lower material and logistics costs and lower SG&A expenses.

• Cost of products sold increased in 2025 compared to 2024 due to incremental tariff costs of $55 million, partially offset by favorable material and logistics costs of $24 million.

• SG&A expenses decreased in 2025 compared to 2024 driven primarily by lower compensation expense and reduced discretionary spending, partially offset by the unfavorable impact of foreign currency.

Industrial Motion Segment:

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Net sales, excluding the impact of acquisitions and currency $ 1,507.7 $ 1,538.7 $ (31.0) (2.0 %)

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.

The Industrial Motion segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, decreased $31.0 million or 2.0% in 2025 compared to 2024, driven primarily by lower demand in most segment platforms, partially offset by higher pricing.

Sales were down across most markets, with the largest declines in renewable energy and industrial services.

Adjusted EBITDA decreased $9.1 million or 3.0% in 2025 compared to 2024 primarily due to the impact of lower volume and the incremental cost of tariffs, partially offset by favorable pricing and the benefit of acquisitions.

• Cost of products sold increased in 2025 compared to 2024 due to the impact of the incremental cost of goods sold from acquisitions of $25 million, the unfavorable impact of foreign currency of $14 million, and the incremental cost of tariffs of $10 million , partially offset by the impact of lower volume of $13 million.

• Depreciation and amortization increased in 2025 compared to 2024 primarily due to the addition of property, plant and equipment assets from the acquisition completed during 2024 and the addition of assets from capital projects in the Americas.

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

Unallocated Corporate:

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Unallocated corporate expense % to net sales (1.6 %) (1.5 %) — (10) bps

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.

Unallocated corporate expense increased in 2025 compared to 2024 primarily due to the unfavorable impact of foreign currency losses of $11.5 million in 2025 compared to $8.2 million in 2024 and higher charitable donations, partially offset by reduced corporate compensation expenses.

2025 2024 $ Change

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Net cash used in investing activities (148.3) (304.6) 156.3

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

Net cash used in financing activities (437.1) (194.8) (242.3)

Effect of exchange rate changes on cash 22.9 (22.0) 44.9

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

Decrease in cash, cash equivalents and restricted cash $ (8.2) $ (45.7) $ 37.5

Operating Activities:

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.

The increase in net cash provided by operating activities in 2025 compared to 2024 was primarily due to the favorable impact of working capital items of $95.1 million and the favorable impact of income taxes on cash of $17.2 million, partially offset by a decrease in net income of $58.0 million.

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

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2025 2024 $ Change

Cash (used in) provided by:

Cash provided by (used in):

Accounts receivable $ 3.7 $ (14.2) $ 17.9

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Other accrued expenses 27.6 (7.1) 34.7

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

Cash provided by (used in) working capital items $ 49.6 $ (45.5) $ 95.1

The following table displays the impact of income taxes on cash during 2025 and 2024:

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Investing Activities:

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.

The decrease in net cash used in investing activities in 2025 compared to 2024 was primarily due to a decrease in cash used for acquisitions of $167.4 million and a decrease in capital expenditures of $21.8 million, partially offset by a decrease in cash from the net liquidation of short-term marketable securities of $19.7 million and a decrease in proceeds from disposals of property, plant and equipment of $13.1 million.

Financing Activities:

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.

The change in net cash used in financing activities in 2025 compared to 2024 was primarily due to proceeds received from the sale of shares of Timken India Limited ("TIL") in 2024 of $232.3 million that did not repeat in 2025, an increase in the purchase of treasury shares of $16.9 million and an increase in noncontrolling dividends paid of $13.9 million, partially offset by an increase in net borrowings of $21.6 million.

LIQUIDITY AND CAPITAL RESOURCES

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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.

At December 31, 2025, the Senior Credit Facility had $21.2 million of outstanding borrowings.

The Credit Agreement has two financial covenants:

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The Accounts Receivable Facility is subject to certain borrowing base limitations and is secured by certain domestic trade accounts receivable of the Company.

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

The Accounts Receivable Facility had no borrowing base limitations at December 31, 2025.

As of December 31, 2025, there were no outstanding borrowings under the Accounts Receivable Facility.

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At December 31, 2025, the Company had borrowings outstanding of $24.5 million and bank guarantees of $6.2 million, which reduced the aggregate availability under these facilities to $216.5 million.

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.

On May 23, 2024, the Company issued fixed-rate Euro senior unsecured notes ("2034 Notes") in the aggregate principal amount of €600 million with an interest rate of 4.13%, 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, 2025, the Company was in full compliance with all applicable covenants on its outstanding debt.

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

The Company expects capital expenditures in 2026 to be approximately 3.5% of sales.

FUTURE CONTRACTUAL AND OTHER PAYMENTS

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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, except its Belts and Chain reporting unit, in the fourth quarter of 2024.

The Company chose to utilize this qualitative assessment in the annual goodwill impairment testing for all reporting units in the fourth quarter of 2025.

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.

In 2024, the Company performed 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.

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

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 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.

In 2025, the Company recorded $13.2 million of net tax benefit for uncertain tax positions, which consisted primarily of $21.0 million of the net reversal of accruals for prior year uncertain tax positions and settlements with tax authorities.

This benefit was partially offset by $7.8 million related to increases to current and prior year uncertain tax positions and interest.

During 2025, the Company recorded a $2.6 million increase of uncertain tax positions related to foreign currency translation adjustments and deferred tax liabilities.

The Company also released $0.3 million of uncertain tax positions related to prior years for acquisitions made during 2024.

Purchase Accounting and Business Combinations:

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Refer to Note 1 - Significant Accounting Policies in the Notes to the Consolidated Financial Statements for further discussion around the Company's revenue policy.

Benefit Plans:

Defined Benefit Pension Plans:

The Company sponsors a number of defined benefit pension plans that cover eligible employees.

The Company also sponsors several funded and unfunded postretirement plans that provide health care and life insurance benefits for eligible retirees and their dependents.

These plans are accounted for in accordance with ASC Topic 715-30, "Defined Benefit Plans – Pension," and ASC Topic 715-60, "Defined Benefit Plans – Other Postretirement."

The measurement of liabilities related to these plans is based on management's assumptions related to future events, including discount rates and health care cost trend rates.

These plans are accounted for in accordance with ASC Topic 715-30, "Defined Benefit Plans – Pension."

The measurement of liabilities related to these plans is based on management's assumptions related to future events, including discount rates.

Management regularly evaluates these assumptions and adjusts them as required and appropriate.

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Actual experience that differs from these assumptions may affect future liquidity, expense and the overall financial position of the Company.

While the Company believes that current assumptions are appropriate, significant differences in actual experience or significant changes in these assumptions may affect materially the Company's pension and other postretirement employee benefit obligations and its future expense and cash flow.

The discount rate is used to calculate the present value of expected future pension and postretirement cash flows as of the measurement date.

The Company establishes the discount rate by constructing a notional portfolio of high-quality corporate bonds and matching the coupon payments and bond maturities to projected benefit payments under the Company's pension and postretirement welfare plans.

The bonds included in the portfolio generally are non-callable.

The discount rate is used to calculate the present value of expected future pension cash flows as of the measurement date.

A lower discount rate will result in a higher benefit obligation;

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The discount rate also is used to calculate the annual interest cost, which is a component of net periodic benefit cost.

During 2025, the Company entered into an insurance buy-in contract for its pension obligation related to its defined benefit pension plan in the United Kingdom ("U.K.").

Refer to Note 17 - Retirement Benefit Plans in the Notes to the Consolidated Financial Statements for additional information regarding the insurance buy-in contract.

The insurance buy-in contract matches cash flows with future benefit payments for participants as of the contract date with the obligation remaining with the plan.

The discount rate for this plan has been set at the discount rate inherent in the insurance buy-in contract.

The expected rate of return on plan assets is determined by analyzing the historical long-term performance of the Company's pension plan assets, as well as the mix of plan assets between equities, fixed-income securities and other investments, the expected long-term rate of return expected for those asset classes and long-term inflation rates.

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The Company recognizes actuarial gains and losses immediately through net periodic benefit cost upon the annual remeasurement in the fourth quarter, or on an interim basis if specific events trigger a remeasurement.

Defined Benefit Pension Plans:

The Company recognized net periodic benefit cost of $25.2 million during 2025 for defined benefit pension plans, compared to net periodic benefit cost of $12.2 million during 2024.

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.

The Company recognized net mark-to-market losses of $11.2 million during 2025 compared to net mark-to-market gains of $0.7 million during 2024.

Mark-to-market losses during 2025 were primarily due to the impact of a net reduction in the discount rate used to measure the Company's defined benefit pension obligations of $10.6 million and the impact of experience losses of $2.9 million, partially offset by higher than expected returns on plans assets of $1.3 million and other actuarial gains of $1.0 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 36 basis point decrease in the discount rate used to measure its plan obligations in the U.K., which decreased from 5.43% in 2024 to 5.07% in 2025, and a 24 basis point decrease in the weighted-average discount rate used to measure its U.S.

plan obligations, which decreased from 5.83% in 2024 to 5.59% in 2025.

Excluding mark-to-market gains and losses recognized in 2025 and 2024, including a curtailment gain, net period benefit cost was $14.0 million and $13.0 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.

The increase in 2025 was due to higher interest costs.

In 2026, the Company expects net periodic benefit cost to be approximately $12 million for defined benefit pension plans, compared to net periodic benefit cost of $25.2 million in 2025.

Net periodic benefit cost for 2026 does not include mark-to-market charges that will be recognized immediately through earnings in the fourth quarter of 2026, or on an interim basis if specific events trigger a remeasurement.

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.

Excluding the mark-to-market losses of $11.2 million recognized in 2025, net periodic benefit cost was $14.0 million in 2025.

The expected decrease in net periodic benefit cost for 2026, excluding mark-to-market charges, primarily reflects a higher expected return on plan assets.

The Company expects to contribute to its defined benefit pension plans or pay directly to participants of defined benefit plans approximately $32 million in 2026 compared to $36.8 million of contributions and payments in 2025.

The decrease is primarily due to lower expected contributions on to the U.S.

pension plans in 2026.

For expense purposes in 2025, the Company applied a weighted-average discount rate of 5.83% to its U.S.

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In addition, a 25 basis point decrease in returns on pension assets will decrease income before income taxes by $0.6 million, and a 25 basis point increase in return on pension assets will increase income before income taxes by $0.6 million.

Other Postretirement Benefit Plans:

The Company recognized net periodic benefit credit of $6.9 million during 2024 for other postretirement benefit plans, compared to net periodic benefit credit of $7.3 million during 2023.

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

For expense purposes in 2024, the Company applied a discount rate of 5.55% to its other postretirement benefit plans.

For expense purposes in 2025, the Company will apply a discount rate of 5.83% to its other postretirement benefit plans.

The following table presents the sensitivity of the Company's accumulated other postretirement benefit obligation ("APBO") to the indicated increase/decrease in key assumptions:

+ / - Change at December 31, 2024

Discount rate .25% $ 0.6

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 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.

A one percentage point increase in the assumed health care cost trend rate would have increased the 2024 total service and interest cost components by $0.1 million and would have increased the postretirement benefit obligation by $0.7 million.

A one percentage point decrease would provide corresponding reductions of $0.1 million and $0.7 million, respectively.

NON-GAAP MEASURES

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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.

This information is intended to supplement U.S.

GAAP financial measures and is not intended to replace U.S.

GAAP financial measures.

Net debt and the ratio of net debt to capital is disclosed in the "Liquidity and Capital Resources" section of Management's Discussion and Analysis of Financial Condition and Results of Operations.

Adjusted Net Income and Adjusted EBITDA:

Adjusted net income and adjusted earnings per share represent net income attributable to The Timken Company and diluted earnings per share, respectively, adjusted for the amortization of intangible assets related to acquisitions, impairment, restructuring and reorganization charges, acquisition costs, including transaction costs and the amortization of the inventory step-up, property losses and recoveries, actuarial gains and losses associated with the remeasurement of the Company's defined benefit pension and other postretirement benefit plans, gains and losses on the sale of real estate, gains and losses on divestitures, the income tax impact of these adjustments, as well as other income tax discrete items, and other items from time to time that are not part of the Company's core operations.

Adjusted net income and adjusted earnings per share represent net income attributable to The Timken Company and diluted earnings per share, respectively, adjusted for the amortization of intangible assets related to acquisitions, impairment, restructuring and reorganization charges, acquisition costs, including transaction costs and the amortization of the inventory step-up, property losses and recoveries, actuarial gains and losses associated with the remeasurement of the Company's defined benefit pension and other postretirement benefit plans, CEO transition expenses, gains and losses on the sale of real estate, gains and losses on divestitures, the income tax impact of these adjustments, as well as other discrete income tax items, and other items from time to time that are not part of the Company's core operations.

Management believes adjusted net income and adjusted earnings per share are useful to investors as they are representative of the Company's core operations and are used in the management of the business.

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— 13.0 31.8 14.8 2.3

Acquisition-related gain (4)

— — — (0.9) (11.1)

Gain on divestitures and sale of certain assets (4)

(2.6) (14.7) (5.2) (2.9) —

Property losses (recoveries) and related

1.2 — — — (5.5)

Property losses and related expenses (5)

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

CEO succession expenses (7)

CEO transition expenses (6)

20.8 3.7 — — —

Noncontrolling interest of above adjustments 4.9 (0.2) (2.1) (5.3) —

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Adjusted EBITDA Margin (% of net sales) 17.4 % 18.5 % 19.7 % 19.0 % 17.4 %

Diluted earnings and adjusted earnings per share in the table below are based on net income attributable to The Timken Company and adjusted net income, respectively, in the table above.

Twelve Months Ended December 31,

2024 2023 2022 2021 2020

Diluted earnings per share (EPS) $ 4.99 $ 5.47 $ 5.48 $ 4.79 $ 3.72

Adjusted EPS $ 5.79 $ 7.05 $ 6.46 $ 5.18 $ 4.56

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

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

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Impairment, restructuring and reorganization charges for 2023 included $28.3 million related to the impairment of goodwill.

Impairment, restructuring and reorganization charges for 2022 included $29.3 million related to the sale of ADS.

Impairment, restructuring and reorganization charges for 2022 included $29.3 million related to the sale of Timken Aerospace Drives Systems, LLC.

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 (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.

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

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

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

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

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

(3) Acquisition-related charges represent deal-related expenses associated with completed transactions and certain unsuccessful transactions, as well as any resulting inventory step-up impact, and a bargain purchase gain in 2021 on the acquisition of the assets of Aurora Bearing Company, that closed on November 30, 2020.

(4) 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.

(5) 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.

(6) On August 22, 2025, the Company announced the appointment of Lucian Boldea as President and CEO, effective September 1, 2025, and that Richard G.

Kyle would retire from the role of interim President and CEO.

On March 31, 2025, the Company announced that Tarak B.

Mehta, President and CEO of the Company, would be departing from the Company, effective immediately, and Mr.

Kyle would be serving as interim President and CEO.

CEO transition expenses primarily relate to the cost of the settlement agreement with Mr.

Mehta in connection with his departure, net of the impact for stock awards forfeited, the acceleration of certain stock compensation awards issued to Mr.

Kyle, and other one-time costs associated with the transition in 2025.

During 2024, the Company announced that Mr.

Kyle, President and CEO of the Company, would be retiring from his position as CEO as of February 15, 2025, and that Mr.

Mehta would be appointed President and CEO on September 5, 2024.

CEO transition expenses for 2024 relate to the acceleration of certain stock compensation awards for Mr.

Kyle and other one-time costs associated with the transition in 2024.

(7) 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.

(8) Depreciation and amortization shown excludes depreciation recognized in reorganization charges, if any.

Diluted earnings and adjusted earnings per share in the table below are based on net income attributable to The Timken Company and adjusted net income, respectively, in the table above.

Twelve Months Ended December 31,

2025 2024 2023 2022 2021

Diluted earnings per share (EPS) $ 4.11 $ 4.99 $ 5.47 $ 5.48 $ 4.79

Adjusted EPS $ 5.33 $ 5.79 $ 7.05 $ 6.46 $ 5.18

Diluted shares 70,231,706 70,750,482 72,081,884 74,323,839 77,006,589

Free Cash Flow:

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Net income for the trailing twelve months ended December 31, 2025 and December 31, 2024 was $317.3 million and $375.3 million, respectively.

Net debt to adjusted EBITDA for the trailing twelve months was 2.0 at December 31, 2024 , compared with 2.1 at December 31, 2023 .

Net debt to adjusted EBITDA for the trailing twelve months was 2.0 at both December 31, 2025 and December 31, 2024 .

Reconciliation of Net income to Adjusted EBITDA for the twelve months:

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$ 20.7 $ 17.8

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

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

Acquisition-related charges (3)

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Gain on divestitures and sale of certain assets (5)

CEO succession expenses (6)

CEO transition 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, 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.

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

The Company recognizes actuarial losses and (gains) 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) 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.

(4) 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.

(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.

(6) On August 22, 2025, the Company announced the appointment of Lucian Boldea as President and CEO, effective September 1, 2025, and that Richard G.

Kyle would retire from the role of interim President and CEO.

On March 31, 2025, the Company announced that Tarak B.

Mehta, President and CEO of the Company, would be departing from the Company, effective immediately, and Mr.

Kyle would be serving as interim President and CEO.

CEO transition expenses primarily relate to the cost of the settlement agreement with Mr.

Mehta in connection with his departure, net of the impact for stock awards forfeited, the acceleration of certain stock compensation awards issued to Mr.

Kyle, and other one-time costs associated with the transition in 2025.

During 2024, the Company announced that Mr.

Kyle, President and CEO of the Company, would be retiring from his position as CEO as of February 15, 2025, and that Mr.

Mehta would be appointed President and CEO on September 5, 2024.

CEO transition expenses for 2024 relate to the acceleration of certain stock compensation awards for Mr.

Kyle and other one-time costs associated with the transition in 2024.

Return on Invested Capital:

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Total equity 3,345.7 2,984.1 2,702.4 2,352.9 2,377.7 2,225.2

Invested capital (total debt + total

Invested capital (net debt + total

equity) 4,903.3 4,673.6 4,679.4 3,984.5 3,585.5 3,469.5

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Return on invested capital 9.8 % 11.0 % 13.8 % 14.5 % 12.9 %

(1) Refer to page 43 for reconciliations to the most directly comparable GAAP financial measures.

(1) Refer to page 39 for reconciliations to the most directly comparable U.S.

GAAP financial measures.

(2) Depreciation and amortization shown excludes depreciation recognized in reorganization charges, if any.

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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 $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.

Net of related derivative activity, the Company recognized foreign currency exchange losses resulting from transactions of $14.0 million, $9.3 million and $14.8 million for the years ended December 31, 2025, 2024 and 2023, respectively.

For the year ended December 31, 2025, the Company recorded a positive non-cash foreign currency translation adjustment of $215.6 million that increased shareholders’ equity, compared to a negative non-cash foreign currency translation adjustment of $156.4 million that decreased shareholders’ equity for the year ended December 31, 2024.

The foreign currency translation adjustments for the year ended December 31, 2025 were positively impacted by the weakening of the U.S.

dollar relative to other currencies as of December 31, 2025 compared to December 31, 2024.

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.

CEO Transition:

On September 5, 2024, the Company's Board of Directors appointed Tarak B.

Mehta President and CEO 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.

Mehta succeeded Mr.

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

On March 31, 2025, Timken announced that the Company and Mr.

Mehta had mutually agreed that Mr.

Mehta would depart from the Company, including resigning as a member of the Company’s Board of Directors, effective immediately.

The Company also announced that the Board had appointed Mr.

Kyle as the interim President and CEO of the Company.

On September 1, 2025, the Company's Board appointed Lucian Boldea President and CEO and appointed Mr.

Kyle Advisor to the CEO.

During the three months ended March 31, 2025, the Company recorded severance of $9.3 million, plus related taxes, for Mr.

Mehta's settlement arrangement and release of claims for his termination without cause.

Approximately two-thirds of this amount was paid in 2025, with the remaining amounts to be paid in 2026 and 2027.

In addition, the Company recorded incremental stock compensation expense related to stock compensation awards issued to Mr.

Kyle during the twelve months ended December 31, 2025, as well as other one-time costs associated with the transition in 2025.

CEO transition expenses for 2024 relate to the acceleration of certain stock compensation awards for Mr.

Kyle and other one-time costs associated with the transition in 2024.

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, 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;

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 macroeconomic 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;

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This includes:

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;

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, changes in customer preferences due to emergent technologies, evolving regulatory landscapes or other factors 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, such as AI, that may impact the way the Company’s products are produced, sold or distributed;

(e) changes in operating costs.

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availability and cost of raw materials, energy and fuel;

changes in costs associated with the effects of tariffs;

changes in tariff rates and other costs associated with tariffs;

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

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the effects of unplanned plant shutdowns;

costs associated with inclement weather events;

the effects of government-imposed restrictions, commercial requirements and Company goals associated with climate change and emissions or other sustainability initiatives;

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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, 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;

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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