UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



ý☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~2021



o☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-1169

THE TIMKEN COMPANY

(Exact name of registrant as specified in its charter)



~~OHIO~~

	~~34-0577130~~
Ohio			34-0577130
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

4500 Mount Pleasant Street NW ~~North Canton, Ohio~~			~~44720-5450~~
North Canton		Ohio	44720-5450
(Address of principal executive offices)			(Zip Code)

234.262.3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Shares, without par value

TKR

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý☒ No o☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ý☒ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” a “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

~~Large accelerated filer~~

~~Accelerated filer~~

Non-accelerated filer

o☐

Smaller reporting company

o☐

Emerging growth company

o☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o☐ No ý☒

Indicate the number of shares outstanding of each of the issuer's classes of common ~~stock,~~shares, as of the latest practicable date.

Class

Outstanding at ~~September~~June 30, ~~2017~~2021

Common Shares, without par value

~~77,617,122~~76,258,559 shares

Table of Contents

THE TIMKEN COMPANY

INDEX TO FORM 10-Q REPORT


					PAGE
I.			PART I.		~~PAGE~~
I.			Item 1.	~~PART I.~~
	~~Item 1.~~	Financial Statements	1
			Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2825
			Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4844
			Item 4.	Controls and Procedures	4844
II.			PART II.
			Item 1.	Legal Proceedings	4945
			Item1A.	Risk Factors	4945
			Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4945
			Item 6.	Exhibits	5046

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THE TIMKEN COMPANY AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,				Six Months Ended June 30,
	2017			2016			2017			2016				2021		2020		2021		2020
(Dollars in millions, except per share data)				(Revised)						(Revised)			(Dollars in millions, except per share data)
Net sales	$	771.4		$	657.4		$	2,225.8		$	2,015.0		Net sales	$	1,062.9	$	803.5	$	2,088.3	$	1,726.9
Cost of products sold	554.4			487.7			1,626.5			1,477.7			Cost of products sold	760.6		573.2		1,486.8		1,217.7
Gross Profit	217.0			169.7			599.3			537.3			Gross Profit	302.3		230.3		601.5		509.2
Selling, general and administrative expenses	134.0			107.2			377.4			331.3			Selling, general and administrative expenses	149.0		111.8		293.5		265.4
Pension settlement expenses	—			0.1			—			1.3

Impairment and restructuring charges	1.3			5.3			3.8			18.7			Impairment and restructuring charges	1.3		3.1		5.3		6.7

Operating Income	81.7			57.1			218.1			186.0			Operating Income	152.0		115.4		302.7		237.1
Interest expense	(10.1		)	(8.0		)	(26.5		)	(25.1		)	Interest expense	(15.3)		(18.9)		(30.2)		(36.0)
Interest income	0.7			0.4			2.0			1.1			Interest income	0.7		0.6		1.2		2.1
Continued Dumping & Subsidy Offset Act income (expense), net	—			(0.2		)	—			53.6
Other income (expense), net	2.9			(0.1		)	9.1			(1.8		)

Non-service pension and other postretirement income (expense)													Non-service pension and other postretirement income (expense)	1.4		(5.3)		5.4		(1.9)
Other (expense) income, net													Other (expense) income, net	(2.2)		(2.0)		(1.2)		2.1
Income Before Income Taxes	75.2			49.2			202.7			213.8			Income Before Income Taxes	136.6		89.8		277.9		203.4
Provision for income taxes	21.1			15.2			28.5			65.8			Provision for income taxes	29.4		28.0		54.7		57.6
Net Income	54.1			34.0			174.2			148.0			Net Income	107.2		61.8		223.2		145.8
Less: Net income attributable to noncontrolling interest	0.6			0.4			—			0.3
Net Income attributable to The Timken Company	$	53.5		$	33.6		$	174.2		$	147.7
Less: Net income (loss) attributable to noncontrolling interest													Less: Net income (loss) attributable to noncontrolling interest	2.4		(0.1)		5.1		3.2
Net Income Attributable to The Timken Company													Net Income Attributable to The Timken Company	$	104.8	$	61.9	$	218.1	$	142.6

Net Income per Common Share attributable to The Timken Company's Common Shareholders
Net Income per Common Share Attributable to The Timken Company Common Shareholders													Net Income per Common Share Attributable to The Timken Company Common Shareholders
Basic earnings per share	$	0.69		$	0.43		$	2.24		$	1.87		Basic earnings per share	$	1.38	$	0.82	$	2.87	$	1.89

Diluted earnings per share	$	0.68		$	0.43		$	2.21		$	1.86		Diluted earnings per share	$	1.36	$	0.82	$	2.82	$	1.88

Dividends per share	$	0.27		$	0.26		$	0.80		$	0.78

See accompanying Notes to the Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended September 30,					Nine Months Ended September 30,							Three Months Ended June 30,				Six Months Ended June 30,
	2017			2016		2017			2016				2021		2020		2021		2020
(Dollars in millions)				(Revised)					(Revised)			(Dollars in millions)

Net Income	$	54.1		$	34.0	$	174.2		$	148.0		Net Income	$	107.2	$	61.8	$	223.2	$	145.8
Other comprehensive income (loss), net of tax:												Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	10.9			3.7		42.8			5.2			Foreign currency translation adjustments	23.2		24.5		(21.2)		(54.3)
Pension and postretirement liability adjustment	0.1			0.4		0.2			1.2
Pension and postretirement liability adjustments												Pension and postretirement liability adjustments	(1.7)		(1.5)		(3.3)		(2.8)
Change in fair value of marketable securities												Change in fair value of marketable securities	0		0.5		0		0.1
Change in fair value of derivative financial instruments	(2.0		)	—		(4.2		)	(1.6		)	Change in fair value of derivative financial instruments	(0.2)		(2.6)		2.0		1.6
Other comprehensive income, net of tax	9.0			4.1		38.8			4.8
Other comprehensive income (loss), net of tax												Other comprehensive income (loss), net of tax	21.3		20.9		(22.5)		(55.4)
Comprehensive Income, net of tax	63.1			38.1		213.0			152.8			Comprehensive Income, net of tax	128.5		82.7		200.7		90.4
Less: comprehensive income attributable to noncontrolling interest	0.5			1.0		1.9			2.2
Comprehensive Income attributable to The Timken Company	$	62.6		$	37.1	$	211.1		$	150.6
Less: comprehensive income (loss) attributable to noncontrolling interest												Less: comprehensive income (loss) attributable to noncontrolling interest	1.8		1.1		4.1		(3.1)
Comprehensive Income Attributable to The Timken Company												Comprehensive Income Attributable to The Timken Company	$	126.7	$	81.6	$	196.6	$	93.5

See accompanying Notes to the Consolidated Financial Statements.

Table of Contents

Consolidated Balance Sheets


	(Unaudited)			(Revised)
	September 30, 2017			December 31, 2016				(Unaudited)
(Dollars in millions)							(Dollars in millions)	June 30, 2021		December 31, 2020
ASSETS							ASSETS
Current Assets							Current Assets
Cash and cash equivalents	$	137.2		$	148.8		Cash and cash equivalents	$	305.5	$	320.3
Restricted cash	3.3			2.7			Restricted cash	0.8		0.8
Accounts receivable, less allowances (2017 – $20.5 million; 2016 – $20.2 million)	542.2			438.0
Accounts receivable, less allowances (2021 – $16.9 million; 2020 – $16.5 million)							Accounts receivable, less allowances (2021 – $16.9 million; 2020 – $16.5 million)	704.4		581.1
Unbilled receivables							Unbilled receivables	100.4		110.9
Inventories, net	687.5			553.7			Inventories, net	919.5		841.3
Deferred charges and prepaid expenses	39.9			20.3			Deferred charges and prepaid expenses	34.2		39.9
Other current assets	64.2			48.4			Other current assets	130.2		106.0

Total Current Assets	1,474.3			1,211.9			Total Current Assets	2,195.0		2,000.3

Property, Plant and Equipment, net	842.2			804.4			Property, Plant and Equipment, net	1,025.1		1,035.6

Other Assets							Other Assets
Goodwill	510.3			357.5			Goodwill	1,034.8		1,047.6
Other intangible assets							Other intangible assets	704.2		741.4
Operating lease assets							Operating lease assets	115.3		118.2
Non-current pension assets	31.6			32.1			Non-current pension assets	3.2		2.0
Other intangible assets	428.9			271.0

Deferred income taxes	47.9			51.4			Deferred income taxes	70.9		77.0
Other non-current assets	28.4			34.9			Other non-current assets	17.7		19.5

Total Other Assets	1,047.1			746.9			Total Other Assets	1,946.1		2,005.7
Total Assets	$	3,363.6		$	2,763.2		Total Assets	$	5,166.2	$	5,041.6

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES AND EQUITY							LIABILITIES AND EQUITY
Current Liabilities							Current Liabilities
Short-term debt	$	41.1		$	19.2		Short-term debt	$	76.0	$	119.8
Current portion of long-term debt	5.0			5.0			Current portion of long-term debt	11.1		10.9
Short-term operating lease liabilities							Short-term operating lease liabilities	27.0		27.2
Accounts payable, trade	248.1			176.2			Accounts payable, trade	385.1		351.4
Salaries, wages and benefits	112.2			85.9			Salaries, wages and benefits	131.9		135.7
Income taxes payable	7.4			16.9			Income taxes payable	24.8		16.1

Other current liabilities	154.9			149.5			Other current liabilities	201.4		186.9

Total Current Liabilities	568.7			452.7			Total Current Liabilities	857.3		848.0

Non-Current Liabilities							Non-Current Liabilities
Long-term debt	959.8			635.0			Long-term debt	1,424.3		1,433.9
Accrued pension cost	160.3			154.7
Accrued postretirement benefits cost	126.7			131.5
Accrued pension benefits							Accrued pension benefits	160.6		163.0
Accrued postretirement benefits							Accrued postretirement benefits	51.4		41.3
Long-term operating lease liabilities							Long-term operating lease liabilities	72.5		75.5
Deferred income taxes	44.9			3.9			Deferred income taxes	135.0		148.7
Other non-current liabilities	47.3			74.5			Other non-current liabilities	97.8		106.0

Total Non-Current Liabilities	1,339.0			999.6			Total Non-Current Liabilities	1,941.6		1,968.4

Shareholders’ Equity							Shareholders’ Equity
Class I and II Serial Preferred Stock, without par value:							Class I and II Serial Preferred Stock, without par value:
Authorized – 10,000,000 shares each class, none issued	—			—			Authorized – 10,000,000 shares each class, none issued	0		0
Common stock, without par value:
Common shares, without par value:							Common shares, without par value:
Authorized – 200,000,000 shares							Authorized – 200,000,000 shares
Issued (including shares in treasury) (2017 – 98,375,135 shares; 2016 – 98,375,135 shares)
Issued (including shares in treasury) (2021 – 77,069,551 shares; 2020 – 75,834,668 shares)							Issued (including shares in treasury) (2021 – 77,069,551 shares; 2020 – 75,834,668 shares)
Stated capital	53.1			53.1			Stated capital	40.7		40.7
Other paid-in capital	898.2			906.9			Other paid-in capital	778.6		740.7
Earnings invested in the business	1,400.2			1,289.3
Accumulated other comprehensive loss	(41.0		)	(77.9		)
Treasury shares at cost (2017 – 20,758,013 shares; 2016 – 20,925,492 shares)	(887.5		)	(891.7		)
Retained earnings							Retained earnings	1,510.9		1,339.5
Accumulated other comprehensive income							Accumulated other comprehensive income	19.8		41.3
Treasury shares at cost (2021 – 810,992 shares; 2020 – 158,836 shares)							Treasury shares at cost (2021 – 810,992 shares; 2020 – 158,836 shares)	(59.1)		(9.3)
Total Shareholders’ Equity	1,423.0			1,279.7			Total Shareholders’ Equity	2,290.9		2,152.9
Noncontrolling Interest	32.9			31.2			Noncontrolling Interest	76.4		72.3
Total Equity	1,455.9			1,310.9			Total Equity	2,367.3		2,225.2
Total Liabilities and Shareholders’ Equity	$	3,363.6		$	2,763.2
Total Liabilities and Equity							Total Liabilities and Equity	$	5,166.2	$	5,041.6

See accompanying Notes to the Consolidated Financial Statements.

Table of Contents

Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,							Six Months Ended June 30,
	2017			2016				2021		2020
(Dollars in millions)				(Revised)			(Dollars in millions)
CASH PROVIDED (USED)							CASH PROVIDED (USED)
Operating Activities							Operating Activities
Net income attributable to The Timken Company	$	174.2		$	147.7
Net income attributable to noncontrolling interest	—			0.3
Net income							Net income	$	223.2	$	145.8
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	102.5			98.3			Depreciation and amortization	85.2		84.0
Impairment charges	—			3.8			Impairment charges	4.5		0.1
(Gain) loss on sale of assets	(2.6		)	0.8
Deferred income tax provision	7.5			4.6
Loss on sale of assets							Loss on sale of assets	0.7		1.6

Acquisition-related gain							Acquisition-related gain	(0.6)		0
Deferred income tax benefit							Deferred income tax benefit	(5.8)		(7.1)
Stock-based compensation expense	18.2			10.9			Stock-based compensation expense	12.5		11.4
Pension and other postretirement expense	12.6			14.5
Pension contributions and other postretirement benefit payments	(16.3		)	(22.3		)
Pension and other postretirement benefit expense							Pension and other postretirement benefit expense	0.5		8.2
Pension and other postretirement benefit contributions and payments							Pension and other postretirement benefit contributions and payments	(15.0)		(8.6)

Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Accounts receivable	(61.6		)	12.2			Accounts receivable	(125.8)		(8.4)
Unbilled receivables							Unbilled receivables	10.4		3.0
Inventories	(85.4		)	(13.6		)	Inventories	(81.4)		41.3
Accounts payable, trade	55.7			15.0			Accounts payable, trade	41.2		(28.9)
Other accrued expenses	15.9			(17.5		)	Other accrued expenses	30.8		5.3
Income taxes	(59.6		)	22.9			Income taxes	(1.6)		30.9
Other, net	(18.2		)	1.1			Other, net	0		25.0

Net Cash Provided by Operating Activities	142.9			278.7			Net Cash Provided by Operating Activities	178.8		303.6

Investing Activities							Investing Activities
Capital expenditures	(62.5		)	(84.4		)	Capital expenditures	(60.5)		(56.5)
Acquisitions, net of cash received	(347.2		)	(62.8		)	Acquisitions, net of cash received	0.1		(6.7)
Proceeds from disposal of property, plant and equipment	6.8			1.5

Investments in short-term marketable securities, net	(4.2		)	2.1			Investments in short-term marketable securities, net	(13.8)		(1.6)
Other	(0.3		)	0.3			Other	0.3		0.1

Net Cash Used in Investing Activities	(407.4		)	(143.3		)	Net Cash Used in Investing Activities	(73.9)		(64.7)

Financing Activities							Financing Activities
Cash dividends paid to shareholders	(62.4		)	(61.4		)	Cash dividends paid to shareholders	(46.7)		(43.9)
Purchase of treasury shares	(41.0		)	(83.3		)	Purchase of treasury shares	(26.3)		(42.3)
Proceeds from exercise of stock options	27.7			0.7			Proceeds from exercise of stock options	25.4		7.5
Shares surrendered for taxes	(10.8		)	(1.6		)
Payments related to tax withholding for stock-based compensation							Payments related to tax withholding for stock-based compensation	(23.5)		(10.4)
Accounts receivable facility borrowings	51.2			50.0			Accounts receivable facility borrowings	66.1		10.0
Accounts receivable facility payments	(25.3		)	(30.1		)	Accounts receivable facility payments	(124.1)		(110.0)
Proceeds from long-term debt	862.7			275.5			Proceeds from long-term debt	135.0		550.0
Payments on long-term debt	(574.4		)	(290.1		)	Payments on long-term debt	(141.4)		(417.1)
Deferred financing costs	(1.1		)	—			Deferred financing costs	0		(1.6)
Short-term debt activity, net	12.8			(1.4		)	Short-term debt activity, net	16.6		26.5
Increase in restricted cash	(0.5		)	(2.5		)
Other	(2.6		)	4.5
Net Cash Provided by (Used in) Financing Activities	236.3			(139.7		)

Net Cash Used in Financing Activities							Net Cash Used in Financing Activities	(118.9)		(31.3)
Effect of exchange rate changes on cash	16.6			3.7			Effect of exchange rate changes on cash	(0.8)		(7.7)
Decrease in Cash and Cash Equivalents	(11.6		)	(0.6		)
Cash and cash equivalents at beginning of year	148.8			129.6
Cash and Cash Equivalents at End of Period	$	137.2		$	129.0
(Decrease) Increase in Cash, Cash Equivalents and Restricted Cash							(Decrease) Increase in Cash, Cash Equivalents and Restricted Cash	(14.8)		199.9
Cash, cash equivalents and restricted cash at beginning of year							Cash, cash equivalents and restricted cash at beginning of year	321.1		216.2
Cash, Cash Equivalents and Restricted Cash at End of Period							Cash, Cash Equivalents and Restricted Cash at End of Period	$	306.3	$	416.1

See accompanying Notes to the Consolidated Financial Statements.

Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions, except per share data)

Note 1 - Basis of Presentation

The accompanying Consolidated Financial Statements (unaudited) for The Timken Company (the "Company" or "Timken") have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by the accounting principles generally accepted in the United States ("U.S. GAAP") for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and disclosures considered necessary for a fair presentation have been included. For further information, refer to the Consolidated Financial Statements and accompanying Notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020.

~~. Certain amounts recorded in 2016 consolidated financial statements and accompanying footnotes have been reclassified to conform to the current presentation.~~

Note 2 - ~~Change~~Significant Accounting Policies

The Company's significant accounting policies are detailed in "Note 1 - Significant Accounting ~~Principles~~Policies"

~~Effective January 1, 2017,~~ of the ~~Company voluntarily changed its accounting principles~~Annual Report on Form 10-K for recognizing actuarial gains and losses and expected returns on plan assets for its defined benefit pension and other postretirement benefit plans, with retrospective application to prior periods. Prior to 2017, the Company amortized, as a component of pension and other postretirement expense, unrecognized actuarial gains and losses (included within accumulated other comprehensive income (loss)) over the average remaining service period of active plan participants expected to receive benefits under the plan, or average remaining life expectancy of inactive plan participants when all or almost all of individual plan participants were inactive. The Company also historically calculated the market-related value of plan assets based on a five-year market adjustment. Under the new principles, actuarial gains and losses will be immediately recognized through net periodic benefit cost in the Statement of Income, upon the annual remeasurement in the fourth quarter, or on an interim basis if specific events trigger a remeasurement. In addition, the Company has changed its accounting policy for measuring the market-related value of plan assets from a calculated amount (based on a five-year smoothing of asset returns) to fair value. The Company believes these changes are preferable as they result in an accelerated recognition of actuarial gains and losses and changes in fair value of plan assets in its Consolidated Statement of Income, which provides greater transparency and better aligns with fair value principles by fully reflecting the impact of interest rate and economic changes on the Company's pension and other postretirement benefit liabilities and assets in the Company's operating results in the year in which the gains and losses are incurred. As of January 1, 2017, the cumulative effect of the change in accounting principles resulted in a decrease of $239 million in earnings invested in the business and a corresponding increase of $244 million in accumulated other comprehensive loss that was partially offset by the net impact of the direct effects of these changes on inventory and deferred taxes of $5 million.ended December 31, 2020.

The following tables reflect the changes to financial statement line items as a result of the change in accounting principles for the periods presented in the accompanying unaudited consolidated financial statements:

~~Consolidated Statements of Income:~~

Three Months Ended
September 30, 2017 September 30, 2016
Previous Accounting Method As Reported Effect of Accounting Change As Previously Reported Revised Effect of Accounting Change
Cost of products sold $ 556.7
$ 554.4
$ (2.3 ) $ 489.9
$ 487.7
$ (2.2 )
Gross profit 214.7
217.0
2.3
167.5
169.7
2.2
Selling, general and administrative expense 136.8
134.0
(2.8 ) 109.5
107.2
(2.3 )
Pension settlement expenses 3.9
—
(3.9 ) 10.3
0.1
(10.2 )
Operating income 72.7
81.7
9.0
42.4
57.1
14.7
Income before income taxes 66.2
75.2
9.0
34.5
49.2
14.7
Provision for income taxes 18.0
21.1
3.1
13.5
15.2
1.7
Net income 48.2
54.1
5.9
21.0
34.0
13.0
Net income attributable to The Timken Company $ 47.6
$ 53.5
$ 5.9
$ 20.6
$ 33.6
$ 13.0
Basic earnings per share $ 0.61
$ 0.69
$ 0.08
$ 0.26
$ 0.43
$ 0.17
Diluted earnings per share $ 0.60
$ 0.68
$ 0.08
$ 0.26
$ 0.43
$ 0.17

~~Consolidated Statements of Income:~~

Nine Months Ended
September 30, 2017 September 30, 2016
Previous Accounting Method As Reported Effect of Accounting Change As Previously Reported Revised Effect of Accounting Change
Cost of products sold $ 1,630.9
$ 1,626.5
$ (4.4 ) $ 1,484.3
$ 1,477.7
$ (6.6 )
Gross profit 594.9
599.3
4.4
530.7
537.3
6.6
Selling, general and administrative expense 383.8
377.4
(6.4 ) 338.0
331.3
(6.7 )
Pension settlement expenses 15.7
—
(15.7 ) 11.9
1.3
(10.6 )
Operating income 191.6
218.1
26.5
162.1
186.0
23.9
Income before income taxes 176.2
202.7
26.5
189.9
213.8
23.9
Provision for income taxes 19.3
28.5
9.2
61.1
65.8
4.7
Net income 156.9
174.2
17.3
128.8
148.0
19.2
Net income attributable to The Timken Company $ 156.9
$ 174.2
$ 17.3
$ 128.5
$ 147.7
$ 19.2
Basic earnings per share $ 2.02
$ 2.24
$ 0.22
$ 1.63
$ 1.87
$ 0.24
Diluted earnings per share $ 1.99
$ 2.21
$ 0.22
$ 1.62
$ 1.86
$ 0.24

~~Consolidated Statements of Comprehensive Income:~~

Three Months Ended
September 30, 2017 September 30, 2016
Previous Accounting Method As Reported Effect of Accounting Change As Previously Reported Revised Effect of Accounting Change
Net Income $ 48.2
$ 54.1
$ 5.9
$ 21.0
$ 34.0
$ 13.0
Foreign currency translation adjustments 10.9
10.9
—
2.2
3.7
1.5
Pension and postretirement liability adjustment 6.0
0.1
(5.9 ) 15.0
0.4
(14.6 )
Other comprehensive income, net of tax 14.9
9.0
(5.9 ) 17.2
4.1
(13.1 )
Comprehensive Income, net of tax 63.1
63.1
—
38.2
38.1
(0.1 )
Less: comprehensive income attributable to noncontrolling interest 0.5
0.5
—
0.9
1.0
0.1
Comprehensive income attributable to
The Timken Company
$ 62.6
$ 62.6
$ —
$ 37.3
$ 37.1
$ (0.2 )

Nine Months Ended
September 30, 2017 September 30, 2016
Previous Accounting Method As Reported Effect of Accounting Change As Previously Reported Revised Effect of Accounting Change
Net Income $ 156.9
$ 174.2
$ 17.3
$ 128.8
$ 148.0
$ 19.2
Foreign currency translation adjustments 42.8
42.8
—
(1.4 ) 5.2
6.6
Pension and postretirement liability adjustment 17.5
0.2
(17.3 ) 27.0
1.2
(25.8 )
Other comprehensive income, net of tax 56.1
38.8
(17.3 ) 24.0
4.8
(19.2 )
Comprehensive Income, net of tax 213.0
213.0
—
152.8
152.8
—
Less: comprehensive income attributable to noncontrolling interest 1.9
1.9
—
2.1
2.2
0.1
Comprehensive income attributable to
The Timken Company
$ 211.1
$ 211.1
$ —
$ 150.7
$ 150.6
$ (0.1 )

~~Consolidated Balance Sheets:~~

September 30, 2017 December 31, 2016
Previous Accounting Method As Reported Effect of Accounting Change As Previously Reported Revised Effect of Accounting Change
Inventories, net $ 679.6
$ 687.5
$ 7.9
$ 545.8
$ 553.7
$ 7.9
Total current assets 1,466.4
1,474.3
7.9
1,204.0
1,211.9
7.9
Deferred income taxes 50.9
47.9
(3.0 ) 54.4
51.4
(3.0 )
Total other assets 1,050.1
1,047.1
(3.0 ) 749.9
746.9
(3.0 )
Total assets 3,358.7
3,363.6
4.9
2,758.3
2,763.2
4.9
Earnings invested in the business 1,622.2
1,400.2
(222.0 ) 1,528.6
1,289.3
(239.3 )
Accumulated other comprehensive loss (267.8 ) (41.0 ) 226.8
(322.0 ) (77.9 ) 244.1
Total shareholders' equity 1,418.2
1,423.0
4.8
1,274.9
1,279.7
4.8
Noncontrolling interest 32.8
32.9
0.1
31.1
31.2
0.1
Total equity 1,451.0
1,455.9
4.9
1,306.0
1,310.9
4.9
Total liabilities and shareholders' equity $ 3,358.7
$ 3,363.6
$ 4.9
$ 2,758.3
$ 2,763.2
$ 4.9

~~Consolidated Statements of Cash Flows:~~

Nine Months Ended
September 30, 2017 September 30, 2016
Previous Accounting Method As Reported Effect of Accounting Change As Previously Reported Revised Effect of Accounting Change
Net income attributable to The Timken Company $ 156.9
$ 174.2
$ 17.3
$ 128.5
$ 147.7
$ 19.2
Deferred income tax (benefit) provision (1.7 ) 7.5
9.2
(0.1 ) 4.6
4.7
Pension and other postretirement expense 39.1
12.6
(26.5 ) 38.4
14.5
(23.9 )

~~Note 3 -~~ Recent Accounting ~~Pronouncements~~Pronouncements:

New Accounting Guidance Adopted:

In ~~March 2016,~~December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~2016-09, "Compensation - Stock Compensation (Topic 718): Improvements~~2019-12, “Income Taxes (ASC 740) – Simplifying the Accounting for Income Taxes,” which is intended to ~~Employee Share-Based Payment Accounting." ASU 2016-09 simplifies various aspects of~~reduce complexity in the accounting for ~~stock-based payments.~~income taxes while maintaining or improving the usefulness of information provided to financial statement users. The ~~simplifications include:~~


a.	recording all tax effects associated with stock-based compensation through the income statement, as opposed to recording certain amounts in other paid-in capital, which eliminates the requirements to calculateguidance amends certain existing provisions under ASC 740 to address a ~~“windfall pool”;~~


b.	allowing entities to withhold shares to satisfy the employer’s statutory tax withholding requirement up to the highest marginal tax rate applicable to employees rather than the employer’s minimum statutory rate, without requiring liability classification for the award;


c.	modifying the requirement to estimate the number of awards that will ultimately vest by providing an accounting policy election to either estimate the number of forfeitures or recognize forfeitures as they occur;


d.	changing certain presentation requirements in the statement of cash flows, including removing the requirement to present excess tax benefits as an inflow from financing activities and an outflow from operating activities and requiring the cash paid to taxing authorities arising from withheld shares to be classified as a financing activity; and


e.	amending the assumed proceeds from applying the treasury stock method when computing earnings per share to exclude the amount of excess tax benefits that would be recognized in additional paid-in capital.

On January 1, 2017, the Company adopted the provisions of ASU 2016-09. The presentation of the Consolidated Statement of Cash Flows for shares surrendered by employees to meet the minimum statutory withholding requirement was applied retrospectively. As a result of the adoption of ASU 2016-09, $1.6 million was reclassified from the other accrued expenses line in the operating activities section of the Consolidated Statement of Cash Flows to the shares surrendered for taxes line in the financing activities section for the first ~~nine~~ ~~months of 2016.~~

~~In addition, the adoption of ASU 2016-09 resulted in the Company making an accounting policy election to change how it will recognize the~~ number of ~~stock awards that will ultimately vest. In the past, the Company applied a forfeiture rate to shares granted. With the adoption of ASU 2016-09, the Company will recognize forfeitures as they occur.~~distinct items. This ~~change resulted in the Company making a cumulative effect change to retained earnings of $0.9 million. For additional information, refer to~~ ~~Note 10 - Equity~~ for the disclosure of the cumulative effect change. In addition, the Company began recording the tax effects associated with stock-based compensation through the income statement on a prospective basis, which resulted in a tax benefit of $1.9 million for the first nine months of 2017. Finally, the Company adjusted dilutive shares to remove the excess tax benefits from the calculation of earnings per share on a prospective basis. The revised calculation is more dilutive, but it did not change earnings per share for prior years.

In July 2015, the FASB issued ASU 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory." ASU 2015-11 requires inventory to be measured at the lower of cost and net realizable value, which is defined as the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. Under existing guidance, net realizable value is one of several acceptable measures of market value that could be used to measure inventory at the lower of cost or market and, as such, the new guidance reduces the complexity in the measurement. On January 1, 2017, the Company adopted the provisions of ASU 2015-11 on a prospective basis. The adoption of ASU 2015-11 did not have a material impact on the Company's results of operations or financial condition. For our disclosures related to inventories, refer to ~~Note 5 - Inventories~~.

~~New Accounting Guidance Issued and Not Yet Adopted:~~

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities", which impacts both designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. ASU 2017-12 amends and clarifies the requirements to qualify for hedge accounting, removes the requirement to recognize changes in fair value from certain hedges in current earnings, and specifies the presentation of changes in fair value in the income statement for all hedging instruments. ASU 2017-02standard is effective for public companies ~~for fiscal years, and interim periods within those~~in fiscal years beginning after December 15, ~~2018.~~2020, including interim periods within those fiscal years. Early adoption is permitted, including in any interim period for which financial statements have not yet been issued, but the effect of adoption is required to be reflected as of the beginning of the fiscal year of adoption. The Company is currently evaluating the effect that the adoption of ASU 2017-12 will have on the Company's results of operations and financial condition.

In May 2017, the FASB issued ASU 2017-09, "Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting." ASU 2017-09 provides clarity on which changes to the terms or conditions of share-based payment awards require entities to apply the modification accounting provisions required in Topic 718. ASU 2017-09 is effective for public companies for annual reporting periods beginning after December 15, 2017, with early adoption permitted, including adoption in any interim period for which financial statements have not yet been issued. The Company ~~does not expect that~~adopted ASU 2019-12 effective January 1, 2021, and the impact of the adoption ~~of ASU 2017-09 will have a~~was not material ~~impact on the Company's results of operations and financial condition, as the Company does not anticipate future modifications of share-based payment awards.~~

In March 2017, the FASB issued ASU 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” ASU 2017-07 impacts where the components of net benefit cost are presented within an entity’s income statement. Service cost will be included in other employee compensation costs within operating income and is the only component that may be capitalized when applicable. The other components of net periodic benefit cost will be presented separately outside of operating income. ASU 2017-07 is effective for public companies for annual reporting periods beginning after December 15, 2017 and interim periods within that reporting period. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements have not been issued or made available for issuance. Our initial assessment has indicated that the adoption of ASU 2017-07 will result in the reclassification of certain amounts out of "Cost of products sold" and "Selling, general and administrative ("SG&A") expenses" into "Other expense, net" in the Consolidated Statement of Income. Also, the adoption of this standard will result in the reclassification of certain amounts from "Cost of products sold" and "SG&A expenses" for the Mobile Industries and Process Industries segments into Corporate "Other expense, net". The amounts impacted may be material. The Company is currently performing further analysis on the effect that the adoption of ASU 2017-07 will have on the Company's results of operations.

~~In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” Prior~~ to the issuance of the new accounting guidance, entities first assessed qualitative factors to determine whether a two-step goodwill impairment test was necessary. When entities bypassed or failed the qualitative analysis, they were required to apply a two-step goodwill impairment test. Step 1 compared a reporting unit’s fair value to its carrying amount to determine if there is a potential impairment. If the carrying amount of a reporting unit exceeds its fair value, Step 2 was required to be completed. Step 2 involved determining the implied fair value of goodwill and comparing it to the carrying amount of that goodwill to measure the impairment loss, if any. ASU 2017-04 eliminates Step 2 of the current goodwill impairment test. ASU 2017-04 will require that a goodwill impairment loss be measured at the amount by which a reporting unit's carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for public companies for years beginning after December 15, 2019, with early adoption permitted, and must be applied prospectively. The Company is currently evaluating the effect that the adoption of ASU 2017-04 will have on the Company's results of operations and financial condition.

New Accounting Guidance Issued and Not Yet Adopted:

In ~~June 2016,~~March 2020, the FASB issued ASU ~~2016-13, "Financial Instruments - Credit Losses~~2020-04, "Reference Rate Reform (Topic ~~326)~~848): ~~Measurement~~Facilitation of ~~Credit Losses~~the Effects of Reference Rate Reform on Financial ~~Instruments.~~Reporting." ~~ASU 2016-13 changes how entities will measure credit losses for most~~This guidance is intended to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial ~~assets and certain other instruments that are not measured at fair value through net income. The new guidance will replace~~reporting burden related to the ~~current incurred loss approach with an~~ expected ~~loss model. The new expected credit loss impairment model will apply to most financial assets measured at amortized cost and certain other instruments, including trade~~market transition from the London Interbank Offered Rate ("LIBOR") and other ~~receivables, loans, held-to-maturity debt instruments, net investments~~interbank offered rates to alternative reference rates. This guidance is available immediately and may be implemented in ~~leases, loan commitments and standby letters of credit. Upon initial recognition of~~any period prior to the exposure, the expected credit loss model requires entities to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses should consider historical information, current information and reasonable and supportable forecasts, including estimates of prepayments. Financial instruments with similar risk characteristics should be grouped together when estimating expected credit losses. ASU 2016-13 does not prescribe a specific method to make the estimate, so its application will require significant judgment. ASU 2016-13 is effective for public companies in fiscal years beginning afterguidance expiration on December ~~15, 2019, including interim periods within those fiscal years.~~31, 2022. The Company is currently ~~evaluating the effect that the adoption~~assessing which of ~~ASU 2016-13~~its various contracts will ~~have on the Company's results of operations and financial condition.~~

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." ASU 2016-02 was issued to increase transparency and comparability among entities by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about lease arrangements. ASU 2016-02 is effectiverequire an update for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the effect that the adoption of ASU 2016-02 will have on the Company's results of operations and financial condition.

~~In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)." ASU 2014-09 introduces~~ a new ~~five-step revenue recognition model in which an entity should recognize revenue to depict~~reference rate and will determine the ~~transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange~~timing for those goods or services. ASU 2014-09 also requires disclosures sufficient to enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments and assets recognized from the costs to obtain or fulfill a contract. On July 9, 2015, the FASB decided to delay the effective dateimplementation of this ~~new accounting~~ guidance ~~by one year, which will result in it being effective for public companies for annual periods beginning~~ after ~~December 15, 2017. Although early adoption is permitted, the Company intends to adopt the new accounting standard effective January 1, 2018.~~completing that analysis.

The two permitted transition methods under the new standard are: (1) the full retrospective method, in which case the standard would be applied to each prior reporting period presented, subject to allowable practical expedients and the cumulative effect

Table of applying the standard would be recognized at the earliest period shown and (2) the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application accompanied by additional disclosures comparing the current period results presented under the new standard to the prior periods presented under the current revenue recognition standards. The Company plans to use the modified retrospective method.Contents

Note 3 - Acquisitions

The Company ~~has substantially~~ completed the assessment phase of the project, which has identified potential differences from the application of the new standard. Upon adoption, the Company expects that certain revenue streams currently accounted for using a point-in-time model will utilize an over-time model due to the continuous transfer of control to customers. The Company is currently designing and implementing procedures and related internal controls to address the potential differences identified, including the expanded disclosure requirements resulting from the new standard, and performing a deeper analysis of those potential differences to quantify the impacts of applying the new standard. The Company expects to finalize its evaluation of these potential differences that may result from applying the new standard to the Company's contracts with customers1 acquisition in ~~2017 and will provide updates on its progress in future filings.~~

~~Note 4 - Acquisitions~~

~~During the first nine months of 2017, the Company completed three acquisitions.~~2020. On ~~July 3, 2017, the Company completed the acquisition of Groeneveld Group ("Groeneveld"), a leading provider of automatic lubrication solutions used in on- and off-highway applications. On~~ ~~May 5, 2017~~,November 30, 2020, the Company completed the acquisition of the assets of ~~PT Tech, Inc.~~Aurora Bearing Company ("~~PT Tech"~~Aurora"),. With annual sales of approximately $30 million, Aurora serves a ~~manufacturer~~diverse range of ~~engineered clutches, brakes, hydraulic power take-off units~~industrial sectors, including aerospace and ~~other torque management devices used~~defense, racing, off-highway equipment and packaging. Aurora is headquartered in ~~mining, aggregate, wood recycling and metals industries. On~~ ~~April 3, 2017~~, the Company completed the acquisition of Torsion Control Products, Inc. ("Torsion Control Products"), a manufacturer of engineered torsional couplings used in the construction, agriculture and mining industries. Aggregate sales for these companies for the most recent twelve months prior to their respective acquisitions totaled approximately $146.2 million.Montgomery, Illinois. The total purchase price for ~~these acquisitions~~this acquisition was ~~$346.6~~$17.2 million, including a post-closing net of $35.0 million cash received. The Company incurred acquisition-related costs of $3.6 million to complete these acquisitions. The 2017 acquisitions are subject to post-closing purchase price allocation adjustments. working capital adjustment. Based on markets and customers served, ~~substantially all of the~~results for ~~Groeneveld, PT Tech and Torsion Control Products~~Aurora are reported in both the Mobile Industries segment and the Process Industries segment.

The following table presents the ~~initial~~ purchase price allocation at fair value, net of cash acquired, for ~~acquisitions~~the Aurora acquisition as of June 30, 2021:


	Initial Purchase Price Allocation		Adjustments		Purchase Price Allocation
Assets:

Accounts receivable, net	$	2.7	$	0	$	2.7
Inventories, net	16.4		0		16.4
Other current assets	0.1		0.1		0.2
Property, plant and equipment, net	10.9		0		10.9




Total assets acquired	$	30.1	$	0.1	$	30.2
Liabilities:
Accounts payable, trade	$	0.8	$	0	$	0.8


Other current liabilities	0.9		(0.4)		0.5







Total liabilities assumed	1.7		(0.4)		1.3

Net assets acquired	$	28.4	$	0.5	$	28.9

As a result of applying the accounting rules on business combinations, the Company recognized a bargain purchase gain of $11.7 million on the acquisition of Aurora. The Company recognized $0.6 million of the bargain purchase price gain during the first three months of 2021 primarily due to the net working capital adjustment. The Company believes it was able to negotiate a bargain purchase price for the business due to some historic operational performance challenges, as well as the seller's desire to exit the business in ~~2017:~~ an expedited manner in an exclusive process with the Company.

Initial Purchase Price Allocation
Assets:
Accounts receivable, net $ 27.6
Inventories, net 29.1
Other current assets 4.7
Property, plant and equipment, net 31.6
Goodwill 147.6
Other intangible assets 175.3
Other non-current assets 1.9
Total assets acquired $ 417.8
Liabilities:
Accounts payable, trade $ 9.5
Salaries, wages and benefits 5.8
Other current liabilities 8.2
Short-term debt 1.0
Long-term debt 2.0
Deferred income taxes 42.4
Other non-current liabilities 2.3
Total liabilities assumed $ 71.2
Net assets acquired $ 346.6

In determining the fair value of the amounts above, the Company utilized various forms of the income, cost and market approaches depending on the asset or liability being valued. The estimation of fair value required significant judgment related to future net cash flows, discount rates, competitive trends, market comparisons and other factors. Inputs were generally determined by taking into account independent appraisals and historical data, supplemented by current and anticipated market conditions.

During the applicable measurement period, the Company will adjust assets and liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date. The effect of measurement period adjustments to the estimated fair values will be reflected as if the adjustments had been completed on the acquisition date. The above purchase price allocation is subject to change as additional information concerning final asset and liability valuations is obtained. The primary area of the Aurora purchase price allocation that has not been finalized relates to the fair value of inventory. Any changes in fair value could affect the bargain purchase price gain recognized.

Table of Contents

Note 4 - Revenue

The following table ~~summarizes~~presents details deemed most relevant to the ~~initial purchase price allocation~~users of the financial statements about total revenue for ~~identifiable intangible assets acquired in 2017:~~the three and six months ended June 30, 2021 and 2020, respectively:


	Three Months Ended						Three Months Ended
	June 30, 2021						June 30, 2020
	Mobile		Process		Total		Mobile		Process		Total
United States	$	237.4	$	201.6	$	439.0	$	186.6	$	173.7	$	360.3
Americas, excluding the United States	52.3		49.1		101.4		26.8		29.3		56.1
Europe / Middle East / Africa	124.3		137.2		261.5		78.8		112.9		191.7
China	32.2		138.4		170.6		26.4		122.0		148.4
Asia-Pacific, excluding China	48.0		42.4		90.4		24.0		23.0		47.0
Net sales	$	494.2	$	568.7	$	1,062.9	$	342.6	$	460.9	$	803.5

Initial Purchase
Price Allocation
Weighted -
Average Life
Trade names (indefinite life) $ 33.4
Indefinite
Trade names (finite life) 2.2
13 years
Technology and know-how 29.9
16 years
Customer relationships 108.2
17 years
Other 0.2
5 years
Capitalized software 1.4
3 years
Total intangible assets $ 175.3


	Six Months Ended						Six Months Ended
	June 30, 2021						June 30, 2020
	Mobile		Process		Total		Mobile		Process		Total
United States	$	480.3	$	387.8	$	868.1	$	424.8	$	366.3	$	791.1
Americas, excluding the United States	101.1		92.3		193.4		75.6		64.3		139.9
Europe / Middle East / Africa	251.4		264.4		515.8		187.5		228.5		416.0
China	66.6		262.7		329.3		48.2		203.0		251.2
Asia-Pacific, excluding China	99.3		82.4		181.7		73.2		55.5		128.7
Net sales	$	998.7	$	1,089.6	$	2,088.3	$	809.3	$	917.6	$	1,726.9

On ~~July 5, 2017~~,When reviewing revenue by sales channel, the Company ~~announced that the Company's majority-owned subsidiary, Timken India Ltd.~~separates net sales to original equipment manufacturers ("~~Timken India"~~OEMs")~~, entered into a definitive agreement~~ from sales to ~~acquire ABC Bearings Limited ("ABC Bearings"). Timken India is a public limited company listed on the National Stock Exchange of India Limited~~distributors and ~~BSE Limited. ABC Bearings is a manufacturer of tapered, cylindrical and spherical roller bearings and slewing rings in India.~~ ~~The transaction is structured as a merger of ABC Bearings into Timken India, whereby shareholders of ABC Bearings will receive shares of Timken India as consideration.~~ ~~The transaction is subject to receipt of various approvals in India, which are expected to~~ ~~be completed in the first half of 2018~~. ABC Bearings, located in Mumbai, India, operates primarily out of manufacturing facilities in Bharuch, Gujarat and Dehradun, Uttarakhand and had annual sales of approximately $29 million for the twelve months ended March 31, 2017.

~~During 2016, the Company completed two acquisitions. On~~ ~~October 31, 2016, the Company completed the acquisition of EDT Corp. ("EDT"), a manufacturer of polymer housed units and stainless steel ball bearings used primarily in the food and beverage industry. On~~ ~~July 8, 2016, the Company completed the acquisition of Lovejoy Inc. ("Lovejoy"), a manufacturer of premium industrial couplings and universal joints.~~

In January 2017, the Company paid a net purchase price adjustment of $0.6 million in connection with the EDT acquisition, resulting in an adjustment to goodwill. During the second quarter of 2017, the Company re-evaluated the fair value of certain contingent liabilities assumed in the Lovejoy acquisition, resulting in adjustments to other current assets, goodwill, other current liabilities and other non-current liabilities.end users. The following table presents the ~~final purchase~~percent of revenue by sales channel for the six months ended June 30, 2021 and 2020, respectively:


	Six Months Ended
Revenue by sales channel	June 30, 2021	June 30, 2020
Original equipment manufacturers	61%	59%
Distribution/end users	39%	41%

In addition to disaggregating revenue by segment, geography and by sales channel as shown above, the Company believes information about the timing of transfer of goods or services, type of customer and distinguishing service revenue from product sales is also relevant. During the six months ended June 30, 2021 and June 30, 2020, approximately 9% and 13%, respectively, of total net sales were recognized on an over-time basis because of the continuous transfer of control to the customer, with the remainder recognized as of a point in time. Approximately 4% and 5% of total net sales represented service revenue during each of the six months ended June 30, 2021 and June 30, 2020, respectively. Finally, the United States ("U.S.") government or its contractors represented approximately 7% and 9% of total net sales during the six months ended June 30, 2021 and June 30, 2020, respectively.

Remaining Performance Obligations:

Remaining performance obligations represent the transaction price ~~allocation~~of orders meeting the definition of a contract for ~~both~~which work has not been performed and excludes unexercised contract options. Performance obligations having a duration of more than one year are concentrated in contracts for certain products and services provided to the ~~Lovejoy~~U.S. government or its contractors. The aggregate amount of the transaction price allocated to remaining performance obligations for such contracts with a duration of more than one year was approximately $456.9 million at June 30, 2021.

Table of Contents

Note 4 - Revenue(continued)

Unbilled Receivables:

The following table contains a rollforward of unbilled receivables for the six months ended June 30, 2021 and the ~~EDT acquisitions:~~ twelve months ended December 31, 2020:


	June 30, 2021		December 31, 2020
Beginning balance, January 1	$	110.9	$	129.2
Additional unbilled revenue recognized	179.4		393.6
Less: amounts billed to customers	(189.9)		(411.9)

Ending balance	$	100.4	$	110.9

Initial Purchase Price Allocation Adjustment Final Purchase Price Allocation
Assets:
Accounts receivable, net $ 8.4
$ 8.4
Inventories, net 17.8
17.8
Other current assets 5.3
(0.2 ) 5.1
Property, plant and equipment, net 16.5
16.5
Goodwill 29.9
(1.1 ) 28.8
Other intangible assets 27.9
27.9
Other non-current assets 0.1
0.1
Total assets acquired $ 105.9
$ (1.3 ) $ 104.6
Liabilities:
Accounts payable, trade $ 8.1
$ 8.1
Salaries, wages and benefits 1.3
1.3
Other current liabilities 4.4
(0.6 ) 3.8
Long-term debt 2.2
2.2
Deferred taxes 10.4
10.4
Other non-current liabilities 7.6
(1.3 ) 6.3
Total liabilities assumed $ 34.0
$ (1.9 ) $ 32.1
Net assets acquired $ 71.9
$ 0.6
$ 72.5

There were no impairment losses recorded on unbilled receivables for the six months ended June 30, 2021 and June 30, 2020, respectively.

Note 5 - ~~Inventories~~Segment Information

The ~~components of inventories at September 30, 2017 and December 31, 2016 were as follows:~~

September 30,
2017 December 31,
2016
Manufacturing supplies $ 29.5
$ 28.2
Raw materials 85.7
54.9
Work in process 238.4
182.9
Finished products 367.4
308.8
Subtotal $ 721.0
$ 574.8
Allowance for obsolete and surplus inventory (33.5 ) (21.1 )
Total Inventories, net $ 687.5
$ 553.7

~~Inventories are valued at~~primary measurement used by management to measure the lower of cost or market, with approximately 55% valued by the first-in, first-out ("FIFO") method and the remaining 45% valued by the last-in, first-out ("LIFO") method. The majority of the Company's domestic inventories are valued by the LIFO method and all of the Company's international (outside the United States) inventories are valued by the FIFO method.

~~An actual valuation of the inventory under the LIFO method can be made only at the end~~financial performance of each ~~year based~~segment is earnings before interest, taxes, depreciation and amortization ("EBITDA").


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net sales:
Mobile Industries	$	494.2	$	342.6	$	998.7	$	809.3
Process Industries	568.7		460.9		1,089.6		917.6
Net sales	$	1,062.9	$	803.5	$	2,088.3	$	1,726.9
Segment EBITDA:
Mobile Industries	$	67.3	$	38.8	$	146.9	$	113.9
Process Industries	141.2		126.3		272.2		233.8
Total EBITDA, for reportable segments	$	208.5	$	165.1	$	419.1	$	347.7
Unallocated corporate expense	(11.6)		(6.5)		(23.2)		(17.6)


Corporate pension and other postretirement benefit related expense (1)	(3.5)		(8.8)		(4.4)		(8.8)
Acquisition-related gain (2)	0		0		0.6		0
Depreciation and amortization	(42.2)		(41.7)		(85.2)		(84.0)
Interest expense	(15.3)		(18.9)		(30.2)		(36.0)
Interest income	0.7		0.6		1.2		2.1
Income before income taxes	$	136.6	$	89.8	$	277.9	$	203.4

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

(2) The acquisition-related gain represents measurement period adjustments to the bargain purchase gain on the ~~inventory levels and costs at that time. Accordingly, interim LIFO calculations must be based~~acquisition of Aurora, which closed on ~~management’s estimates~~November 30, 2020. See Note 3 - Acquisitions for additional information.

Table of expected year-end inventory levels and costs. Because these calculations 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.Contents

~~The LIFO reserves at~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~ ~~were $167.4 million and $179.5 million, respectively. The Company recognized a decrease in its LIFO reserve of $12.1 million during the first~~ ~~nine~~ ~~months of~~ ~~2017, compared with a decrease in its LIFO reserve of $0.2 million during the first~~ ~~nine~~ ~~months of~~ ~~2016~~.

Note 6 - ~~Property, Plant and Equipment~~Income Taxes

The ~~components of property, plant and equipment at September 30, 2017 and December 31, 2016 were as follows:~~Company's provision for income taxes in interim periods is computed by applying the estimated annual effective tax rates to income or loss before income taxes for the period. In addition, non-recurring or discrete items are recorded during the period(s) in which they occur.


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Provision for income taxes	$	29.4		$	28.0		$	54.7		$	57.6
Effective tax rate	21.5		%	31.2		%	19.7		%	28.3		%

September 30,
2017 December 31,
2016
Land and buildings $ 478.2
$ 425.4
Machinery and equipment 1,882.4
1,807.6
Subtotal $ 2,360.6
$ 2,233.0
Accumulated depreciation (1,518.4 ) (1,428.6 )
Property, plant and equipment, net $ 842.2
$ 804.4

~~Total depreciation~~Income tax expense for the ~~nine~~three and six months ended ~~September~~June 30, 2021 was calculated using forecasted multi-jurisdictional annual effective tax rates to determine a blended annual effective tax rate. The effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the release of accruals for uncertain tax positions from the settlement of the 2017 and ~~2016~~ ~~was $73.3 million~~2018 U.S. federal tax years and ~~$71.1 million, respectively.~~other foreign jurisdictions, and favorable U.S. permanent book-tax differences. These items were partially offset by the unfavorable impact of earnings in foreign jurisdictions with higher tax rates.

~~Note 7 - Goodwill and Other Intangible Assets~~

~~The changes in the carrying amount of goodwill for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017~~ ~~were as follows:~~

Mobile
Industries
Process
Industries
Total
Beginning balance $ 97.2
$ 260.3
$ 357.5
Acquisitions 147.6
(1.1 ) 146.5
Foreign currency translation adjustments 4.0
2.3
6.3
Ending balance $ 248.8
$ 261.5
$ 510.3

The ~~Groeneveld, PT Tech and Torsion Control Products acquisitions added a total~~effective tax rate of ~~$147.6 million of goodwill~~21.5% for the three months ended June 30, 2021 was lower than the rate for the three months ended June 30, 2020 primarily due to the ~~Mobile Industries segment. The goodwill acquired from PT Tech~~release of accruals for uncertain tax positions, discrete benefits on tax rate changes in foreign jurisdictions and ~~Torsion Control Products is expected to be tax-deductible over 15 years. The goodwill acquired from Groeneveld is not expected to be tax-deductible. The Company paid~~ a ~~net purchase price adjustment~~more favorable mix of ~~$0.6 million~~earnings in ~~January 2017~~lower tax rate jurisdictions, including the United States. Income taxes in ~~connection with~~ the ~~acquisition of EDT, which resulted in an increase to goodwill. The Company also adjusted its purchase price allocation for~~United States were favorably impacted by permanent book-tax differences, including the ~~Lovejoy acquisition in 2017, which resulted in a $1.7 million reduction to goodwill. The goodwill resulting from the EDT and Lovejoy acquisitions was allocated to the Process Industries segment.~~new elective Global Intangible Low Tax Income ("GILTI") high tax exemption rules.

~~The following table displays intangible assets as of September 30, 2017 and December 31, 2016:~~

As of September 30, 2017 As of December 31, 2016

Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Intangible assets
subject to amortization:

Customer relationships $ 322.4
$ 97.6
$ 224.8
$ 211.4
$ 84.4
$ 127.0
Technology and know-how 126.4
29.9
96.5
95.2
25.4
69.8
Trade names 8.6
4.2
4.4
6.5
3.8
2.7
Capitalized software 260.0
223.4
36.6
251.7
211.8
39.9
Other 12.2
8.1
4.1
11.0
7.5
3.5
$ 729.6
$ 363.2
$ 366.4
$ 575.8
$ 332.9
$ 242.9
Intangible assets not subject to amortization:
Trade names $ 53.8
$ 53.8
$ 19.4
$ 19.4
FAA air agency certificates 8.7
8.7
8.7
8.7
$ 62.5

$ 62.5
$ 28.1

$ 28.1
Total intangible assets $ 792.1
$ 363.2
$ 428.9
$ 603.9
$ 332.9
$ 271.0

~~Amortization expense for intangible assets was $29.2 million and $27.2 million~~The effective tax rate of 19.7% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 was lower than the rate for the six months ended June 30, 2020 primarily due to the release of accruals for uncertain tax positions, a more favorable mix of earnings in lower tax rate jurisdictions, including the United States. Income taxes in the United States were favorably impacted by permanent book-tax differences, including the tax impact from stock-based compensation awards and ~~2016, respectively. Amortization expense for intangible assets is estimated to be $40.5 million in 2017; $39.8 million in 2018; $36.0 million in 2019; $29.9 million in 2020; and $27.3 million in 2021.~~the new elective GILTI high tax exemption rules.

Table of Contents

Note ~~8 - Financing Arrangements~~

~~Short-term debt at~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~ ~~was as follows:~~

September 30,
2017 December 31,
2016
Variable-rate Accounts Receivable Facility with an interest rate of 2.07% at September 30, 2017 $ 5.6
$ —
Borrowings under variable-rate lines of credit for certain of the Company’s foreign subsidiaries with various banks with interest rates ranging from 0.32% to 1.75% at September 30, 2017 and 0.50% at December 31, 2016, respectively 35.5
19.2
Short-term debt $ 41.1
$ 19.2

~~The Company has a $100 million Amended and Restated Asset Securitization Agreement ("Accounts Receivable Facility") that matures on~~ ~~November 30, 2018~~. Under the terms of the Accounts Receivable Facility, the Company sells, on an ongoing basis, certain domestic trade receivables to Timken Receivables Corporation, a wholly owned consolidated subsidiary, which, in turn, uses the trade receivables to secure borrowings that are funded through a vehicle that issues commercial paper in the short-term market. Borrowings under the Accounts Receivable Facility are limited by certain borrowing base limitations. These limitations reduced the availability of the Accounts Receivable Facility to $80.3 million at September 30, 2017. As of September 30, 2017, there were outstanding borrowings of $74.8 million under the Accounts Receivable Facility, which reduced the availability under this facility to $5.5 million. The cost of this facility, which is the prevailing commercial paper rate plus program fees, is considered a financing cost and is included in interest expense in the Consolidated Statement of Income. The outstanding balance under the Accounts Receivable Facility was classified as short term or long term in accordance with the terms of the agreement and reflects the Company's expectations relative to the minimum borrowing base.

The lines of credit for certain of the Company’s foreign subsidiaries provide for short-term borrowings up to $250.0 million in the aggregate. Most of these lines of credit are uncommitted. At September 30, 2017, the Company’s foreign subsidiaries had borrowings outstanding of $35.5 million and bank guarantees of $2.0 million, which reduced the aggregate availability under these facilities to $212.5 million.

~~Long-term debt at~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~ ~~was as follows:~~

September 30,
2017 December 31,
2016
Fixed-rate Medium-Term Notes, Series A, maturing at various dates through May 2028, with interest rates ranging from 6.74% to 7.76% $ 159.5
$ 159.5
Fixed-rate Senior Unsecured Notes, maturing on September 1, 2024, with an interest rate of 3.875% 346.6
345.9
Variable-rate Senior Credit Facility with a weighted-average interest rate of 1.59% at September 30, 2017 and 1.50% at December 31, 2016 91.2
83.8
Variable-rate Accounts Receivable Facility with an interest rate of 2.07% at September 30, 2017 and 1.65% at December 31, 2016 69.2
48.9
Fixed-rate Euro Senior Unsecured Notes, maturing on September 7, 2027, with an interest rate of 2.02% 176.5
—
Variable-rate Euro Term Loan with an interest rate of 1.13% at September 30, 2017 117.8
—
Other 4.0
1.9
$ 964.8
$ 640.0
Less: Current maturities 5.0
5.0
Long-term debt $ 959.8
$ 635.0

~~The Company has a $500 million Amended and Restated Credit Agreement ("Senior Credit Facility"), which matures on~~ ~~June 19, 2020~~. At September 30, 2017, the Company had $91.2 million of outstanding borrowings under the Senior Credit Facility, which reduced the availability under this facility to $408.8 million. The Senior Credit Facility has two financial covenants: a consolidated leverage ratio and a consolidated interest coverage ratio. At September 30, 2017, the Company was in full compliance with both of these covenants.

On ~~September~~ 7 ~~2017, the Company issued €150 million of fixed-rate 2.02% senior unsecured notes that mature on~~ ~~September 7, 2027~~ ~~("2027 Notes"). On~~ ~~September 18, 2017, the Company entered into a €100 million variable-rate term loan that matures on~~ ~~September 18, 2020~~ ~~("2020 Term Loan"). The increased borrowings were primarily to refinance the acquisition of Groeneveld that closed on~~ ~~July 3, 2017. Refer to~~ ~~Note 4 - Acquisitions~~ for additional information. These debt instruments have two financial covenants: a consolidated leverage ratio and a consolidated interest coverage ratio. These covenants are the same as those in the Senior Credit Facility. At September 30, 2017, the Company was in full compliance with both of these covenants.

~~Note 9 - Contingencies~~

~~Product Warranties:~~

~~The Company provides limited warranties on certain of its products. The following is a rollforward of the warranty liability for the~~ ~~nine~~ ~~months ended September 30, 2017 and the twelve months ended December 31, 2016:~~

September 30,
2017 December 31,
2016
Beginning balance, January 1 $ 6.9
$ 5.4
Additions 2.6
2.4
Payments (2.1 ) (0.9 )
Ending balance $ 7.4
$ 6.9

~~The product warranty liability at September 30, 2017 and December 31, 2016 was included in other current liabilities on the Consolidated Balance Sheets.~~

Currently, the Company is evaluating claims raised by certain customers with respect to the performance of bearings sold into the wind energy sector. Accruals related to this matter are included in the table above. Management believes that the outcome of these claims will not have a material effect on the Company’s consolidated financial position; however, the effect of any such outcome may be material to the results of operations of any particular period in which costs in excess of amounts provided, if any, are recognized.

~~Note 10 - Equity~~

~~The changes in the equity components for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017~~ ~~were as follows:~~

The Timken Company Shareholders
Total
Stated
Capital
Other
Paid-In
Capital
Earnings
Invested
in the
Business
Accumulated
Other
Comprehensive
(Loss)
Treasury
Stock
Non-
controlling
Interest
Balance at December 31, 2016 $ 1,310.9
$ 53.1
$ 906.9
$ 1,289.3
$ (77.9 ) $ (891.7 ) $ 31.2
Cumulative effect of ASU 2016-09 0.5
1.4
(0.9 )
Net income 174.2
174.2
—
Foreign currency translation adjustment 42.8
40.9
1.9
Pension and postretirement liability
adjustments (net of $0.1 income
tax benefit) 0.2
0.2

Change in fair value of derivative financial
instruments, net of reclassifications (4.2 ) (4.2 )
Dividends paid to noncontrolling
interest (0.2 ) (0.2 )
Dividends – $0.80 per share (62.4 ) (62.4 )
Stock-based compensation expense 18.2
18.2

Stock purchased at fair market value (41.0 ) (41.0 )
Stock option exercise activity 27.7
(9.7 ) 37.4

Restricted share activity —
(18.6 ) 18.6

Shares surrendered for taxes (10.8 ) (10.8 )
Balance at September 30, 2017 $ 1,455.9
$ 53.1
$ 898.2
$ 1,400.2
$ (41.0 ) $ (887.5 ) $ 32.9

~~Note 11 - Accumulated Other Comprehensive Income (Loss)~~

~~The following tables present details about components of accumulated other comprehensive loss for the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended September 30, 2017 and 2016, respectively:~~

Foreign currency translation adjustments Pension and postretirement liability adjustments Change in fair value of derivative financial instruments Total
Balance at June 30, 2017 $ (49.9 ) $ 1.6
$ (1.8 ) $ (50.1 )
Other comprehensive income (loss) before
reclassifications and income tax 10.9
—
(4.0 ) 6.9
Amounts reclassified from accumulated other
comprehensive income, before income tax —
0.1
0.9
1.0
Income tax expense —
—
1.1
1.1
Net current period other comprehensive
income (loss), net of income taxes 10.9
0.1
(2.0 ) 9.0
Noncontrolling interest 0.1
—
—
0.1
Net current period comprehensive income (loss),
net of income taxes and noncontrolling interest
11.0
0.1
(2.0 ) 9.1
Balance at September 30, 2017 $ (38.9 ) $ 1.7
$ (3.8 ) $ (41.0 )

Foreign currency translation adjustments Pension and postretirement liability adjustments Change in fair value of derivative financial instruments Total
Balance at December 31, 2016 $ (79.8 ) $ 1.5
$ 0.4
$ (77.9 )
Other comprehensive income (loss) before
reclassifications and income tax 42.8
—
(7.1 ) 35.7
Amounts reclassified from accumulated other
comprehensive income, before income tax —
0.3
0.4
0.7
Income tax expense (benefit) —
(0.1 ) 2.5
2.4
Net current period other comprehensive
income (loss), net of income taxes 42.8
0.2
(4.2 ) 38.8
Noncontrolling interest (1.9 ) —
—
(1.9 )
Net current period comprehensive income (loss),
net of income taxes and noncontrolling interest
40.9
0.2
(4.2 ) 36.9
Balance at September 30, 2017 $ (38.9 ) $ 1.7
$ (3.8 ) $ (41.0 )

Foreign currency translation adjustments Pension and postretirement liability adjustments Change in fair value of derivative financial instruments Total
Balance at June 30, 2016 $ (55.1 ) $ 1.2
$ (1.3 ) $ (55.2 )
Other comprehensive income (loss) before
reclassifications and income tax 3.7
—
(0.5 ) 3.2
Amounts reclassified from accumulated other
comprehensive income, before income tax —
0.7
0.5
1.2
Income tax benefit —
(0.3 ) —
(0.3 )
Net current period other comprehensive
income, net of income taxes 3.7
0.4
—
4.1
Noncontrolling interest (0.6 ) —
—
(0.6 )
Net current period comprehensive income,
net of income taxes and noncontrolling interest
3.1
0.4
—
3.5
Balance at September 30, 2016 $ (52.0 ) $ 1.6
$ (1.3 ) $ (51.7 )

Foreign currency translation adjustments Pension and postretirement liability adjustments Change in fair value of derivative financial instruments Total
Balance at December 31, 2015 $ (55.3 ) $ 0.4
$ 0.3
$ (54.6 )
Other comprehensive income (loss) before
reclassifications and income tax 5.2
—
(2.5 ) 2.7
Amounts reclassified from accumulated other
comprehensive income (loss), before income tax —
2.0
(0.1 ) 1.9
Income tax (benefit) expense —
(0.8 ) 1.0
0.2
Net current period other comprehensive
income (loss), net of income taxes 5.2
1.2
(1.6 ) 4.8
Noncontrolling interest (1.9 ) —
—
(1.9 )
Net current period comprehensive income (loss),
net of income taxes and noncontrolling interest
3.3
1.2
(1.6 ) 2.9
Balance at September 30, 2016 $ (52.0 ) $ 1.6
$ (1.3 ) $ (51.7 )

~~Other comprehensive income (loss) before reclassifications and income taxes includes the effect of foreign currency.~~

The before-tax reclassification of pension and postretirement liability adjustments was due to the amortization of prior service costs and was included in costs of products sold and SG&A expenses in the Consolidated Statement of Income. The reclassification of the remaining components of accumulated other comprehensive loss was included in "Other income (expense), net" in the Consolidated Statement of Income.

~~Note 12~~ - Earnings Per Share

The following table sets forth the reconciliation of the numerator and the denominator of basic earnings per share and diluted earnings per share for the three and ~~nine~~six months ended June 30, 2021 and 2020, respectively:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Numerator:
Net income attributable to The Timken Company	$	104.8	$	61.9	$	218.1	$	142.6
Less: undistributed earnings allocated to nonvested stock	0		0		0		0
Net income available to common shareholders for basic and diluted earnings per share	$	104.8	$	61.9	$	218.1	$	142.6
Denominator:
Weighted average number of shares outstanding - basic	76,122,257		75,078,207		75,969,569		75,298,356
Effect of dilutive securities:
Stock options and awards - based on the treasury stock method	1,131,900		620,082		1,288,192		733,693
Weighted average number of shares outstanding assuming dilution of stock options and awards	77,254,157		75,698,289		77,257,761		76,032,049
Basic earnings per share	$	1.38	$	0.82	$	2.87	$	1.89
Diluted earnings per share	$	1.36	$	0.82	$	2.82	$	1.88

~~September 30, 2017~~ ~~and~~ ~~2016, respectively:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Numerator:
Net income attributable to The Timken Company $ 53.5
$ 33.6
$ 174.2
$ 147.7
Less: undistributed earnings allocated to nonvested stock —
—
—
—
Net income available to common shareholders for basic earnings per share and diluted earnings per share $ 53.5
$ 33.6
$ 174.2
$ 147.7
Denominator:
Weighted average number of shares outstanding, basic 77,694,974
77,935,783
77,766,828
78,808,179
Effect of dilutive securities:
Stock options and awards based on the treasury stock method 1,109,322
681,693
1,123,102
663,577
Weighted average number of shares outstanding, assuming dilution
of stock options and awards
78,804,296
78,617,476
78,889,930
79,471,756
Basic earnings per share $ 0.69
$ 0.43
$ 2.24
$ 1.87
Diluted earnings per share $ 0.68
$ 0.43
$ 2.21
$ 1.86

The exercise prices for certain stock options that the Company has awarded ~~exceed~~exceeded the average market price of the Company’s common ~~shares.~~shares during certain periods presented. Such stock options are antidilutive and were not included in the computation of diluted earnings per share. The antidilutive stock options outstanding during the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 were ~~473,694~~0 and ~~2,706,711,~~1,338,686, respectively. ~~During the~~ ~~nine~~ ~~months ended September 30, 2017 and 2016, the~~The antidilutive stock options outstanding during the six months ended June 30, 2021 and 2020 were ~~529,020~~0 and ~~3,080,133,~~ 1,353,254, respectively.

Note 8 - Inventories

The components of inventories at June 30, 2021 and December 31, 2020 were as follows:


	June 30, 2021		December 31, 2020
Manufacturing supplies	$	36.2	$	34.8
Raw materials	122.0		99.5
Work in process	352.6		320.3
Finished products	466.9		441.2
Subtotal	977.7		895.8
Allowance for obsolete and surplus inventory	(58.2)		(54.5)
Total Inventories, net	$	919.5	$	841.3

Inventories are valued at net realizable value, with approximately 61% valued on the first-in, first-out ("FIFO") method and the remaining 39% valued on the last-in, first-out ("LIFO") method. The majority of the Company's domestic inventories are valued on the LIFO method, and all the Company's international inventories are valued on the FIFO method.

The LIFO reserve at June 30, 2021 and December 31, 2020 was $185.1 million and $172.1 million, respectively. An actual valuation of the inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must be based on management’s estimates of expected year-end inventory levels and costs. Because these calculations 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.

Table of Contents

Note 9 - Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the six months ended June 30, 2021 were as follows:


	Mobile Industries		Process Industries		Total
Beginning balance	$	384.6	$	663.0	$	1,047.6


Foreign currency translation adjustments and other changes	(5.9)		(6.9)		(12.8)
Ending balance	$	378.7	$	656.1	$	1,034.8

The following table displays intangible assets as of June 30, 2021 and December 31, 2020:


	Balance at June 30, 2021						Balance at December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible assets subject to amortization:
Customer relationships	$	526.4	$	(176.7)	$	349.7	$	532.2	$	(161.9)	$	370.3
Technology and know-how	273.9		(79.7)		194.2		277.2		(72.0)		205.2
Trade names	14.3		(9.2)		5.1		14.2		(8.8)		5.4
Capitalized software	277.5		(258.2)		19.3		276.4		(254.6)		21.8
Other	4.7		(3.9)		0.8		4.7		(3.7)		1.0
	$	1,096.8	$	(527.7)	$	569.1	$	1,104.7	$	(501.0)	$	603.7
Intangible assets not subject to amortization:
Trade names	$	126.4			$	126.4	$	129.0			$	129.0
FAA air agency certificates	8.7				8.7		8.7				8.7
	$	135.1			$	135.1	$	137.7			$	137.7
Total intangible assets	$	1,231.9	$	(527.7)	$	704.2	$	1,242.4	$	(501.0)	$	741.4

Amortization expense for intangible assets was $28.2 million and $28.1 million for the six months ended June 30, 2021 and 2020, respectively. Amortization expense for intangible assets is projected to be $57.5 million in 2021; $49.4 million in 2022; $46.3 million in 2023; $44.3 million in 2024; and $43.2 million in 2025.

Table of Contents

Note 10 - Financing Arrangements

Short-term debt at June 30, 2021 and December 31, 2020 was as follows:


	June 30, 2021		December 31, 2020
Variable-rate Accounts Receivable Facility with an interest rate of 0.96% at December 31, 2020	$	0	$	58.0
Borrowings under lines of credit for certain of the Company’s foreign subsidiaries with various banks with interest rates ranging from 0.50% to 2.10% at June 30, 2021 and 0.24% to 1.75% at December 31, 2020	76.0		61.8
Short-term debt	$	76.0	$	119.8

~~Note 13 - Segment Information~~

The Company has a $100 million Amended and Restated Asset Securitization Agreement (the "Accounts Receivable Facility"), which matures on November 30, 2021. The Company currently intends to renew or replace the Accounts Receivable Facility prior to its maturity. Under the terms of the Accounts Receivable Facility, the Company sells, on an ongoing basis, certain domestic trade receivables to Timken Receivables Corporation, a wholly-owned consolidated subsidiary that, in turn, uses the trade receivables to secure borrowings that are funded through a vehicle that issues commercial paper in the short-term market. Borrowings under the Accounts Receivable Facility may be limited to certain borrowing base limitations; however, availability under the Accounts Receivable Facility was not reduced by any such borrowing base limitations at June 30, 2021. As of June 30, 2021, there were 0 outstanding borrowings under the Accounts Receivable Facility. The cost of this facility, which is the prevailing commercial paper rate plus facility fees, is considered a financing cost and is included in interest expense in the Consolidated Statements of Income.

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

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Net sales:
Mobile Industries $ 422.8
$ 353.1
$ 1,214.2
$ 1,104.1
Process Industries 348.6
304.3
1,011.6
910.9
$ 771.4
$ 657.4
$ 2,225.8
$ 2,015.0

Segment EBIT:
Mobile Industries $ 34.9
$ 25.9
$ 100.1
$ 95.3
Process Industries 61.7
42.0
164.9
123.7
Total EBIT, for reportable segments $ 96.6
$ 67.9
$ 265.0
$ 219.0
Corporate expenses (12.0 ) (10.9 ) (37.8 ) (34.8 )
Continued Dumping & Subsidy Offset Act income
(expense), net —
(0.2 ) —
53.6
Interest expense (10.1 ) (8.0 ) (26.5 ) (25.1 )
Interest income 0.7
0.4
2.0
1.1
Income before income taxes $ 75.2
$ 49.2
$ 202.7
$ 213.8

The lines of credit for certain of the Company's foreign subsidiaries provide for short-term borrowings up to $286.1 million in the aggregate. Most of these lines of credit are uncommitted. At June 30, 2021, the Company’s foreign subsidiaries had borrowings outstanding of $76.0 million and bank guarantees of $0.5 million, which reduced the aggregate availability under these facilities to $209.6 million.

Long-term debt at June 30, 2021 and December 31, 2020 was as follows:


	June 30, 2021		December 31, 2020
Variable-rate Senior Credit Facility with an average interest rate on U.S. Dollar of 1.46% and Euro of 1.48% at June 30, 2021 and U.S. Dollar of 2.01% and Euro of 1.48% at December 31, 2020	$	9.4	$	9.7


Variable-rate Term Loan(1), maturing on September 11, 2023, with an interest rate of 1.35% at June 30, 2021 and 1.63% at December 31, 2020	325.4		329.6
Fixed-rate Senior Unsecured Notes(1), maturing on September 1, 2024, with an interest rate of 3.875%	349.3		349.0
Fixed-rate Euro Senior Unsecured Notes(1), maturing on September 7, 2027, with an interest rate of 2.02%	177.6		182.9
Fixed-rate Senior Unsecured Notes(1), maturing on December 15, 2028, with an interest rate of 4.50%	396.7		396.5
Fixed-rate Medium-Term Notes, Series A(1), maturing at various dates through May 2028, with interest rates ranging from 6.74% to 7.76%	154.7		154.7
Fixed-rate Bank Loan, maturing on June 30, 2033, with an interest rate of 2.15%	17.5		18.8
Other	4.8		3.6
Total debt	$	1,435.4	$	1,444.8
Less: Current maturities	11.1		10.9
Long-term debt	$	1,424.3	$	1,433.9

(1) Net of discounts and fees

Table of Contents

Note 10 - Financing Arrangements (continued)

The Company entered into the Fourth Amended and Restated Credit Agreement ("Senior Credit Facility") on June 25, 2019. The Senior Credit Facility is a $650.0 million unsecured revolving credit facility, which matures on June 25, 2024. At June 30, 2021, the Company had $9.4 million of outstanding borrowings under the Senior Credit Facility, which reduced the availability under this facility to $640.6 million. The Senior Credit Facility has two financial covenants: a consolidated leverage ratio and a consolidated interest coverage ratio. On May 27, 2020, the Senior Credit Facility was amended to, among other things, effectively increase the limit with respect to the consolidated leverage ratio. As amended, the consolidated leverage ratio is calculated using a net debt construct, netting unrestricted cash in excess of $25 million, instead of total debt. The change to the consolidated leverage ratio calculation was effective through June 30, 2021. In the third quarter of 2021, the calculation of the consolidated leverage ratio under the Senior Credit Facility will revert back to a total debt construct.

On September 11, 2018, the Company entered into a $350 million variable-rate term loan that matures on September 11, 2023 (the "2023 Term Loan"). Proceeds from the 2023 Term Loan were used to fund the acquisitions of Apiary Investments Holding Limited and Rollon S.p.A., which closed on September 1, 2018 and September 18, 2018, respectively. On July 12, 2019, the Company amended the 2023 Term Loan agreement to, among other things, align covenants and other terms with the Senior Credit Facility. On May 27, 2020, the 2023 Term Loan agreement was further amended to align the calculation of the consolidated leverage ratio and other terms with the Senior Credit Facility. The change to the consolidated leverage ratio calculation was effective through June 30, 2021. In the third quarter of 2021, the calculation of the consolidated leverage ratio under the 2023 Term Loan will revert back to a total debt construct.

At June 30, 2021, the Company was in full compliance with all applicable covenants on its outstanding debt.

In the ordinary course of business, the Company utilizes standby letters of credit issued by financial institutions to guarantee certain obligations, most of which relate to insurance contracts. At June 30, 2021, outstanding letters of credit totaled $41.9 million, most with expiration dates within 12 months.

Table of Contents

Note 11 - Contingencies

The Company and certain of its subsidiaries have been identified as potentially responsible parties for investigation and remediation under the Comprehensive Environmental Response, Compensation and Liability Act, known as the Superfund, or similar state laws with respect to certain sites. Claims for investigation and remediation have been asserted against numerous other entities, which are believed to be financially solvent and are expected to fulfill their proportionate share of the obligation.

On December 28, 2004, the United States Environmental Protection Agency (“USEPA”) sent Lovejoy, Inc. ("Lovejoy") a Special Notice Letter that identified Lovejoy as a potentially responsible party, together with at least 14 other companies, at the Ellsworth Industrial Park Site, Downers Grove, DuPage County, Illinois (the “Site”). The Company acquired Lovejoy in 2016. Lovejoy’s Downers Grove property is situated within the Ellsworth Industrial Complex. The USEPA and the Illinois Environmental Protection Agency (“IEPA”) allege there have been one or more releases or threatened releases of hazardous substances, allegedly including, but not limited to, a release or threatened release on or from Lovejoy's property, at the Site. The relief sought by the USEPA and IEPA includes further investigation and potential remediation of the Site and reimbursement of response costs. Lovejoy’s allocated share of past and future costs related to the Site, including for investigation and/or remediation, could be significant. All previously pending property damage and personal injury lawsuits against Lovejoy related to the Site were settled or dismissed prior to our acquisition of Lovejoy.

The Company had total environmental accruals of $5.2 million and $5.3 million for various known environmental matters that are probable and reasonably estimable at June 30, 2021andDecember 31, 2020, respectively, which includes the Lovejoy matter described above. These accruals were recorded based upon the best estimate of costs to be incurred in light of the progress made in determining the magnitude of remediation costs, the timing and extent of remedial actions required by governmental authorities and the amount of the Company’s liability in proportion to other responsible parties.

Product Warranties:

In addition to the contingencies above, the Company provides limited warranties on certain of its products. The product warranty liability included in "Other current liabilities" on the Consolidated Balance Sheets was $10.9 million and $9.4 million at June 30, 2021 and December 31, 2020, respectively. The increase in the liability since year end primarily relates to accruals that are based on the best estimate of costs for future claims based on products sold that are still under warranty. The estimate of these accruals is based on historical claims and expected trends that continue to mature. Any significant change to these assumptions may be material to the results of operations in any particular period in which that change occurs.

The following is a rollforward of the consolidated product warranty accrual for the six months ended June 30, 2021 and twelve months ended December 31, 2020:


	June 30, 2021		December 31, 2020
Beginning balance, January 1	$	9.4	$	7.5
Expense	5.0		9.4
Payments	(3.5)		(7.5)
Ending balance	$	10.9	$	9.4

Table of Contents

Note 12 - Equity

The following tables present the changes in the components of equity for the three and six months ended June 30, 2021 and 2020, respectively:


			The Timken Company Shareholders
	Total		Stated Capital		Other Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Non controlling Interest
Balance at March 31, 2021	$	2,250.1	$	40.7	$	761.3	$	1,429.0	$	(2.1)	$	(53.4)	$	74.6
Net income	107.2						104.8						2.4
Foreign currency translation adjustment	23.2								23.8				(0.6)
Pension and other postretirement liability adjustments (net of income tax benefit of $0.5 million)	(1.7)								(1.7)

Change in fair value of derivative financial instruments, net of reclassifications	(0.2)								(0.2)
Dividends – $0.30 per share	(22.9)						(22.9)
Stock-based compensation expense	6.0				6.0

Stock option exercise activity	11.3				11.3

Payments related to tax withholding for stock-based compensation	(5.7)										(5.7)
Balance at June 30, 2021	$	2,367.3	$	40.7	$	778.6	$	1,510.9	$	19.8	$	(59.1)	$	76.4


			The Timken Company Shareholders
	Total		Stated Capital		Other Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Non controlling Interest
Balance at December 31, 2020	$	2,225.2	$	40.7	$	740.7	$	1,339.5	$	41.3	$	(9.3)	$	72.3
Net income	223.2						218.1						5.1
Foreign currency translation adjustment	(21.2)								(20.2)				(1.0)
Pension and other postretirement liability adjustments (net of income tax benefit of $1.1 million)	(3.3)								(3.3)
Change in fair value of derivative financial instruments, net of reclassifications	2.0								2.0
Dividends – $0.59 per share	(46.7)						(46.7)
Stock-based compensation expense	12.5				12.5
Stock purchased at fair market value	(26.3)										(26.3)
Stock option exercise activity	25.4				25.4

Payments related to tax withholding for stock-based compensation	(23.5)										(23.5)
Balance at June 30, 2021	$	2,367.3	$	40.7	$	778.6	$	1,510.9	$	19.8	$	(59.1)	$	76.4

Table of Contents

Note 12 - Equity (continued)


			The Timken Company Shareholders
	Total		Stated Capital		Other Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)		Treasury Stock		Non controlling Interest
Balance at March 31, 2020	$	1,900.3	$	53.1	$	920.1	$	1,964.8	$	(118.9)	$	(1,001.7)	$	82.9
Net income (loss)	61.8						61.9						(0.1)
Foreign currency translation adjustment	24.5								23.3				1.2
Pension and other postretirement liability adjustments (net of income tax benefit of $0.5 million)	(1.5)								(1.5)
Unrealized loss on marketable securities	0.5								0.5
Change in fair value of derivative financial instruments, net of reclassifications	(2.6)								(2.6)

Dividends – $0.28 per share	(21.0)						(21.0)
Stock-based compensation expense	5.8				5.8

Restricted share activity	0				(1.5)						1.5
Payments related to tax withholding for stock-based compensation	(0.2)										(0.2)
Balance at June 30, 2020	$	1,967.6	$	53.1	$	924.4	$	2,005.7	$	(99.2)	$	(1,000.4)	$	84.0


			The Timken Company Shareholders
	Total		Stated Capital		Other Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)		Treasury Stock		Non controlling Interest
Balance at December 31, 2019	$	1,954.8	$	53.1	$	937.6	$	1,907.4	$	(50.1)	$	(979.8)	$	86.6
Cumulative effect of ASU 2016-13 (net of income tax benefit of $0.2 million)	(0.4)						(0.4)
Net income	145.8						142.6						3.2
Foreign currency translation adjustment	(54.3)								(48.0)				(6.3)
Pension and other postretirement liability adjustments (net of income tax benefit of $1.0 million)	(2.8)								(2.8)
Unrealized loss on marketable securities	0.1								0.1
Change in fair value of derivative financial instruments, net of reclassifications	1.6								1.6
Change in ownership of noncontrolling interest	0.5												0.5
Dividends – $0.56 per share	(43.9)						(43.9)
Stock-based compensation expense	11.4				11.4
Stock purchased at fair market value	(42.3)										(42.3)
Stock option exercise activity	7.5				(0.9)						8.4
Restricted share activity	0				(23.7)						23.7
Payments related to tax withholding for stock-based compensation	(10.4)										(10.4)

Balance at June 30, 2020	$	1,967.6	$	53.1	$	924.4	$	2,005.7	$	(99.2)	$	(1,000.4)	$	84.0

Table of Contents

Note 1413 - Impairment and Restructuring Charges

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

For the three months ended June 30, 2021:


	Mobile Industries		Process Industries		Unallocated Corporate		Total
Impairment charges	$	1.0	$	0.1	$	0	$	1.1
Severance and related benefit costs	0		0.1		0		0.1
Exit costs	0.1		0		0		0.1
Total	$	1.1	$	0.2	$	0	$	1.3

For the ~~three~~six months ended ~~September~~June 30, ~~2017~~:2021:


	Mobile Industries		Process Industries		Unallocated Corporate		Total
Impairment charges	$	1.1	$	3.4	$	0	$	4.5
Severance and related benefit costs	0		0.6		0		0.6
Exit costs	0.2		0		0		0.2
Total	$	1.3	$	4.0	$	0	$	5.3

Mobile Industries Process Industries Corporate Total
Severance and related benefit costs $ 1.3
$ —
$ —
$ 1.3
Total $ 1.3
$ —
$ —
$ 1.3
For the three months ended June 30, 2020:


	Mobile Industries		Process Industries		Unallocated Corporate		Total

Severance and related benefit costs	$	1.5	$	1.7	$	0	$	3.2
Exit costs	(0.3)		0.2		0		(0.1)
Total	$	1.2	$	1.9	$	0	$	3.1

For the ~~three~~six months ended ~~September~~June 30, ~~2016~~:2020:


	Mobile Industries		Process Industries		Unallocated Corporate		Total
Impairment charges	$	0	$	0.1	$	0	$	0.1
Severance and related benefit costs	1.6		4.2		0.1		5.9
Exit costs	0.3		0.4		0		0.7
Total	$	1.9	$	4.7	$	0.1	$	6.7

Mobile Industries Process Industries Corporate Total
Impairment charges $ 1.2
$ —
$ —
$ 1.2
Severance and related benefit costs 2.9
0.4
—
3.3
Exit costs 0.3
0.5
—
0.8
Total $ 4.4
$ 0.9
$ —
$ 5.3

~~For the~~ ~~nine~~ ~~months ended September 30, 2017:~~

Mobile Industries Process Industries Corporate Total
Severance and related benefit costs $ 3.1
$ 0.1
$ —
$ 3.2
Exit costs 0.1
—
0.5
0.6
Total $ 3.2
$ 0.1
$ 0.5
$ 3.8

~~For the~~ ~~nine~~ ~~months ended September 30, 2016:~~

Mobile Industries Process Industries Corporate Total
Impairment charges $ 3.8
$ —
$ —
$ 3.8
Severance and related benefit costs 7.7
4.9
—
12.6
Exit costs 1.6
0.7
—
2.3
Total $ 13.1
$ 5.6
$ —
$ 18.7

The following discussion explains the impairment and restructuring charges recorded for the periods presented; however, it is not intended to reflect a comprehensive discussion of all amounts in the tables above.

Coronavirus ("COVID-19") Pandemic Cost Reduction Initiatives:

During the three months ended June 30, 2020, the Company recorded $2.0 million in severance and related benefit costs to eliminate approximately 20 salaried positions. Of the $2.0 million charge, $0.6 million related to the Mobile Industries segment and $1.4 million related to the Process Industries segment.

Mobile Industries:

On ~~September 29, 2016,~~July 19, 2021, the Company announced the closure of its bearing ~~plant~~manufacturing facility in ~~Pulaski, Tennessee ("Pulaski"), which~~Villa Carcina, Italy. The Company will be transferring the manufacturing of its single-row tapered roller bearing production to other bearing facilities in Europe, Asia and the United States. The plant is expected to close ~~during~~by the ~~fourth quarter~~end of ~~2017~~ 2021 and is expected to affect approximately ~~120~~110 employees. The Company expects to incur approximately $7 million to $10 million of expenses related to this closure. Ahead of this announcement, the Company reviewed assets for impairment. As a result, the Company recorded impairment charges of $1.0 million during the three months ended June 30, 2021.

Table of Contents

Note 13 - Impairment and Restructuring Charges (continued)

On October 16, 2019, the Company announced the reorganization of its bearing manufacturing facility in Gaffney, South Carolina. The Company transferred its high-volume bearing production and roller production to other Timken manufacturing facilities in the United States. The transfer of these operations was substantially completed by the end of the third quarter of 2020 and affected approximately 150 employees. The Company expected to incur approximately $8 million to $10 million of pretax costs in total related to this reorganization. During the ~~three and~~ ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, the Company recognized severance and related ~~benefit~~benefits of $0.3 million and exit costs of ~~$0.2~~$0.3 million related to this reorganization. The Company incurred cumulative pretax costs related to this reorganization of $7.8 million as of June 30, 2021, including rationalization costs recorded in cost of products sold.

Process Industries:

On February 4, 2020, the Company announced the closure of its chain manufacturing facility in Indianapolis, Indiana. This facility was part of the Diamond Chain Company ("Diamond Chain") acquisition completed on April 1, 2019. The Company will be transferring the manufacturing of its Diamond Chain product line to its chain facility in Fulton, Illinois. The chain plant is expected to close by the end of the fourth quarter of 2021 and ~~$1.3~~is expected to affect approximately 240 employees. The Company expects to hire approximately 130 full-time positions in Fulton, Illinois and expects to incur approximately $10 million ~~respectively,~~to $12 million of expenses related to this closure. During the three months ended ~~September~~June 30, ~~2016,~~2021 and June 30, 2020, the Company recorded severance and related benefit costs of ~~$1.7~~$0.3 million and $0.3 million, respectively, related to this closure. During the six months ended June 30, 2021 and June 30, 2020, the Company recorded severance and related benefit costs of $0.6 million and $2.2 million, respectively, related to this closure. The Company has incurred cumulative pretax costs related to this closure of ~~$8.1~~$8.5 million as of ~~September~~June 30, ~~2017,~~2021, including rationalization costs recorded in cost of products sold.

In August 2016, the Company completed the consultation process to close the manufacturing operations in Benoni, South Africa ("Benoni") affecting 85 employees. Benoni will continue to recondition bearings and assemble rail bearings. During the three months ended September 30, 2016,addition, the Company recorded impairment charges of ~~$0.5 million and severance and related benefit costs of $0.8~~$3.3 million related to ~~this closure.~~

On ~~March 17, 2016~~,certain engineering-related assets used in the ~~Company announced the closure of its bearing plant in Altavista, Virginia ("Altavista"). The Company completed the closure of this manufacturing facility on March 31, 2017. During~~business during the three months ended ~~September 30, 2016,~~March 31, 2021. Management concluded no further investment would be made in these assets and as a result, reduced the ~~Company recorded impairment charges of $0.7 million and severance and related benefit costs of $0.2 million related~~value to ~~this closure. During the~~ zero.

~~nine~~ months ended September 30, 2016, the Company recorded impairment charges of $3.1 million and severance and related benefit costs of $1.7 million in connection with this closure. The Company has incurred pretax costs related to this closure of $11.5 million as of September 30, 2017, including rationalization costs recorded in cost of products sold.

~~During the three months and~~ Consolid~~nine~~ months ended September 30, 2017, the Company recognized $0.7 million and $1.5 million, respectively, of severance and related benefit costs to eliminate approximately 50 positions in the aggregate. The amounts recognized for the three months and ~~nine~~ ~~months ended September 30, 2017 primarily related to the Mobile Industries segment. During the~~ ~~nine~~ ~~months ended September 30, 2016, the Company recognized $7.7 million of severance and related benefit costs to eliminate approximately 175 positions. Of the $7.7 million charge for the first~~ ~~nine~~ ~~months of 2016, $2.9 million related to the Mobile Industries segment and $4.8 million related to the Process Industries segment.~~ated Restructuring Accrual:

~~Consolidated Restructuring Accrual:~~

The following is a rollforward of the consolidated restructuring accrual for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~the~~ twelve months ended December 31, ~~2016~~2020:


	June 30, 2021		December 31, 2020
Beginning balance, January 1	$	8.0	$	2.7
Expense	0.8		20.8
Payments	(2.5)		(15.5)
Ending balance	$	6.3	$	8.0

September 30,
2017 December 31,
2016
Beginning balance, January 1 $ 10.1
$ 11.3
Expense 3.8
17.8
Payments (9.2 ) (19.0 )
Ending balance $ 4.7
$ 10.1

The restructuring ~~accruals~~accrual at ~~September~~June 30, ~~2017~~ ~~and~~ ~~December 31, 2016~~ ~~were~~2021 was included in other current liabilities on the Consolidated Balance Sheets.

Table of Contents

Note 1514 - Retirement Benefit Plans

The following table sets forth the net periodic benefit cost for the Company’s defined benefit pension plans. The amounts for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 are based on calculations prepared by the Company's actuaries and represent the Company’s best estimate of ~~each~~that period’s proportionate share of the amounts to be recorded for the year ending December 31, ~~2017~~2021.


	U.S. Plans				International Plans				Total
	Three Months Ended June 30,				Three Months Ended June 30,				Three Months Ended June 30,
	2021		2020		2021		2020		2021		2020
Components of net periodic benefit cost (credit):
Service cost	$	2.3	$	2.7	$	0.5	$	0.4	$	2.8	$	3.1
Interest cost	4.5		5.3		1.1		1.3		5.6		6.6
Expected return on plan assets	(6.1)		(6.4)		(2.6)		(2.1)		(8.7)		(8.5)
Amortization of prior service cost	0.3		0.4		0.1		0.1		0.4		0.5
Recognition of net actuarial losses	3.5		8.8		0		0		3.5		8.8

Net periodic benefit cost (credit)	$	4.5	$	10.8	$	(0.9)	$	(0.3)	$	3.6	$	10.5


	U.S. Plans				International Plans				Total
	Six Months Ended June 30,				Six Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020		2021		2020
Components of net periodic benefit cost (credit):
Service cost	$	4.8	$	5.4	$	1.0	$	0.8	$	5.8	$	6.2
Interest cost	8.9		10.5		2.2		2.8		11.1		13.3
Expected return on plan assets	(12.2)		(12.7)		(5.1)		(4.3)		(17.3)		(17.0)
Amortization of prior service cost	0.6		0.8		0.1		0.1		0.7		0.9
Recognition of net actuarial losses	4.4		8.8		0		0		4.4		8.8

Net periodic benefit cost (credit)	$	6.5	$	12.8	$	(1.8)	$	(0.6)	$	4.7	$	12.2

The Company currently expects to make contributions and payments related to its global defined benefit pension plans totaling approximately $15 million in 2021. Approximately $9.6 million of this amount related to the 2021 payout of deferred compensation in June 2021 to a former executive officer of the Company. The payment triggered a remeasurement of the pension obligation for one of the Company's U.S. defined benefit pension plans during the .six months ended June 30, 2021. In addition, the Company made lump sum payments to new retirees in 2021 in excess of annual interest and service costs for two of its other U.S. defined benefit pension plans as of June 30, 2021. These payments triggered a remeasurement of assets and obligations for these U.S. defined benefit pension plans during the six months ended June 30, 2021. As a result of these remeasurements, the Company recognized net actuarial losses of $3.5 million and $4.4 million during the three and six months ended June 30, 2021, respectively.

U.S. Plans International Plans Total
Three Months Ended
September 30, Three Months Ended
September 30, Three Months Ended
September 30,
2017 2016 2017 2016 2017 2016
Components of net periodic benefit cost:
Service cost $ 3.1
$ 3.3
$ 0.4
$ 0.4
$ 3.5
$ 3.7
Interest cost 6.2
6.6
1.9
2.6
8.1
9.2
Expected return on plan assets (7.0 ) (7.4 ) (2.9 ) (2.6 ) (9.9 ) (10.0 )
Amortization of prior service cost 0.3
0.4
0.1
0.1
0.4
0.5
Net periodic benefit cost $ 2.6
$ 2.9
$ (0.5 ) $ 0.5
$ 2.1
$ 3.4

U.S. Plans International Plans Total
Nine Months Ended
September 30, Nine Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016 2017 2016
Components of net periodic benefit cost:
Service cost $ 9.2
$ 9.9
$ 1.2
$ 1.1
$ 10.4
$ 11.0
Interest cost 18.5
20.0
5.6
8.2
24.1
28.2
Expected return on plan assets (21.0 ) (22.3 ) (8.3 ) (8.0 ) (29.3 ) (30.3 )
Amortization of prior service cost 1.0
1.2
0.1
0.1
1.1
1.3
Recognition of actuarial loss 4.4
—
—
—
4.4
—
Net periodic benefit cost $ 12.1
$ 8.8
$ (1.4 ) $ 1.4
$ 10.7
$ 10.2

During the ~~first~~ three and six months ended June 30, 2020, the ~~months of 2017, the~~ Company recognized actuarial losses of ~~$4.4 million as~~$8.8 million. The remeasurement was a result of ~~the remeasurement of plan assets and obligations for one of the Company’s United States ("U.S.") defined benefit pension plans. The remeasurement was due to~~expected lump sum payments to new retirees exceeding service and interest costs for ~~this plan.~~one of the Company's U.S. defined benefit pension plans.

Table of Contents

Note 1615 - Other Postretirement Benefit Plans

The following table sets forth the net periodic benefit cost for the Company’s other postretirement benefit plans. The amounts for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 are based on calculations prepared by the Company's actuaries and represent the Company’s best estimate of ~~each~~that period’s proportionate share of the amounts to be recorded for the year ending December 31, ~~2017.~~2021.


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Components of net periodic benefit credit:
Service cost	$	0.1	$	0.1	$	0.1	$	0.1
Interest cost	0.3		0.5		0.7		1.0
Expected return on plan assets	0		(0.1)		0		(0.2)
Amortization of prior service credit	(2.5)		(2.5)		(5.0)		(4.9)



Net periodic benefit credit	$	(2.1)	$	(2.0)	$	(4.2)	$	(4.0)

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Components of net periodic benefit cost:
Service cost $ —
$ 0.1
$ 0.1
$ 0.3
Interest cost 2.3
2.7
6.8
8.2
Expected return on plan assets (1.4 ) (1.6 ) (4.2 ) (4.9 )
Amortization of prior service cost (0.3 ) 0.2
(0.8 ) 0.7
Net periodic benefit cost $ 0.6
$ 1.4
$ 1.9
$ 4.3

~~Note 17 - Income Taxes~~

~~The Company's provision~~In January 2021, the Company transferred the remaining $11.1 million in an existing Voluntary Employee Beneficiary Association ("VEBA") trust for ~~income taxes in interim periods is computed by applying the estimated annual effective tax rates~~certain retiree medical benefits to ~~income or loss before income taxes~~a second VEBA trust for the ~~period. In addition, non-recurring or discrete items are recorded~~payment of certain active employees’ medical benefits. The Company utilized all of the assets in the second trust during the ~~period(s) in which they occur.~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Provision for income taxes $ 21.1
$ 15.2
$ 28.5
$ 65.8
Effective tax rate 28.1 % 30.9 % 14.1 % 30.8 %

~~The income tax expense for the~~ ~~third~~ ~~quarter and first~~ ~~nine~~ months of 2017 was calculated using the forecasted multi-jurisdictional annual effective tax rates to determine a blended annual effective tax rate. The effective tax rate differs from the U.S. federal statutory rate of 35% primarily due to the projected mix of earnings in international jurisdictions with relatively lower tax rates and tax benefits related to foreign tax credits, which are partially offset by losses in jurisdictions with no tax benefit due to valuation allowances.

~~Income tax expense increased for the~~ ~~third~~ ~~quarter of 2017 compared to the~~ ~~third~~ quarter of 2016 primarily due to the significant increase in pre-tax earnings, primarily in non-U.S. jurisdictions. The expense was partially offset by favorable U.S. tax deductions, tax credits and favorable discrete tax amounts.

~~Income tax expense for the~~ ~~nine~~six months ended ~~September~~June 30, ~~2017 is lower than~~2021.

Table of Contents

Note 16 - Accumulated Other Comprehensive Income (Loss)

The following tables present details about components of accumulated other comprehensive income (loss) for the ~~nine~~three and six months ended ~~September~~June 30, ~~2016 primarily due to the net reversal of accruals for prior year uncertain tax positions recorded discretely~~2021 and ~~favorable U.S. tax deductions and tax credits.~~2020, respectively:


	Foreign currency translation adjustments		Pension and other postretirement liability adjustments		Unrealized gain (loss) on marketable securities		Change in fair value of derivative financial instruments		Total
Balance at March 31, 2021	$	(62.0)	$	61.8	$	0	$	(1.9)	$	(2.1)
Other comprehensive income (loss) before reclassifications and income taxes	23.2		(0.1)		0		(2.1)		21.0
Amounts reclassified from accumulated other comprehensive (loss) income before income taxes	0		(2.1)		0		1.7		(0.4)
Income tax benefit	0		0.5		0		0.2		0.7
Net current period other comprehensive income (loss), net of income taxes	23.2		(1.7)		0		(0.2)		21.3
Noncontrolling interest	0.6		0		0		0		0.6
Net current period comprehensive income (loss), net of income taxes and noncontrolling interest	23.8		(1.7)		0		(0.2)		21.9
Balance at June 30, 2021	$	(38.2)	$	60.1	$	0	$	(2.1)	$	19.8

~~The following table is a rollforward of the Company's gross unrecognized tax benefits for the~~ ~~nine~~ ~~months ended September 30, 2017:~~


	Foreign currency translation adjustments		Pension and other postretirement liability adjustments		Unrealized gain (loss) on marketable securities		Change in fair value of derivative financial instruments		Total
Balance at December 31, 2020	$	(18.0)	$	63.4	$	0	$	(4.1)	$	41.3
Other comprehensive (loss) income before reclassifications and income taxes	(21.2)		(0.1)		0		(0.7)		(22.0)
Amounts reclassified from accumulated other comprehensive (loss) income before income taxes	0		(4.3)		0		3.4		(0.9)
Income tax benefit (expense)	0		1.1		0		(0.7)		0.4
Net current period other comprehensive (loss) income, net of income taxes	(21.2)		(3.3)		0		2.0		(22.5)
Noncontrolling interest	1.0		0		0		0		1.0
Net current period comprehensive (loss) income, net of income taxes and noncontrolling interest	(20.2)		(3.3)		0		2.0		(21.5)
Balance at June 30, 2021	$	(38.2)	$	60.1	$	0	$	(2.1)	$	19.8

September 30,
2017
Beginning balance, January 1 $ 39.1
Tax positions related to the prior years:
  Additions 5.6
  Reductions (1.3 )
  Lapses in statutes of limitation (28.6 )
Ending Balance $ 14.8

Table of Contents

Note 16 - Accumulated Other Comprehensive Income (Loss) (continued)


	Foreign currency translation adjustments		Pension and other postretirement liability adjustments		Unrealized gain (loss) on marketable securities		Change in fair value of derivative financial instruments		Total
Balance at March 31, 2020	$	(186.6)	$	65.6	$	(0.4)	$	2.5	$	(118.9)
Other comprehensive income (loss) before reclassifications and income taxes	24.5		0		0.7		(2.2)		23.0
Amounts reclassified from accumulated other comprehensive (loss) income before income taxes	0		(2.0)		0		(1.3)		(3.3)
Income tax benefit (expense)	0		0.5		(0.2)		0.9		1.2
Net current period other comprehensive income (loss), net of income taxes	24.5		(1.5)		0.5		(2.6)		20.9
Noncontrolling interest	(1.2)		0		0		0		(1.2)
Net current period comprehensive income (loss), net of income taxes and noncontrolling interest	23.3		(1.5)		0.5		(2.6)		19.7
Balance at June 30, 2020	$	(163.3)	$	64.1	$	0.1	$	(0.1)	$	(99.2)


	Foreign currency translation adjustments		Pension and other postretirement liability adjustments		Unrealized gain (loss) on marketable securities		Change in fair value of derivative financial instruments		Total
Balance at December 31, 2019	$	(115.3)	$	66.9	$	0	$	(1.7)	$	(50.1)
Other comprehensive (loss) income before reclassifications and income taxes	(54.3)		0.2		0.2		4.2		(49.7)
Amounts reclassified from accumulated other comprehensive (loss) income before income taxes	0		(4.0)		0		(1.9)		(5.9)
Income tax benefit (expense)	0		1.0		(0.1)		(0.7)		0.2
Net current period other comprehensive (loss) income, net of income taxes	(54.3)		(2.8)		0.1		1.6		(55.4)
Noncontrolling interest	6.3		0		0		0		6.3
Net current period comprehensive (loss) income, net of income taxes and noncontrolling interest	(48.0)		(2.8)		0.1		1.6		(49.1)
Balance at June 30, 2020	$	(163.3)	$	64.1	$	0.1	$	(0.1)	$	(99.2)

Other comprehensive income (loss) before reclassifications and income taxes includes the effect of foreign currency.

Table of Contents

Note 1817 - Fair Value

Fair value is defined as the price that would be expected to be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The FASB provides accounting rules that classify the inputs used to measure fair value into the following hierarchy:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

Level 3 – Unobservable inputs for the asset or liability.

The following tables present the fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016:~~2020:


	June 30, 2021
	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	305.5	$	303.5	$	2.0	$	0

Restricted cash	0.8		0.8		0		0
Short-term investments	52.0		0		52.0		0

Foreign currency forward contracts	0.9		0		0.9		0
Total Assets	$	359.2	$	304.3	$	54.9	$	0
Liabilities:
Foreign currency forward contracts	$	3.4	$	0	$	3.4	$	0

Total Liabilities	$	3.4	$	0	$	3.4	$	0

September 30, 2017
Total Level 1 Level 2 Level 3
Assets:
Cash and cash equivalents $ 125.4
$ 120.5
$ 4.9
$ —
Cash and cash equivalents measured at net asset value 11.8
—
—
—
Restricted cash 3.3
3.3
—
—
Short-term investments 16.5
—
16.5
—
Short-term investments measured at net asset value 0.2
—
—
—
Foreign currency hedges 1.6
—
1.6
—
Total Assets $ 158.8
$ 123.8
$ 23.0
$ —
Liabilities:
Foreign currency hedges $ 3.9
$ —
$ 3.9
$ —
Total Liabilities $ 3.9
$ —
$ 3.9
$ —


	December 31, 2020
	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	320.3	$	318.6	$	1.7	$	0

Restricted cash	0.8		0.8		0		0
Short-term investments	37.6		0		37.6		0

Foreign currency forward contracts	1.1		0		1.1		0
Total Assets	$	359.8	$	319.4	$	40.4	$	0
Liabilities:
Foreign currency forward contracts	$	8.1	$	0	$	8.1	$	0
Total Liabilities	$	8.1	$	0	$	8.1	$	0

December 31, 2016
Total Level 1 Level 2 Level 3
Assets:
Cash and cash equivalents $ 129.6
$ 125.0
$ 4.6
$ —
Cash and cash equivalents measured net asset value 19.2
—
—
—
Restricted cash 2.7
2.7
—
—
Short-term investments 9.4
—
9.4
—
Short-term investments measured at net asset value 2.3
—
—
—
Foreign currency hedges 9.9
—
9.9
—
Total Assets $ 173.1
$ 127.7
$ 23.9
$ —
Liabilities:
Foreign currency hedges $ 2.1
$ —
$ 2.1
$ —
Total Liabilities $ 2.1
$ —
$ 2.1
$ —

Cash and cash equivalents are highly liquid investments with maturities of three months or less when purchased and are valued at the ~~redemption~~redemption value. Short-term investments are investments with maturities between four months and one year, and generally are valued at amortized cost, which approximates fair value. A portion of the cash and cash equivalents and short-term investments are valued based on net asset value. The Company uses publicly available foreign currency ~~forward~~forward and spot rates to measure the fair value of its foreign currency forward contracts.

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

~~2017~~

In addition, the Company remeasures certain assets at fair value, using Level 3 inputs, as a result of the occurrence of triggering events such as purchase accounting for acquisitions. See Note 3 - Acquisitions for further discussion.

No other material assets were measured at fair value on a nonrecurring basis ~~for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2021 and 2020, respectively.

~~2016~~

~~The following table presents those assets measured at fair value on a nonrecurring basis for the~~ ~~nine~~ ~~months ended September 30, 2016 using Level 3 inputs:~~

Carrying Value Fair Value Adjustment Fair Value
Long-lived assets held for sale:
Land $ 0.2
$ (0.2 ) $ —
Total long-lived assets held for sale $ 0.2
$ (0.2 ) $ —

Long-lived assets held and used:
Altavista bearing plant $ 5.6
$ (3.1 ) $ 2.5
Equipment at Benoni bearing plant 0.5
(0.5 ) —
Total long-lived assets held and used $ 6.1
$ (3.6 ) $ 2.5

~~Assets held for sale~~

Table of $0.2 million were written down to their fair value of zero during the first quarter of 2016, resulting in an impairment charge of $0.2 million. The fair value of these assets was based on the price that the Company expected to receive when it disposed of these assets.Contents

Note 17 - Fair Value (continued)

On March 17, 2016, the Company announced the closure of its Altavista bearing plant. The Company completed the closure of this manufacturing facility on March 31, 2017. The Altavista bearing plant, with a carrying value of $5.6 million, was written down to its fair value of $3.2 million during the first quarter of 2016, resulting in an impairment charge of $2.4 million. The fair value for the plant was based on the price that the Company expected to receive from the sale of this facility. During the third quarter of 2016, the Company reevaluated the fair value of this facility. The Altavista bearing plant was written down to its fair value of $2.5 million during the third quarter of 2016, resulting in an additional impairment of $0.7 million. During the second quarter of 2017, this facility was reclassified to assets held for sale and included in other current assets on the Consolidated Balance Sheet. On
~~July 14, 2017, this facility was sold for a pretax gain of approximately $1.6 million.~~

In August 2016, the Company completed the consultation process to close the manufacturing operations in Benoni. The Benoni facility will continue to recondition bearings and assemble rail bearings. Equipment at this facility, with a carrying value of ~~$0.5 million~~, was written down to its fair value of zero during the third quarter of 2016, resulting in an impairment charge of $0.5 million. The fair value for the equipment was based on the price that the Company expected to receive from the sale of the equipment.

Financial Instruments:

The Company’s financial instruments consist primarily of cash and cash equivalents, ~~restricted cash,~~ short-term investments, accounts receivable, ~~net,~~trade accounts payable, ~~trade,~~ short-term borrowings and long-term debt. Due to their short-term nature, the carrying value of cash and cash equivalents, ~~restricted cash,~~ short-term investments, accounts receivable, ~~net,~~trade accounts payable ~~trade~~ and short-term borrowings are a reasonable estimate of their fair value. Due to the nature of fair value ~~calculations~~calculations for variable-rate debt, the carrying value of the Company's long-term ~~variable rate~~variable-rate debt is a reasonable estimate of its fair value. The fair value of the Company’s long-term fixed-rate debt, based on quoted market prices, was ~~$723.9~~$1,204.0 million and ~~$532.2~~$1,220.7 million at ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively. The carrying value of this debt was ~~$684.3~~$1,095.7 million and ~~$507.3~~$1,103.2 million at ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively. The fair value of long-term fixed-rate debt ~~was~~was measured using Level 2 inputs.

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

Note 1918 - Derivative Instruments and Hedging Activities

The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are foreign currency exchange rate risk ~~commodity price risk~~ and interest rate risk. Forward ~~exchange~~ contracts on various foreign currencies are entered into in order to manage the foreign currency exchange rate risk associated with certain of the ~~Company’s~~Company's commitments denominated in foreign currencies. From time to time, interest rate swaps are used to manage interest rate risk associated with the Company’s fixed and floating-rate borrowings.

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

On September 8, 2020, the Company entered into a $100 million floating-to-fixed rate swap on the 2023 Term Loan, which hedges the change in the 1-month LIBOR rate between October 30, 2020 and September 11, 2023 to a fixed rate. The Company’s risk management objective is to hedge the risk of changes in the monthly interest expense attributable to changes in the benchmark interest rate.

On September 15, 2020, the Company designated €54.5 million of its €150.0 million fixed-rate senior unsecured notes, maturing on September 7, 2027 (the "2027 Notes"), as a hedge against its net investment in one of its European affiliates. The objective of the hedge transaction is to protect the net investment in the foreign operations against changes in the exchange rate between the U.S. dollar and the Euro. The net impact for the three and six months ended June 30, 2021, respectively, was a loss of $0.7 million and a gain of $1.9 million to accumulated comprehensive loss with a corresponding offset to other (expense) income, which partially offsets the impact of the foreign currency adjustment on the 2027 Notes.

The Company does not purchase or hold any derivative financial instruments for trading purposes. As of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, the Company had ~~$223.2~~$187.8 million ~~and $282.8~~and $173.2 million, respectively, of outstanding foreign currency forward contracts at notional value. Refer to Note 1817 - Fair Value for the fair value disclosure of derivative financial instruments.

Cash Flow Hedging Strategy:

For certain derivative instruments that are designated and qualify as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), ~~the effective portion of~~ the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. ~~The remaining gain or loss on the derivative instrument in excess~~

Table of ~~the cumulative change in the present value of future cash flows of the hedged item, if any (~~Contents

Note 18 - Derivative Instruments and Hedging Activities (continued)

~~i.e., the ineffective portion), or hedge components excluded from the assessment of effectiveness, are recognized in the Consolidated Statement of Income during the current period.~~

To protect against a reduction in the value of forecasted foreign currency cash flows resulting from export sales, ~~over the next year,~~ the Company has instituted a foreign currency cash flow hedging program. The Company hedges portions of its forecasted ~~revenue or expense~~cash flows denominated in foreign currencies with forward contracts. When the dollar strengthens significantly against foreign currencies, the decline in the present value of future foreign currency revenue is offset by gains in the fair value of the forward contracts designated as hedges. ~~Conversely,~~Conversely, when the dollar weakens, the increase in the present value of future foreign currency cash flows is offset by losses in the fair value of the forward contracts.

As of June 30, 2021 and December 31, 2020, the Company had $88.7 million and $86.9 million, respectively, of outstanding foreign currency forward contracts at notional value that were classified as cash flow hedges.

The maximum length of time over which the Company hedges its exposure to the variability in future cash flows for ~~forecasted~~forecast transactions is generally 18eighteen months or less.

~~Fair Value Hedging Strategy:~~

~~For derivative instruments that are designated and qualify as fair value hedges (i.e~~., hedging the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a particular risk), the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in the same line item associated with the hedged item (~~i.e., in interest expense when the hedged item is fixed-rate debt).~~

Purpose for Derivative Instruments not ~~Designated~~designated as Hedging Instruments:

For derivative instruments that are not designated as hedging instruments, the instruments are typically ~~are~~ forward contracts. In general, the practice is to reduce volatility by selectively hedging transaction exposures including intercompany loans, accounts payable and accounts receivable. Intercompany loans between entities with different functional currencies typically are hedged with a forward contract at the inception of the loan with a maturity date atcorresponding to the maturity of the loan. The revaluation of these contracts, as well as the revaluation of the underlying balance sheet items, is recorded directly to the income statement so the adjustment generally offsets the revaluation of the underlying balance sheet items to protect cash payments and reduce income statement volatility.

As of June 30, 2021 and December 31, 2020, the Company had $99.1 million and $86.3 million, respectively, of outstanding foreign currency forward contracts at notional value that were not designated as hedging instruments. The following table presents the ~~fair value of the Company's derivative instruments. Those balances are presented in the other non-current assets/liabilities accounts within the Consolidated Balance Sheets.~~

Derivative Assets Derivatives Liabilities
Derivatives designated as hedging instruments Fair Value at 9/30/17 Fair Value at 12/31/16 Fair Value at 9/30/17 Fair Value at 12/31/16
Foreign currency forward contracts $ 0.3
$ 2.3
$ 2.9
$ 0.5

Derivatives not designated as hedging instruments
Foreign currency forward contracts 1.3
7.6
1.0
1.6
Total Derivatives $ 1.6
$ 9.9
$ 3.9
$ 2.1

~~The following tables present the~~ impact of derivative instruments not designated as hedging instruments for the three and ~~their~~six months ended June 30, 2021 and 2020, respectively, and the related location within the Consolidated Statements of Income:


		Amount of gain or (loss) recognized in income
		Three Months Ended June 30,				Six Months Ended June 30,
Derivatives not designated as hedging instruments:	Location of gain or (loss) recognized in income	2021		2020		2021		2020

Foreign currency forward contracts	Other income (expense), net	$	(0.9)	$	(3.7)	$	(0.7)	$	1.8

Amount of gain or (loss) recognized in
Other Comprehensive Income on derivative instruments
Three Months Ended
September 30, Nine Months Ended
September 30,
Derivatives in cash flow hedging relationships 2017 2016 2017 2016
Foreign currency forward contracts $ (1.6 ) $ (0.5 ) $ (4.7 ) $ (2.5 )
Interest rate swaps (2.4 ) —
(2.4 ) —
Total $ (4.0 ) $ (0.5 ) $ (7.1 ) $ (2.5 )

Amount of gain or (loss) reclassified from Accumulated Other Comprehensive Loss into income (effective portion)
Three Months Ended
September 30, Nine Months Ended
September 30,
Derivatives in cash flow hedging relationships 2017 2016 2017 2016
Foreign currency forward contracts $ (0.9 ) $ (0.4 ) $ (0.2 ) $ 0.4
Interest rate swaps —
(0.1 ) (0.2 ) (0.3 )
Total $ (0.9 ) $ (0.5 ) $ (0.4 ) $ 0.1

Table of Contents

Amount of gain or (loss) recognized in
income on derivative instruments
Three Months Ended
September 30, Nine Months Ended
September 30,
Derivatives not designated as hedging instruments Location of gain or (loss) recognized in income on derivative 2017 2016 2017 2016
Foreign currency forward contracts Other income (expense), net $ 2.7
$ (0.2 ) $ (5.6 ) $ (4.5 )

~~Note 20 - Continued Dumping and Subsidy Offset Act~~

The U.S. Continued Dumping and Subsidy Offset Act ("CDSOA") provides for distribution of monies collected by U.S. Customs and Border Protection ("U.S. Customs") on entries of merchandise subject to antidumping orders that entered the U.S. prior to October 1, 2007 to qualifying domestic producers where the domestic producers have continued to invest in their technology, equipment and people. During the third quarter of 2016, the Company recognized CDSOA expense of $0.2 million. During the first nine months of 2016, the Company recognized pretax CDSOA income, net of related expenses, of $53.6 million.

In September 2002, the World Trade Organization ruled that CDSOA payments are not consistent with international trade rules. In February 2006, U.S. legislation was enacted that ended CDSOA distributions for imports covered by antidumping duty orders entering the U.S. after September 30, 2007. Instead, any such antidumping duties collected would remain with the U.S. Treasury.

CDSOA has been the subject of significant litigation since 2002 and U.S. Customs has withheld CDSOA distributions for certain years while litigation was ongoing. However, much of the CDSOA litigation that involves antidumping orders where Timken is a qualifying domestic producer has concluded.

Subsequently, the Company was notified by letters dated March 25, 2016 and June 24, 2016 that funds were being distributed to the Company. On April 1, 2016 and July 1, 2016, the Company received CDSOA distributions of $48.1 million and $6.3 million, respectively, representing funds that would have been distributed to the Company at the end of calendar years 2011 through 2015.

While some of the challenges to CDSOA have been resolved, others are still in litigation. Since there continue to be legal challenges to CDSOA, U.S. Customs has advised all affected domestic producers that it is possible that CDSOA distributions could be subject to clawback. Management of the Company believes that the likelihood of any clawback is remote.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

~~Overview~~OVERVIEW

Introduction:

The Timken Company ~~engineers, manufactures~~designs and ~~markets~~manages a growing portfolio of engineered bearings ~~transmissions, gearboxes, belts, chain, lubrication systems, couplings, industrial clutches~~ and ~~brakes~~power transmission products. With more than a century of innovation and ~~related products~~increasing knowledge, the Company continuously improves the reliability and ~~offers a variety~~efficiency of ~~power system rebuild~~global machinery and ~~repair services.~~equipment to move the world forward. The Company’s growing product and services portfolio features many strong industrial brands, such as Timken®, ~~Fafnir®,~~ Philadelphia Gear®, Drives®, Cone Drive®, Rollon®, Lovejoy®, Diamond®, BEKA® and Groeneveld®. Timken applies its deep knowledge of metallurgy, friction management and mechanical power transmission across the broad spectrum of bearings and related systems to improve the reliability and efficiency of machinery and equipment all around the world. Known for its quality products and collaborative technical sales model, Timken focuses on providing value to diverse markets worldwide through both original equipment manufacturers ("OEMs") and aftermarket channels. Withemploys more than ~~14,000~~ 17,000 people ~~operating~~globally in ~~31 countries, Timken makes the world more productive and keeps industry in motion.~~ 42 countries. The Company operates under two reportable segments: (1) Mobile Industries and (2) Process Industries. The following further describes these business segments:

•Mobile Industries serves OEM customers that manufacture off-highway equipment for the agricultural, mining and construction markets; on-highway vehicles including passenger cars, light trucks, and medium- and heavy-duty trucks; rail cars and locomotives; outdoor power equipment; rotorcraft and fixed-wing aircraft; and other mobile equipment. Beyond service parts sold to OEMs, aftermarket sales and services to individual end users, equipment owners, operators and maintenance shops are handled directly or through the Company's extensive network of authorized automotive and heavy-truck distributors.

•Process Industries serves OEM and end-user customers in industries that place heavy demands on the fixed operating equipment they make or use in heavy and other general industrial sectors. This includes metals, cement and aggregate production; power generation and renewable energy sources; oil and gas extraction and refining; pulp and paper and food processing; automation and robotics; and health and critical motion control equipment. Other applications include marine equipment, gear drives, cranes, hoists and conveyors. This segment also supports aftermarket sales and service needs through its global network of authorized industrial distributors and through the provision of services directly to end users.

•

~~Mobile Industries~~ serves OEM customers that manufacture off-highway equipment for the agricultural, mining and construction markets; on-highway vehicles including passenger cars, light trucks and medium- and heavy-duty trucks; rail cars and locomotives; outdoor power equipment; and rotorcraft and fixed-wing aircraft. Beyond service parts sold to OEMs, aftermarket sales to individual end users, equipment owners, operators and maintenance shops are handled through the Company's extensive network of authorized automotive and heavy-truck distributors.

•

~~Process Industries~~ serves OEM and end-user customers in industries that place heavy demands on the fixed operating equipment they make or use in heavy and other general industrial sectors. This includes metals, cement and aggregate production; coal and wind power generation; oil and gas extraction and refining; pulp and paper and food processing; and health and critical motion control equipment. Other applications include marine equipment, gear drives, cranes, hoists and conveyors. This segment also supports aftermarket sales and service needs through its global network of authorized industrial distributors.

Timken creates value by understanding customer needs and applying its know-how to serve a broad range of customers in attractive ~~market sectors.~~markets and industries across the globe. The Company’s business strengths include its ~~channel mix and~~product technology, end-market diversity, ~~serving a broad range of customers~~geographic reach and ~~industries across the globe.~~aftermarket mix. 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.

The Company's strategy has three primary elements:

~~The~~ ~~Timken Business Model~~ ~~is the specific framework for how the Company evaluates opportunities and differentiates itself in the market.~~

~~The Company’s Strategy~~ ~~is to apply the~~ ~~Timken Business Model~~ ~~and leverage the Company’s competitive differentiators and strengths to create customer value and drive increased growth and profitability by:~~

~~Outgrowing Our Markets.~~Profitable Growth. The Company intends to expand into new and existing markets by leveraging its collective knowledge of metallurgy, friction management and ~~mechanical~~ 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. 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. The Company also targets ~~those~~ applications that offer significant aftermarket demand, thereby providing product and services revenue throughout the equipment’s lifetime.

Operating With Excellence. 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, encouraging organizational agility and building greater brand equity to fuel ~~future~~ growth. This requires the Company’s ongoing commitment to attract, retain and develop the best talent across the world.

Table of Contents

~~Deploying~~ Capital Deployment to Drive Shareholder Value. The Company is intently focused on providing the highest returns for shareholders through its capital allocation framework, which includes: (1) investing in the core business through capital expenditures, research and development and other organic growth initiatives; (2) pursuing strategic acquisitions to broaden ~~our~~its portfolio and capabilities across diverse markets, with a focus on bearings, adjacent power transmission products and related services; ~~and~~ (3) returning capital to shareholders through dividends and share ~~repurchases~~repurchases; and ~~dividends.~~(4) maintaining a strong balance sheet and sufficient liquidity. As part of this framework, the Company may also ~~may~~ restructure, reposition or divest underperforming product lines or assets.

~~The following highlights the Company's recent significant strategic accomplishments:~~

On July 3, 2017, the Company completed the acquisition of Groeneveld, a leading provider of automated lubrication solutions used in on- and off-highway applications. Groeneveld, located in Gorinchem, Netherlands, with manufacturing facilities in Italy, had annual sales of approximately $105 million for the twelve months ended May 31, 2017. Based on markets and customers served, substantially all of the results for Groeneveld are reported in the Mobile Industries segment starting in the third quarter of 2017.

On July 5, 2017, the Company announced that the Company's majority-owned subsidiary, Timken India, entered into a definitive agreement to acquire ABC Bearings, a manufacturer of tapered, cylindrical and spherical roller bearings and slewing rings in India. The transaction is structured as a merger of ABC Bearings into Timken India, whereby shareholders of ABC Bearings will receive shares of Timken India as consideration. The transaction is subject to receipt of various approvals in India, which are expected to be completed in the first half of 2018. ABC Bearings, located in Mumbai, India, operates primarily out of manufacturing facilities in Bharuch, Gujarat and Dehradun, Uttarakhand and had annual sales of approximately $29 million for the twelve months ended May 31, 2017.

Overview:


	Three Months Ended June 30,
	2021		2020		$ Change		% Change
Net sales	$	1,062.9	$	803.5	$	259.4	32.3	%
Net income	107.2		61.8		45.4		73.5	%

Net income (loss) attributable to noncontrolling interest	2.4		(0.1)		2.5		NM
Net income attributable to The Timken Company	$	104.8	$	61.9	$	42.9	69.3	%



Diluted earnings per share	$	1.36	$	0.82	$	0.54	65.9	%
Average number of shares – diluted	77,254,157		75,698,289		—		2.1	%

Three Months Ended
September 30,
2017 2016 $ Change % Change
Net sales $ 771.4
$ 657.4
$ 114.0
17.3 %
Net income 54.1
34.0
20.1
59.1 %
Net income attributable to noncontrolling interest 0.6
0.4
0.2
50.0 %
Net income attributable to The Timken Company 53.5
33.6
19.9
59.2 %
Diluted earnings per share $ 0.68
$ 0.43
$ 0.25
58.1 %
Average number of shares – diluted 78,804,296
78,617,476
—
0.2 %


	Nine Months Ended September 30,										Six Months Ended June 30,
	2017		2016		$ Change			% Change			2021		2020		$ Change		% Change
Net sales	$	2,225.8	$	2,015.0	$	210.8		10.5	%	Net sales	$	2,088.3	$	1,726.9	$	361.4	20.9	%
Net income	174.2		148.0		26.2			17.7	%	Net income	223.2		145.8		77.4		53.1	%

Net income attributable to noncontrolling interest	—		0.3		(0.3		)	(100.0	)%	Net income attributable to noncontrolling interest	5.1		3.2		1.9		59.4	%
Net income attributable to The Timken Company	174.2		147.7		26.5			17.9	%	Net income attributable to The Timken Company	$	218.1	$	142.6	$	75.5	52.9	%

Diluted earnings per share	$	2.21	$	1.86	$	0.35		18.8	%	Diluted earnings per share	$	2.82	$	1.88	$	0.94	50.0	%
Average number of shares – diluted	78,889,930		79,471,756		—			(0.7	)%	Average number of shares – diluted	77,257,761		76,032,049		—		1.6	%

The increase in net sales for the ~~third~~ ~~quarter of 2017~~three months ended June 30, 2021 compared with the ~~third~~ ~~quarter of 2016~~three months ended June 30, 2020 was primarily ~~due to~~driven by higher ~~demand~~organic revenue across most ~~end markets~~market sectors, as well as the favorable impact of foreign currency exchange rate changes and the ~~benefit of acquisitions.~~Aurora acquisition. The increase in net income for the ~~third~~ ~~quarter of 2017~~three months ended June 30, 2021 compared with the ~~third~~ ~~quarter of 2016~~three months ended June 30, 2020 was primarily due to the impact of higher volume, favorable manufacturing performance and the ~~benefit~~favorable impact of foreign currency exchange rate changes, partially offset by higher selling, general and administrative ("SG&A") expenses, higher material and logistics costs and unfavorable mix. In addition, there was lower restructuring and pension remeasurement charges and the tax rate was favorable in 2021 compared to 2020.

The increase in net sales for the six months ended June 30, 2021 compared with the six months ended June 30, 2020 was primarily driven by higher organic revenue across most market sectors, as well as the favorable impact of foreign currency exchange rate changes and the Aurora acquisition. The increase in net income for the six months ended June 30, 2021 compared with the six months ended June 30, 2020 was primarily due to the impact of higher volume and related manufacturing performance and the favorable impact of foreign currency exchange rate changes, partially offset by higher material and logistics costs, unfavorable mix, and higher SG&A expenses. In addition, there was lower restructuring and pension remeasurement charges and the tax rate was favorable in 2021 compared to 2020.

Table of Contents

Outlook:

The world continues to be impacted by the COVID-19 pandemic. The Company is adhering to mandates and other guidance from local governments and health authorities, including the World Health Organization and the Centers for Disease Control and Prevention. Timken has implemented risk mitigation plans across the enterprise to protect employees and reduce the risk of spreading the virus, while continuing to operate where permitted and to the extent practicable. The Company’s main priority continues to be the health of its employees and others in the communities where it does business.

The Company’s operations and financial results were adversely impacted during 2020 due to the COVID-19 pandemic. With vaccines now being administered around the world, conditions are improving. During the first half of 2021, the Company operated are near-normal levels. While Timken continued to experience some COVID-19 related supply chain disruptions and staffing issues, the Company was able to adequately serve customers and meet robust demand levels across most markets. The Company will continue to monitor, assess and seek to manage the uncertainty surrounding the COVID-19 pandemic. Timken’s outlook for 2021 assumes that COVID-19 conditions around the world will continue to improve as the year progresses.

The Company expects 2021 full-year revenue to be up approximately 19% compared to 2020, primarily due to higher organic revenue across both the Mobile Industries and Process Industries segments, as well as the favorable impact of foreign currency exchange rates, acquisitions ~~favorable~~and positive pricing. The Company's earnings are expected to be up significantly in 2021 compared with 2020, primarily due to the impact of higher volume and related manufacturing performance, the favorable impact of foreign currency exchange rate changes and lower ~~impairment~~restructuring expenses and ~~restructuring charges. These factors were~~a lower tax rate, partially offset by higher material and logistics costs, higher SG&A ~~expense~~expenses and unfavorable ~~price/~~mix.

The Company expects to generate cash from operating activities in the range of $450 million to $475 million in 2021, down from $577.6 million in 2020, as the impact of higher earnings is expected to be more than offset by the changes in working capital (i.e., a use of cash in 2021 versus a source of cash in 2020). The Company expects capital expenditures to be approximately $150 million (approximately 3.6% of sales) in 2021, compared with $122 million in 2020.

~~The increase in net~~

Table of Contents

THE STATEMENT OF INCOME

Sales:


	Three Months Ended June 30,
	2021		2020		$ Change		% Change
Net Sales	$	1,062.9	$	803.5	$	259.4	32.3	%


	Six Months Ended June 30,
	2021		2020		$ Change		% Change
Net Sales	$	2,088.3	$	1,726.9	$	361.4	20.9	%

Net sales increased for the ~~first~~ ~~nine~~three months ~~of 2017~~ended June 30, 2021 compared with the ~~first~~ ~~nine~~three months ~~of 2016~~ended June 30, 2020. The increase was primarily due to higher ~~end-market demand and the net benefit~~organic revenue of ~~acquisitions. The change in net income for the first~~ ~~nine~~ ~~months of 2017 compared with the first~~ ~~nine~~ months of 2016 was primarily due to the impact of higher volume, lower income tax expense as a result of the net reversal of accruals for uncertain tax positions related to prior years, the benefit of acquisitions, lower restructuring charges,$213 million, the favorable impact of foreign currency exchange rate changes of $39 million and ~~favorable manufacturing performance. These factors were partially offset by pre-tax CDSOA income~~the benefit of ~~$53.6 million recognized in 2016 that did not reoccur in 2017, unfavorable price/mix,~~the Aurora acquisition of $8 million. The higher ~~SG&A expense and a pension mark-to-market remeasurement charge recorded during the first quarter of 2017.~~

~~Outlook:~~

~~The Company expects 2017 full-year net sales to increase approximately 12% compared with 2016 primarily~~organic revenue was driven by higher demand inacross both the ~~industrial~~Mobile Industries and Process Industries segments, as most end markets were up year-over-year, with the distribution, off-highway ~~heavy industries~~ and ~~heavy truck~~automotive sectors ~~and~~posting the benefit of acquisitions, partially offset by lower demand in the rail sector. The Company's earnings are expected to be higher in 2017 compared with 2016, primarily due to the impact of higher volume, favorable manufacturing performance, lower restructuring charges, lower income tax expense and the benefit of acquisitions. These factors are expected to be partially offset by unfavorable price/mix, higher material and logistics costs, increased SG&A expense and the expected absence of CDSOA income in 2017. The results for 2016 include the impacts of pension and other postretirement benefit mark-to-market remeasurement charges, which are not accounted for in the 2017 outlook because the amount will not be known until the fourth quarter.

The Company expects to generate operating cash of approximately $280 million in 2017, a decrease from 2016 of approximately $124 million or 31%, driven by the absence of CDSOA receipts, higher tax payments and unfavorable working capital, partially offset by higher operating income. The Company expects capital expenditures to be between 3% and 3.5% of net sales in 2017, compared with 5% of net sales in 2016.

~~The Statement of Income~~

~~Sales:~~

Three Months Ended
September 30,
2017 2016 $ Change % Change
Net Sales $ 771.4
$ 657.4
$ 114.0
17.3 %

Nine Months Ended
September 30,
2017 2016 $ Change % Change
Net Sales $ 2,225.8
$ 2,015.0
$ 210.8
10.5 %
largest increases.

Net sales increased for the ~~third~~ ~~quarter of 2017~~six months ended June 30, 2021 compared with the ~~third~~ ~~quarter of 2016,~~six months ended June 30, 2020. The increase was primarily due to higher organic revenue of ~~$61~~$282 million, ~~the benefit of acquisitions of $44 million and~~ the favorable impact of foreign currency exchange rate ~~changes.~~changes of $64 million and the benefit of the Aurora acquisition of $16 million. The ~~increase in~~higher organic ~~sales volume~~revenue was driven by higher demand across both the Mobile Industries and Process Industries segments, as most ofend markets were up year-over-year, with the ~~Company's market~~off-highway, distribution, automotive and renewable energy sectors ~~led by industrial distribution and off-highway, partially offset by lower demand in~~posting the ~~automotive market sector.~~largest increases.

Gross Profit:


	Three Months Ended June 30,
	2021			2020			$ Change		Change
Gross profit	$	302.3		$	230.3		$	72.0	31.3%
Gross profit % to net sales	28.4		%	28.7		%			(30)	bps


	Six Months Ended June 30,
	2021			2020			$ Change		Change
Gross profit	$	601.5		$	509.2		$	92.3	18.1%
Gross profit % to net sales	28.8		%	29.5		%			(70)	bps

~~Net sales~~

Gross profit increased for the ~~first~~ ~~nine~~three months ~~of 2017~~ended June 30, 2021 compared with the ~~first~~ ~~nine~~three months of 2016, primarily due to higher organic revenue of $121 million and the benefit of acquisitions of $86 million. The increase in organic sales volume was driven by higher demand across most of the Company's market sectors led by industrial distribution and off-highway, partially offset by lower demand in the rail and automotive market sectors.

~~Gross Profit:~~

Three Months Ended
September 30,
2017 2016 $ Change Change
Gross profit $ 217.0
$ 169.7
$ 47.3
27.9%
Gross profit % to net sales 28.1 % 25.8 % —
230 bps

Nine Months Ended
September 30,
2017 2016 $ Change Change
Gross profit $ 599.3
$ 537.3
$ 62.0
11.5%
Gross profit % to net sales 26.9 % 26.7 % 20 bps

~~Gross profit increased in the~~ ~~third~~ ~~quarter of 2017 compared with the~~ ~~third~~ quarter of 2016, primarily due to the impact of higher sales volume of $23 million, the benefit of acquisitions of $18 million, favorable manufacturing performance of $14 million and the favorable impact of foreign currency exchange rate changes. These factors were partially offset by higher material and logistics costs of $9 million and unfavorable price/mix.

~~Gross profit increased in the first~~ ~~nine~~ ~~months of 2017 compared with the first~~ ~~nine~~ ~~months of 2016,~~ended June 30, 2020, primarily due to the impact of higher volume of ~~$43~~$87 million, the ~~benefit~~favorable impact of ~~acquisitions~~foreign currency exchange rate changes of ~~$33~~$11 million, ~~and~~ favorable manufacturing performance of ~~$29~~$5 million and the favorable impact of acquisitions of $3 million. These ~~factors~~increases were partially offset by ~~unfavorable price/mix of $22 million and~~ higher ~~material~~materials and logistics costs of ~~$20~~$27 million and unfavorable price/mix of $9 million.

Gross profit increased for the six months ended June 30, 2021 compared with the six months ended June 30, 2020, primarily due to the impact of higher volume of $115 million, the favorable impact of foreign currency exchange rate changes of $17 million, favorable manufacturing performance of $15 million and the favorable impact of acquisitions of $5 million. These increases were partially offset by higher materials and logistics costs of $39 million and unfavorable price/mix of $27 million.

Table of Contents

Selling, General and Administrative Expenses:


	Three Months Ended June 30,
	2021			2020			$ Change		Change
Selling, general and administrative expenses	$	149.0		$	111.8		$	37.2	33.3	%
Selling, general and administrative expenses % to net sales	14.0		%	13.9		%			10	bps

Three Months Ended
September 30,
2017 2016 $ Change Change
Selling, general and administrative expenses $ 134.0
$ 107.2
$ 26.8
25.0%
Selling, general and administrative expenses % to net sales 17.4 % 16.3 % —
110 bps


	Nine Months Ended September 30,										Six Months Ended June 30,
	2017			2016			$ Change		Change		2021			2020			$ Change		Change
Selling, general and administrative expenses	$	377.4		$	331.3		$	46.1	13.9%	Selling, general and administrative expenses	$	293.5		$	265.4		$	28.1	10.6	%
Selling, general and administrative expenses % to net sales	17.0		%	16.4		%	—		60 bps	Selling, general and administrative expenses % to net sales	14.1		%	15.4		%			(130)	bps

~~The increase in~~
SG&A expenses increased in the ~~third~~ ~~quarter~~three and ~~first~~ ~~nine~~six months ~~of 2017~~ended June 30, 2021 compared with the ~~third~~ ~~quarter~~three and ~~first~~ ~~nine~~six months ~~of 2016~~ended June 30, 2020. The increase was primarily due to ~~higher incentive compensation expense~~the favorable impact of 2020 cost reduction initiatives, including temporary salary reductions and work furloughs, that the Company implemented in the three and six months ended June 30, 2020 to reduce costs to combat the impact of ~~acquisitions.~~the COVID-19 pandemic, which did not repeat in the current year. The increase was also due to the unfavorable impact of foreign currency exchange rate changes for the three and six months ended June 30, 2021.

Impairment and Restructuring:


	Three Months Ended June 30,
	2021		2020		$ Change		% Change
Impairment charges	$	1.1	$	—	$	1.1	NM
Severance and related benefit costs	0.1		3.2		(3.1)		(96.9)	%
Exit costs	0.1		(0.1)		0.2		(200.0)	%
Total	$	1.3	$	3.1	$	(1.8)	(58.1)	%

Three Months Ended
September 30,
2017 2016 $ Change % Change
Impairment charges $ —
$ 1.2
$ (1.2 ) (100.0 )%
Severance and related benefit costs 1.3
3.3
(2.0 ) (60.6 )%
Exit costs —
0.8
(0.8 ) (100.0 )%
Total $ 1.3
$ 5.3
$ (4.0 ) (75.5 )%


	Nine Months Ended September 30,										Six Months Ended June 30,
	2017		2016		$ Change			% Change			2021		2020		$ Change		% Change
Impairment charges	$	—	$	3.8	$	(3.8	)	(100.0	)%	Impairment charges	$	4.5	$	0.1	$	4.4	NM
Severance and related benefit costs	3.2		12.6		(9.4		)	(74.6	)%	Severance and related benefit costs	0.6		5.9		(5.3)		(89.8)	%
Exit costs	0.6		2.3		(1.7		)	(73.9	)%	Exit costs	0.2		0.7		(0.5)		(71.4)	%
Total	$	3.8	$	18.7	$	(14.9	)	(79.7	)%	Total	$	5.3	$	6.7	$	(1.4)	(20.9)	%

Impairment and restructuring charges of $1.3 million and ~~$3.8~~$5.3 million during the three and six months ended June 30, 2021 were comprised primarily of impairment charges related to the planned closure of the Company's Villa Carcina, Italy facility, as well as severance and related benefits associated with the planned closure of the Company's Indianapolis, Indiana chain plant. These initiatives reduced headcount and right-sized the Company's manufacturing footprint. In addition, impairment and restructuring during the six months ended June 30, 2021 included impairment charges related to certain engineering-related assets used in the ~~third~~ ~~quarter~~business, Management concluded no further investment would be made in the engineered-related assets and ~~first~~ as a result, reduced the value to zero.

~~nine~~

Impairment and restructuring charges of $3.1 million and $6.7 million during the three and six months ~~of 2017, respectively,~~ended June 30, 2020 were comprised primarily ~~comprised~~ of severance and related ~~benefit costs related to~~benefits associated with initiatives to reduce headcount and right-size the Company's manufacturing footprint, including ~~the planned closure of the Pulaski bearing plant.~~

~~Impairment and restructuring charges of $5.3 million and $18.7 million in the~~ ~~third~~ ~~quarter and first~~ ~~nine~~ months of 2016, respectively, were primarily comprised of severance and related benefit costs related to initiatives to reduce headcount and right-size the Company's manufacturing footprint, including the planned closures of the ~~Altavista, Pulaski~~Company's Indianapolis, Indiana chain plant and ~~Benoni bearing plants. In addition,~~ the ~~Company also recognized impairment charges associated with the planned closure~~reorganization of the ~~Altavista and Benoni~~Company's Gaffney, South Carolina bearing ~~plants of $1.2 million and $3.6 million, respectively, during the~~ ~~third~~ ~~quarter and first~~ ~~nine~~ ~~months of 2016.~~

~~Interest Income and Expense:~~

Three Months Ended
September 30,
2017 2016 $ Change % Change
Interest expense $ (10.1 ) $ (8.0 ) $ (2.1 ) 26.3 %
Interest income $ 0.7
$ 0.4
$ 0.3
75.0 %

Nine Months Ended
September 30,
2017 2016 $ Change % Change
Interest expense $ (26.5 ) $ (25.1 ) $ (1.4 ) 5.6 %
Interest income $ 2.0
$ 1.1
$ 0.9
81.8 %
facility.

~~Interest expense increased for the~~
~~third~~ ~~quarter and the first nine months of 2017 compared to the~~ ~~third~~ ~~quarter and the first nine months of 2016, primarily due to borrowings associated with the Groeneveld acquisition. Refer to~~ ~~Note 8 - Financing Arrangements~~ ~~to the Consolidated Financial Statements for further discussion.~~

~~Other Income (Expense):~~

Three Months Ended
September 30,
2017 2016 $ Change % Change
CDSOA expense $ —
$ (0.2 ) $ 0.2
(100.0 )%
Other income (expense), net 2.9
(0.1 ) 3.0
NM
Total other income (expense) $ 2.9
$ (0.3 ) $ 3.2
NM

Nine Months Ended
September 30,
2017 2016 $ Change % Change
CDSOA income $ —
$ 53.6
$ (53.6 ) (100.0 )%
Other income (expense), net 9.1
(1.8 ) 10.9
NM
Total other income $ 9.1
$ 51.8
$ (42.7 ) (82.4 )%

~~CDSOA income in the first~~ ~~nine~~ ~~months of 2016 represents income recorded in connection with funds distributed to the Company from monies collected by U.S. Customs from antidumping cases. Refer to~~ ~~Note 20 - Continued Dumping and Subsidy Offset Act~~ ~~to the Consolidated Financial Statements for further discussion.~~

~~The increase in other income (expense), net for the~~ ~~third~~ quarter of 2017 was primarily due to the gain on the sale of the former manufacturing facility in Altavista and lower foreign currency exchange losses. The increase in other income (expense), net for the first ~~nine~~ months of 2017 was primarily due to lower foreign currency exchange losses and the gain on the sale of former manufacturing facilities in Benoni and Altavista during the second and third quarter of 2017, respectively.

~~Income Tax Expense:~~

Three Months Ended
September 30,
2017 2016 $ Change Change
Income tax expense $ 21.1
$ 15.2
$ 5.9
38.8 %
Effective tax rate 28.1 % 30.9 % —
NM

Nine Months Ended
September 30,
2017 2016 $ Change Change
Income tax expense $ 28.5
$ 65.8
$ (37.3 ) (56.7 )%
Effective tax rate 14.1 % 30.8 % —
NM

~~The effective tax rate for the~~ ~~three~~ ~~months ended September 30, 2017 is 28.1%. The income tax expense increase from the~~ ~~three~~ months ended September 30, 2016 is driven by $9.1 million of additional expense at the U.S. statutory rate as a result of the increase in income before income taxes and additional expense related to losses in jurisdictions with no tax benefit. These increases are partially offset by favorable U.S. tax deductions and tax credits, and discrete tax amounts.

~~The effective tax rate for the~~ ~~nine~~ ~~months ended September 30, 2017 is 14.1%. The decrease in income tax expense when compared to the first~~ ~~nine~~ months ended September 30, 2016 was primarily due to the net reversal of accruals for prior year uncertain tax positions (including interest) of $33.9 million in the second quarter of 2017 and favorable U.S. tax deductions and tax credits.

Refer to Note 1713 - ~~Income Taxes~~Impairment and Restructuring Charges in to the Notes to the Consolidated Financial Statements for additional information.

Table of Contents

Other Income (Expense):


	Three Months Ended June 30,
	2021		2020		$ Change		% Change

Non-service pension and other postretirement income (expense)	$	1.4	$	(5.3)	$	6.7	(126.4)	%
Other expense	(2.2)		(2.0)		(0.2)		10.0	%
Total other expense	$	(0.8)	$	(7.3)	$	6.5	(89.0)	%


	Six Months Ended June 30,
	2021		2020		$ Change		% Change

Non-service pension and other postretirement income (expense)	$	5.4	$	(1.9)	$	7.3	(384.2)	%
Other (expense) income, net	(1.2)		2.1		(3.3)		(157.1)	%
Total other income	$	4.2	$	0.2	$	4.0	NM

Non-service pension and other postretirement income (expense) increased for the three and six months ended June 30, 2021 compared with the three and six months ended June 30, 2020. The increase was primarily due to lower actuarial losses due to remeasurement of pension plan assets and obligations in the three and six months ended June 30, 2021. The remeasurement was triggered by lump sum payments to new retirees exceeding annual service and interest costs for three of the Company's U.S. defined benefit pension plans. As a result of the remeasurements, the Company recognized net actuarial losses of $3.5 million and $4.4 million during the three and six months ended June 30, 2021, respectively. Actuarial losses of $8.8 million were realized in the second quarter of 2020 due to the remeasurement of pension plan assets and obligations for one of the Company's U.S. defined benefit pension plans. The remeasurement was required in the second quarter of 2020 as a result of lump sum payments to new retirees in 2020 that are expected to exceed annual service and interest costs. The remaining increase was due to lower interest costs for the Company's defined benefit pension plans. Refer to Note 14 - Retirement Benefit Plans and Note 15 - Other Postretirement Benefit Plans inthe Notes to the Consolidated Financial Statements for additional information.

Other (expense) income, net decreased for the six months ended June 30, 2021 compared with the six months ended June 30, 2020, primarily due to lower insurance recoveries. In addition, there were foreign currency exchange losses recognized in the six months ended June 30, 2021, compared to foreign currency exchange gains in the six months ended June 30, 2020.

Table of Contents

Income Tax Expense:


	Three Months Ended June 30,
	2021			2020			$ Change		% Change
Provision for income taxes	$	29.4		$	28.0		$	1.4	5.0	%
Effective tax rate	21.5		%	31.2		%			(970)	bps


	Six Months Ended June 30,
	2021			2020			$ Change		% Change
Provision for income taxes	$	54.7		$	57.6		$	(2.9)	(5.0)	%
Effective tax rate	19.7		%	28.3		%			(860)	bps

Income tax expense increased $1.4 million for the three months ended June 30, 2021 compared with the three months ended June 30, 2020, primarily due to higher earnings. The impact was partially offset by discrete benefits on tax rate changes in foreign jurisdictions and a more favorable mix of earnings in lower tax rate jurisdictions, including the United States. Income taxes in the United States were favorably impacted by permanent book-tax differences, including the new elective GILTI high tax exemption rules.

Income tax expense decreased $2.9 million for the six months ended June 30, 2021 compared with the six months ended June 30, 2020, primarily due to the release of accruals for uncertain tax positions from the settlement of the 2017 and 2018 U.S. federal tax years and a more favorable mix of earnings in lower tax rate jurisdictions, including the United States. Income taxes in the United States were favorably impacted by permanent book-tax differences, including the tax impact from stock-based compensation awards and the new elective GILTI high tax exemption rules. This impact was partially offset by increased income taxes due to higher pre-tax earnings.

Refer to Note 6 - Income Taxes for more information on the computation of the income tax expense in interim periods.

~~Business Segments~~

BUSINESS SEGMENTS

The Company's reportable segments are business units that serve different industry sectors. While the segments ~~often~~ operate using shared infrastructure, each reportable segment is managed to address specific customer needs in these diverse market sectors. The primary measurement used by management to measure the financial performance of each segment is ~~EBIT.~~EBITDA. Refer to Note 135 - Segment Information in the Notes to the Consolidated Financial Statements for the reconciliation of ~~EBIT~~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 completed in ~~2017~~2021 and ~~2016~~2020 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 ~~items highlight~~item highlights the Company's ~~acquisitions~~only acquisition completed in ~~2016~~2020:

•~~and the first~~ ~~nine~~ ~~months of 2017.~~

The Company acquired ~~Groeneveld~~Aurora during the ~~third~~fourth quarter of ~~2017. Based on markets and customer served, substantially all of the results~~2020. Results for ~~Groeneveld~~Aurora are reported in the Mobile Industries ~~segment.~~

~~The Company acquired Torsion Control Products~~ and ~~PT Tech during the second quarter of 2017. Based on markets and customers served, substantially all of the results for both businesses are reported in the Mobile Industries segment.~~

~~The Company acquired EDT during the fourth quarter of 2016. Based on markets and customers served, substantially all of the results for EDT are reported in the~~ Process Industries ~~segment.~~segments based on customers and underlying market sectors served.

~~The Company acquired Lovejoy during the third quarter~~

Table of ~~2016. Based on markets and customers served, substantially all of the results for Lovejoy are primarily reported in the Process Industries segment.~~Contents

Mobile Industries Segment:


	Three Months Ended June 30,
	2021			2020			$ Change		Change
Net sales	$	494.2		$	342.6		$	151.6	44.2%
EBITDA	$	67.3		$	38.8		$	28.5	73.5%
EBITDA margin	13.6		%	11.3		%			230	bps

Three Months Ended
September 30,
2017 2016 $ Change Change
Net sales $ 422.8
$ 353.1
$ 69.7
19.7%
EBIT $ 34.9
$ 25.9
$ 9.0
34.7%
EBIT margin 8.3 % 7.3 % —
100 bps


	Three Months Ended June 30,
	2021		2020		$ Change		% Change
Net sales	$	494.2	$	342.6	$	151.6	44.2	%
Less: Acquisitions	4.6		—		4.6		NM

Currency	12.5		—		12.5		NM
Net sales, excluding the impact of acquisitions and currency	$	477.1	$	342.6	$	134.5	39.3	%


	Six Months Ended June 30,
	2021			2020			$ Change		Change
Net sales	$	998.7		$	809.3		$	189.4	23.4%
EBITDA	$	146.9		$	113.9		$	33.0	29.0%
EBITDA margin	14.7		%	14.1		%	$	—	60	bps

Three Months Ended
September 30,
2017 2016 $ Change % Change
Net sales $ 422.8
$ 353.1
$ 69.7
19.7%
Less: Acquisitions 42.2
—
42.2
NM
Currency 4.5
—
4.5
NM
Net sales, excluding the impact of acquisitions and currency $ 376.1
$ 353.1
$ 23.0
6.5%

Nine Months Ended
September 30,
2017 2016 $ Change Change
Net sales $ 1,214.2
$ 1,104.1
$ 110.1
10.0%
EBIT $ 100.1
$ 95.3
$ 4.8
5.0%
EBIT margin 8.2 % 8.6 % —
(40) bps


	Nine Months Ended September 30,								Six Months Ended June 30,
	2017		2016		$ Change		% Change		2021		2020		$ Change		% Change
Net sales	$	1,214.2	$	1,104.1	$	110.1	10.0%	Net sales	$	998.7	$	809.3	$	189.4	23.4	%
Less: Acquisitions	54.2		—		54.2		NM	Less: Acquisitions	8.8		—		8.8		NM

Currency	3.7		—		3.7		NM	Currency	21.8		—		21.8		NM
Net sales, excluding the impact of acquisitions and currency	$	1,156.3	$	1,104.1	$	52.2	4.7%	Net sales, excluding the impact of acquisitions and currency	$	968.1	$	809.3	$	158.8	19.6	%

The Mobile Industries segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, increased ~~$23.0~~$134.5 million or ~~6.5%~~39.3% in the ~~third~~ ~~quarter of 2017~~three months ended June 30, 2021 compared with the ~~third~~ ~~quarter of 2016,~~three months ended June 30, 2020, reflecting organic growth in the off-highway, ~~and~~automotive, heavy truck ~~sectors,~~and rail sectors. These increases were partially offset by lower ~~demand~~shipments in the ~~automotive~~aerospace sector. ~~EBIT~~EBITDA increased by ~~$9.0~~$28.5 million or ~~34.7%~~73.5% in the ~~third~~ ~~quarter of 2017~~three months ended June 30, 2021 compared with the ~~third~~ ~~quarter of 2016,~~three months ended June 30, 2020, primarily due to the impact of higher volume, ~~of $9 million,~~ favorable manufacturing performance ~~of $7 million, the benefit of acquisitions of $6 million, lower restructuring charges~~ and the favorable impact of foreign currency exchange rate ~~changes. These factors were~~changes, partially offset by ~~higher SG&A expense of $9 million,~~ higher material and logistics costs, ~~of $6 million~~higher SG&A expenses and unfavorable ~~price/~~mix.

The Mobile Industries segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, increased~~$52.2~~ $158.8 million or~~4.7%~~ 19.6% in the ~~first~~ ~~nine~~six months ~~of 2017~~ended June 30, 2021 compared with the ~~first~~ ~~nine~~six months ~~of 2016,~~ended June 30, 2020, reflecting organic growth in the off-highway, automotive and heavy truck ~~sectors,~~sectors. These increases were partially offset by ~~decreased demand~~lower shipments in the rail and ~~automotive sectors. EBIT~~aerospace sector. EBITDA increased by ~~$4.8~~$33.0 million or ~~5.0%~~29.0% in the ~~first~~ ~~nine~~six months ~~of 2017~~ended June 30, 2021 compared with the ~~first~~ ~~nine~~six months ~~of 2016~~ended June 30, 2020, primarily due to the impact of higher volume, ~~of $19 million, the benefit of acquisitions of $9 million,~~ favorable manufacturing performance of $8 million, lower restructuring charges of $6 million and the impact of foreign currency exchange rate changes of $6 million. These factors were partially offset by higher material and logistics costs of $17 million, increased SG&A expense of $14 million and unfavorable price/mix of $12 million.

Full-year sales for the Mobile Industries segment are expected to be up approximately 13% in 2017 compared with 2016. This reflects improved demand in the off-highway and heavy truck sectors, the benefit of acquisitions and the favorable impact of foreign currency exchange rate changes, partially offset by ~~lower demand in the rail sector. EBIT for the Mobile Industries segment is expected to increase in 2017 compared with 2016 primarily due to the impact~~higher material and logistics costs and unfavorable mix.

Table of higher volume and the impact of acquisitions, mostly offset by unfavorable price/mix and higher SG&A expense. The results for 2016 include the impacts of pension and other postretirement benefit mark-to-market remeasurement charges, which are not accounted for in the 2017 outlook because the amount will not be known until the fourth quarter.Contents

Process Industries Segment:


	Three Months Ended June 30,
	2021			2020			$ Change		Change
Net sales	$	568.7		$	460.9		$	107.8	23.4%
EBITDA	$	141.2		$	126.3		$	14.9	11.8%
EBITDA margin	24.8		%	27.4		%			(260)	bps

Three Months Ended
September 30,
2017 2016 $ Change Change
Net sales $ 348.6
$ 304.3
$ 44.3
14.6%
EBIT $ 61.7
$ 42.0
$ 19.7
46.9%
EBIT margin 17.7 % 13.8 % —
390 bps


	Three Months Ended June 30,
	2021		2020		$ Change		% Change
Net sales	$	568.7	$	460.9	$	107.8	23.4	%
Less: Acquisitions	3.5		—		3.5		NM
Currency	26.1		—		26.1		NM
Net sales, excluding the impact of acquisitions and currency	$	539.1	$	460.9	$	78.2	17.0	%


	Six Months Ended June 30,
	2021			2020			$ Change		Change
Net sales	$	1,089.6		$	917.6		$	172.0	18.7%
EBITDA	$	272.2		$	233.8		$	38.4	16.4%
EBITDA margin	25.0		%	25.5		%			(50)	bps

Three Months Ended
September 30,
2017 2016 $ Change % Change
Net sales $ 348.6
$ 304.3
$ 44.3
14.6%
Less: Acquisitions 2.2
—
2.2
NM
Currency 4.4
—
4.4
NM
Net sales, excluding the impact of acquisitions and currency $ 342.0
$ 304.3
$ 37.7
12.4%

Nine Months Ended
September 30,
2017 2016 $ Change Change
Net sales $ 1,011.6
$ 910.9
$ 100.7
11.1%
EBIT $ 164.9
$ 123.7
$ 41.2
33.3%
EBIT margin 16.3 % 13.6 % 270 bps


	Nine Months Ended September 30,								Six Months Ended June 30,
	2017		2016		$ Change		% Change		2021		2020		$ Change		% Change
Net sales	$	1,011.6	$	910.9	$	100.7	11.1%	Net sales	$	1,089.6	$	917.6	$	172.0	18.7	%
Less: Acquisitions	32.3		—		32.3		NM	Less: Acquisitions	7.2		—		7.2		NM
Currency	0.2		—		0.2		NM	Currency	42.0		—		42.0		NM
Net sales, excluding the impact of acquisitions and currency	$	979.1	$	910.9	$	68.2	7.5%	Net sales, excluding the impact of acquisitions and currency	$	1,040.4	$	917.6	$	122.8	13.4	%

The Process Industries segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, increased ~~$37.7~~$78.2 million or ~~12.4%~~17.0% in the ~~third~~ ~~quarter of 2017~~three months ended June 30, 2021 compared with the ~~same period in 2016.~~three months ended June 30, 2020. The increase was primarily driven by ~~organic growth~~increased demand in the distribution, renewable energy, general industrial, ~~distribution,~~marine and heavy industries ~~and wind market~~ sectors. ~~EBIT~~These increases were partially offset by lower services revenue. EBITDA increased ~~$19.7~~$14.9 million or ~~46.9%~~11.8% in the ~~third~~ ~~quarter of 2017~~three months ended June 30, 2021 compared with the ~~third~~ ~~quarter of 2016~~three months ended June 30, 2020 primarily due to higher volume and the favorable impact of ~~higher volume of $18 million and favorable manufacturing performance of $7 million,~~foreign currency exchange rate changes, partially offset by higher SG&A ~~expense~~expenses and higher material and logistics costs.

The Process Industries segment's net sales, excluding the effects of acquisitions and foreign currency exchange rate changes, increased ~~$68.2~~$122.8 million or ~~7.5%~~13.4% in the ~~first~~ ~~nine~~six months ~~of 2017~~ended June 30, 2021 compared with the ~~first~~ ~~nine~~six months ~~of 2016.~~ended June 30, 2020. The increase was primarily driven by ~~organic growth~~increased demand in the distribution, renewable energy and general industrial ~~distribution~~sectors, partially offset by lower marine and ~~heavy industries market sector. EBIT~~services revenue. EBITDA increased ~~$41.2~~$38.4 million or ~~33.3%~~16.4% in the ~~first~~ ~~nine~~six months ~~of 2017~~ended June 30, 2021 compared with the ~~first~~ ~~nine~~six months ~~of 2016~~ended June 30, 2020 primarily due to ~~the impact of~~ higher volume, of $34 million, favorable manufacturing performance of $21 million, lower restructuring charges of $5 million and the benefit of acquisitions, partially offset by unfavorable price/mix of $20 million and higher SG&A expense.

Full-year sales for the Process Industries segment are expected to be up approximately 11% in 2017 compared with 2016. This reflects expected growth across most end market sectors, led by industrial distribution and the benefit of acquisitions and the favorable impact of foreign currency exchange rate ~~changes. EBIT for~~changes and favorable manufacturing performance, partially offset by higher material and logistics costs, unfavorable mix and higher SG&A expenses.

Table of Contents

Unallocated Corporate:


	Three Months Ended June 30,
	2021			2020			$ Change		Change
Unallocated corporate expense	$	(11.6)		$	(6.5)		$	(5.1)	78.5	%
Unallocated corporate expense % to net sales	(1.1)		%	(0.8)		%			(30)	bps


	Six Months Ended June 30,
	2021			2020			$ Change		Change
Unallocated corporate expense	$	(23.2)		$	(17.6)		$	(5.6)	31.8	%
Unallocated corporate expense % to net sales	(1.1)		%	(1.0)		%			(10)	bps

Unallocated corporate expense increased in the ~~Process Industries segment is expected to increase in 2017~~three and six months ended June 30, 2021 compared with ~~2016~~the three and six months ended June 30, 2020, primarily due to the favorable impact of ~~higher volume,~~COVID-19 related temporary cost reduction initiatives in 2020, which did not repeat in 2021.

Table of Contents

CASH FLOW


	Six Months Ended June 30,
	2021		2020		$ Change


Net cash provided by operating activities	$	178.8	$	303.6	$	(124.8)


Net cash used in investing activities	(73.9)		(64.7)		(9.2)


Net cash used in financing activities	(118.9)		(31.3)		(87.6)
Effect of exchange rate changes on cash	(0.8)		(7.7)		6.9
(Decrease) increase in cash, cash equivalents and restricted cash	$	(14.8)	$	199.9	$	(214.7)

Operating Activities:

The decrease in net cash provided by operating activities for the first six months of 2021 compared with the first six months of 2020 was primarily due to an increase in cash used for working capital items of $137.1 million, a reduction in the benefit of ~~acquisitions and lower restructuring charges, partially offset by unfavorable price/mix and higher SG&A expense. The results for 2016 include the impacts~~income taxes on cash of $31.2 million, an increase in pension and other postretirement benefit ~~mark-to-market remeasurement charges, which are not accounted for in the 2017 outlook because the amount will not be known until the fourth quarter.~~

~~Corporate:~~

Three Months Ended
September 30,
2017 2016 $ Change Change
Corporate expenses $ 12.0
$ 10.9
$ 1.1
10.1%
Corporate expenses % to net sales 1.6 % 1.7 % —
(10) bps

Nine Months Ended
September 30,
2017 2016 $ Change Change
Corporate expenses $ 37.8
$ 34.8
$ 3.0
8.6%
Corporate expenses % to net sales 1.7 % 1.7 % —
—

~~The Balance Sheet~~

~~The following discussion is a comparison~~contributions and payments of ~~the Consolidated Balance Sheets at~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~.

~~Current Assets:~~

September 30,
2017 December 31,
2016 $ Change % Change
Cash and cash equivalents $ 137.2
$ 148.8
$ (11.6 ) (7.8 )%
Restricted cash 3.3
2.7
0.6
22.2 %
Accounts receivable, net 542.2
438.0
104.2
23.8 %
Inventories, net 687.5
553.7
133.8
24.2 %
Deferred charges and prepaid expenses 39.9
20.3
19.6
96.6 %
Other current assets 64.2
48.4
15.8
32.6 %
Total current assets $ 1,474.3
$ 1,211.9
$ 262.4
21.7 %

~~Refer to the~~ ~~"Cash Flows"~~ section for discussion on the change in cash and cash equivalents. Accounts receivable, net increased primarily due to higher sales in September 2017 compared to December 2016, current-year acquisitions and the impact of foreign currency exchange rate changes.

Inventories, net increased due to higher demand, current-year acquisitions and the impact of foreign currency exchange rate changes. Deferred charges and prepaid expenses at September 30, 2017 included a prepayment of U.S. income taxes for 2017. Other current assets primarily increased due to an increase in short-term investments and current-year acquisitions.

~~Property, Plant and Equipment, Net:~~

September 30,
2017 December 31,
2016 $ Change % Change
Property, plant and equipment $ 2,360.6
$ 2,233.0
$ 127.6
5.7 %
Accumulated depreciation (1,518.4 ) (1,428.6 ) (89.8 ) 6.3 %
Property, plant and equipment, net $ 842.2
$ 804.4
$ 37.8
4.7 %

~~The increase in property, plant and equipment, net in the first~~ ~~nine~~ ~~months of 2017 was primarily due to capital expenditures of $56 million, current-year acquisitions of $32~~$6.4 million and ~~the impact of foreign currency exchange rate changes of $27 million, partially offset by current-year depreciation of $73 million.~~

~~Other Assets:~~

September 30,
2017 December 31,
2016 $ Change % Change
Goodwill $ 510.3
$ 357.5
$ 152.8
42.7 %
Non-current pension assets 31.6
32.1
(0.5 ) (1.6 )%
Other intangible assets 428.9
271.0
157.9
58.3 %
Deferred income taxes 47.9
51.4
(3.5 ) (6.8 )%
Other non-current assets 28.4
34.9
(6.5 ) (18.6 )%
Total other assets $ 1,047.1
$ 746.9
$ 300.2
40.2 %

The increase in goodwill was primarily due to $148 million of goodwill acquired from current-year acquisitions. The increase in other intangible assets was primarily due to $175 million of intangible assets acquired from the current-year acquisitions and current-year expenditures for software of $6 million, partially offset by current-year amortization of $29 million.

~~Current Liabilities:~~

September 30,
2017 December 31,
2016 $ Change % Change
Short-term debt $ 41.1
$ 19.2
$ 21.9
114.1 %
Current portion of long-term debt 5.0
5.0
—
— %
Accounts payable 248.1
176.2
71.9
40.8 %
Salaries, wages and benefits 112.2
85.9
26.3
30.6 %
Income taxes payable 7.4
16.9
(9.5 ) (56.2 )%
Other current liabilities 154.9
149.5
5.4
3.6 %
Total current liabilities $ 568.7
$ 452.7
$ 116.0
25.6 %

The increase in short-term debt was primarily due to higher borrowings of $16 million under foreign lines of credit. The increase in accounts payable was primarily due to increased purchasing activity, as well as higher days outstanding driven by the Company's initiative to extend payment terms with its suppliers.

The increase in accrued salaries, wages and benefits was primarily due to higher accruals for incentive compensation expense, as well as current-year acquisitions. The decrease in income taxes was primarily due to the Company being in a prepaid position with respect to U.S. income taxes at September 30, 2017 as reflected on the balance sheet; at December 31, 2016, the Company had a current income tax payable balance that included $13.7 million payable for U.S. income taxes.

~~Non-Current Liabilities:~~

September 30,
2017 December 31,
2016 $ Change % Change
Long-term debt $ 959.8
$ 635.0
$ 324.8
51.1 %
Accrued pension cost 160.3
154.7
5.6
3.6 %
Accrued postretirement benefits cost 126.7
131.5
(4.8 ) (3.7 )%
Deferred income taxes 44.9
3.9
41.0
NM
Other non-current liabilities 47.3
74.5
(27.2 ) (36.5 )%
Total non-current liabilities $ 1,339.0
$ 999.6
$ 339.4
34.0 %

The increase in long-term debt was primarily due to additional borrowings of $176.5 million under the 2027 Notes and $117.8 million under the 2020 Term Loan to finance the Groeneveld acquisition, as well as additional borrowings of $20 million classified as long-term under the Accounts Receivable Facility and additional borrowings of $8 million under the Company's Senior Credit Facility.

~~The increase in deferred income taxes was primarily due to current-year acquisitions of $42 million. The~~ decrease in other ~~non-current liabilities was primarily driven by the reversal of accruals for uncertain tax positions of $34 million due to the expiration of statutes of limitation in various jurisdictions.~~

~~Shareholders’ Equity:~~

September 30,
2017 December 31,
2016 $ Change % Change
Common stock $ 951.3
$ 960.0
$ (8.7 ) (0.9 )%
Earnings invested in the business 1,400.2
1,289.3
110.9
8.6 %
Accumulated other comprehensive loss (41.0 ) (77.9 ) 36.9
(47.4 )%
Treasury shares (887.5 ) (891.7 ) 4.2
(0.5 )%
Noncontrolling interest 32.9
31.2
1.7
5.4 %
Total shareholders’ equity $ 1,455.9
$ 1,310.9
$ 145.0
11.1 %

~~Earnings invested in the business in the first~~ ~~nine~~ ~~months of 2017 increased by net income attributable to the Company of $174.2 million, partially offset by dividends declared of $62.4 million.~~

The decrease in accumulated other comprehensive loss was primarily due to foreign currency adjustments of $40.9 million. The foreign currency translation adjustments were due to the weakening of the U.S. dollar relative to other foreign currencies, including the Romanian Leu, Chinese Yuan, Indian Rupee and Polish Zloty. See ~~"Other Matters - Foreign Currency" for further discussion regarding the impact of foreign currency translation.~~

~~Cash Flows~~

Nine Months Ended
September 30,
2017 2016 $ Change
Net cash provided by operating activities $ 142.9
$ 278.7
$ (135.8 )
Net cash used in investing activities (407.4 ) (143.3 ) (264.1 )
Net cash provided by (used in) financing activities 236.3
(139.7 ) 376.0
Effect of exchange rate changes on cash 16.6
3.7
12.9
Decrease in cash and cash equivalents $ (11.6 ) $ (0.6 ) $ (11.0 )

~~Operating Activities:~~

~~Operating activities provided net cash of $142.9 million in the first~~ ~~nine~~ ~~months of 2017, compared with net cash of $278.7 million provided in the first~~ ~~nine~~ ~~months of 2016.~~items. The decrease was ~~primarily due to the unfavorable impact of income taxes of $79.6 million and a net unfavorable change in working capital items of $71.5 million,~~ partially offset by higher net income of ~~$26.2~~$77.4 million. Refer to the tables below for additional detail of the impact of each line item on net cash provided by operating activities.

The following table displays the impact of working capital items on cash during the ~~first~~ ~~nine~~six months of ~~2017~~2021 and ~~2016,~~2020, respectively:


	Six Months Ended June 30,
	2021		2020		$ Change
Cash (Used) Provided:
Accounts receivable	$	(125.8)	$	(8.4)	$	(117.4)
Unbilled receivables	10.4		3.0		7.4
Inventories	(81.4)		41.3		(122.7)
Trade accounts payable	41.2		(28.9)		70.1
Other accrued expenses	30.8		5.3		25.5
Cash (used in) provided by working capital items	$	(124.8)	$	12.3	$	(137.1)

Nine Months Ended
September 30,
2017 2016 $ Change
Cash Provided (Used):
Accounts receivable $ (61.6 ) $ 12.2
$ (73.8 )
Inventories (85.4 ) (13.6 ) (71.8 )
Trade accounts payable 55.7
15.0
40.7
Other accrued expenses 15.9
(17.5 ) 33.4
Cash used by working capital items $ (75.4 ) $ (3.9 ) $ (71.5 )

The following table displays the impact of income taxes on cash during the ~~first~~ ~~nine~~six months of ~~2017~~2021 and ~~2016,~~2020, respectively:


	Six Months Ended June 30,
	2021		2020		$ Change
Accrued income tax expense	$	54.7	$	57.6	$	(2.9)
Income tax payments	(53.1)		(32.5)		(20.6)
Other miscellaneous items	(9.0)		(1.3)		(7.7)
Cash (expense) benefit from income taxes	$	(7.4)	$	23.8	$	(31.2)

Investing Activities:

Nine Months Ended
September 30,
2017 2016 $ Change
Accrued income tax expense $ 28.5
$ 65.8
$ (37.3 )
Income tax payments (77.2 ) (32.5 ) (44.7 )
Other miscellaneous items (3.4 ) (5.8 ) 2.4
Change in income taxes $ (52.1 ) $ 27.5
$ (79.6 )

~~Investing Activities:~~

~~Net~~The increase in net cash used in investing activities ~~of $407.4 million in~~for the first ~~nine~~six months of 2017 increased $264.1 million from the same period in 2016 primarily due to an increase of $284.4 million in cash used for acquisitions, partially offset by a $21.9 million reduction in capital expenditures.

~~Financing Activities:~~

~~Net cash provided by financing activities was $236.3 million in~~2021 compared with the first ~~nine~~six months of ~~2017 compared with net cash of $139.7 million used in financing activities in the first~~ ~~nine~~ ~~months of 2016. The increase~~2020 was primarily due to an increase in ~~net borrowings~~cash used for investments in short-term marketable securities of ~~$323.1~~$12.2 million ~~primarily needed to fund the Groeneveld acquisition that closed on July 3, 2017,~~ and ~~less~~an increase in capital expenditures of $4.0 million, partially offset by a decrease in cash used for acquisitions of $6.8 million.

Financing Activities:

The change in net cash used in ~~share repurchases of $42 million during~~financing activities increased for the first ~~nine~~six months of ~~2017~~2021 compared with the first ~~nine~~six months of ~~2016.~~2020 was primarily due to a decrease in net borrowings of $107.2 million. This change was partially offset by a decrease in the purchase of treasury shares of $16.0 million.

Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

~~Liquidity and Capital Resources:~~

Reconciliation of total debt to net debt and the ratio of net debt to capital:

Net Debt:


	June 30, 2021		December 31, 2020
Short-term debt	$	76.0	$	119.8
Current portion of long-term debt	11.1		10.9
Long-term debt	1,424.3		1,433.9
Total debt	$	1,511.4	$	1,564.6
Less: Cash and cash equivalents	305.5		320.3
Net debt	$	1,205.9	$	1,244.3

September 30,
2017 December 31,
2016
Short-term debt $ 41.1
$ 19.2
Current portion of long-term debt 5.0
5.0
Long-term debt 959.8
635.0
Total debt $ 1,005.9
$ 659.2
Less: Cash and cash equivalents 137.2
148.8
Restricted cash 3.3
2.7
Net debt $ 865.4
$ 507.7

Ratio of Net Debt to Capital:


	June 30, 2021			December 31, 2020
Net debt	$	1,205.9		$	1,244.3
Total equity	2,367.3			2,225.2
Net debt plus total equity (capital)	$	3,573.2		$	3,469.5
Ratio of net debt to capital	33.7		%	35.9		%

September 30,
2017 December 31,
2016
Net debt $ 865.4
$ 507.7
Shareholders’ equity 1,455.9
1,310.9
Net debt plus shareholders’ equity (capital) $ 2,321.3
$ 1,818.6
Ratio of net debt to capital 37.3 % 27.9 %

The Company presents net debt because it believes net debt is more representative of the Company's financial position than total debt due to the amount of cash and cash equivalents held by the ~~Company.~~Company and the ability to utilize such cash and cash equivalents to reduce debt if needed.

At June 30, 2021, the Co~~September 30, 2017, $137.0~~mpany had strong liquidity with $305.5 million of cash and cash equivalents on the ~~Company's $137.2~~Consolidated Balance Sheet. $267.4 million of its $305.5 million of cash and cash equivalents resided in jurisdictions outside the ~~U.S. It is the Company's practice to use available cash in the U.S. to pay down its Senior Credit Facility or Accounts Receivable Facility in order to minimize total interest expense.~~United States. Repatriation of non-U.S. cash could be subject to ~~domestic and foreign~~ taxes and some portion may be subject to governmental restrictions. Part of the Company's strategy is to grow in attractive market sectors, many of which are outside the ~~U.S.~~United States. This strategy includes making investments in facilities, equipment and potential new acquisitions. The Company plans to fund these investments, as well as meet working capital requirements, with cash and cash equivalents and unused lines of credit within the geographic location of these investments where feasible.

The Company has a $100 million Accounts Receivable Facility, which matures on November 30, 2018. The Accounts Receivable Facility is subject to certain borrowing base limitations and is secured by certain domestic accounts receivable of the Company. Certain borrowing base limitations reduced the availability of the Accounts Receivable Facility to $80.3 million at September 30, 2017. As of September 30, 2017,On June 25, 2019, the Company ~~had $74.8 million in outstanding borrowings, which reduced~~entered into the availability under the facility to $5.5 million. The interest rate on the Accounts Receivable Facility is variable and was 2.07% as of September 30, 2017, which reflects the prevailing commercial paper rate plus facility fees.

~~The Company has a $500 million~~ Senior Credit Facility, which is a $650.0 million unsecured revolving credit facility that matures on June ~~19, 2020.~~25, 2024. At ~~September~~June 30, ~~2017,~~2021, the Senior Credit Facility had outstanding borrowings of ~~$91.2~~$9.4 million, which reduced the availability to ~~$408.8~~$640.6 million. The Senior Credit Facility has two financial covenants: a consolidated leverage ratio and a consolidated interest coverage ratio. At ~~September 30, 2017, the Company was in full compliance with the covenants under the Senior Credit Facility and its other debt agreements.~~ The maximum consolidated leverage ratio permitted under the Senior Credit Facility is 3.5 to ~~1.0 (3.75 to 1.0 for a limited period up to four quarters following an acquisition with a purchase price of $200 million or greater).~~1.0. As of ~~September~~June 30, ~~2017,~~2021, the Company's consolidated leverage ratio was ~~2.23~~1.68 to ~~1.0.~~1.0 (based on the net debt construct described further below). The minimum consolidated interest coverage ratio permitted under the Senior Credit Facility is ~~3.5~~3.0 to 1.0. As of ~~September~~June 30, ~~2017,~~2021, the Company's consolidated interest coverage ratio was ~~13.57~~12.08 to 1.0.

On May 27, 2020, both the Senior Credit Facility and the 2023 Term Loan were amended to, among other things, effectively increase the limit with respect to the consolidated leverage ratio. As amended, the consolidated leverage ratio under both the Senior Credit Facility and the 2023 Term Loan was calculated using a net debt construct, netting unrestricted cash in excess of $25 million, instead of total debt. This change to the consolidated leverage ratio calculation was effective through June 30, 2021. In the third quarter of 2021, the calculation of the consolidated leverage ratio under the Senior Credit Facility and the 2023 Term Loan will revert back to a total debt construct.

Table of Contents

The interest rate under the Senior Credit Facility is variable ~~and represents a blended U.S. Dollar and Euro rate~~ with a spread based on the Company's debt rating. ~~This~~The average rate on outstanding U.S. dollar borrowings was ~~1.59%~~1.46% and the average rate on outstanding Euro borrowings was 1.48% as of ~~September~~June 30, ~~2017.~~2021. In addition, the ~~Company~~Company pays a facility fee based on the ~~consolidated leverage ratio~~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.~~Facility. As of June 30, 2021, the Company carried investment-grade credit ratings with Moody's (Baa3), S&P Global (BBB-), and Fitch (BBB-).

The Company has a $100 million Accounts Receivable Facility, which matures on November 30, 2021. The Accounts Receivable Facility is subject to certain borrowing base limitations and is secured by certain domestic trade accounts receivable of the Company. Borrowings under the Accounts Receivable Facility were not reduced by any such borrowing base limitations at June 30, 2021. As of June 30, 2021, the Company had no outstanding borrowings under the Accounts Receivable Facility. The Company currently intends to renew or replace the Accounts Receivable Facility prior to its maturity.

Other sources of liquidity include uncommitted short-term lines of credit for certain of the Company's foreign subsidiaries, which provide for borrowings of up to approximately ~~$250.0 million in the aggregate. Most of these credit lines are uncommitted.~~$286.1 million. At ~~September~~June 30, ~~2017,~~2021, the Company had borrowings outstanding of ~~$35.5~~$76.0 million and bank guarantees of ~~$2.0~~$0.5 million, which reduced the aggregate availability under these facilities to ~~$212.5~~approximately $209.6 million.

~~The~~At June 30, 2021, the Company ~~expects that any cash requirements~~was in ~~excess of cash~~full compliance with all applicable covenants on ~~hand~~its outstanding debt, and cash generated from operating activities will be met by the committed funds available under its Accounts Receivable Facility and the Senior Credit Facility. Management believes it has sufficient liquidity to meet its obligations through at least the term of the Senior Credit Facility.

~~The Company~~ expects to remain in full compliance with its debt covenants. ~~However, the Company may need to limit its borrowings under the Senior Credit Facility or other facilities in order to remain in compliance. As of~~ ~~September 30, 2017, the Company could have borrowed the full amounts available under the Senior Credit Facility and Accounts Receivable Facility and still would have been in compliance with its debt covenants.~~

The Company issued €150 million of 2027 Notes, which mature on September 7, 2027. On September 18, 2017, the Company entered into a €100 million 2020 Term Loan, which matures on September 18, 2020. Refer to
~~Note 8 - Financing Arrangements~~ ~~for additional information.~~

The Company expects to generate cash from ~~operations~~operating activities in the range of ~~approximately $280~~$450 million to $475 million in ~~2017, a decrease~~2021, down from ~~2016~~$577.6 million in 2020, as the impact of ~~approximately $124 million or 31%, driven~~higher earnings is expected to be more than offset by the ~~absence of CDSOA receipts, higher tax payments and unfavorable~~changes in working capital ~~partially offset by higher operating income.~~(i.e., a use of cash in 2021 versus a source of cash in 2020). The Company expects capital expenditures to be ~~between 3% and 3.5%~~approximately $150 million (approximately 3.6% of ~~net sales~~sales) in ~~2017,~~2021, compared with ~~5% of net sales~~$122 million in ~~2016.~~2020.

Financing Obligations and Other Commitments:

During the first ~~nine~~six months of ~~2017,~~2021, the Company made cash contributions and payments of ~~$8.8~~$13.1 million to its global defined benefit pension plans and $1.9 million to its other postretirement benefit plans. The Company ~~currently~~ expects to make contributions to its global defined benefit ~~pension~~ plans of approximately $15 million in ~~2017 totaling approximately $10 million. Returns for the Company's U.S. defined benefit plan pension assets for the first~~ ~~nine~~ months of 2017 were approximately 10.1%. Returns for the Company's global defined benefit pension plan assets in 2016 were 8.5%, which was above the weighted-average expected rate of return of 5.78% predominantly due to both strong returns in equity and fixed-income markets.2021. The Company expects to ~~record pension expense~~make payments of approximately ~~$15~~$6 million to its other postretirement benefit plans in ~~2017, including~~2021. Excluding mark-to-market charges, the ~~mark-to-market remeasurement losses of approximately $4 million recorded during the first quarter, compared with~~Company expects lower pension and other postretirement benefits expense ~~of $73.4 million~~ in 2016, which included approximately $60 million of mark-to-market remeasurement losses. The amount for 2017 does not include actuarial gains and losses that will be recognized immediately through earnings as a result of the remeasurement of pension plan assets and obligations in the fourth quarter of 2017.2021.

The Company does not have any off-balance sheet arrangements with unconsolidated entities or other persons.

~~Critical Accounting Policies and Estimates:~~

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's financial statements are prepared in accordance with accounting principles generally accepted in the ~~U.S.~~United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The Company reviews its critical accounting policies throughout the year. The Company has concluded that there have been no significant changes to its critical accounting policies or estimates, as described in its Annual Report on Form 10-K for the year ended December 31, ~~2016~~,2020, during the ~~nine~~six months ended June 30, 2021.

Table~~September 30, 2017~~ of Contents

OTHER MATTERS

~~other than the change in accounting principles described below.~~

~~Benefit Plans:~~

Effective January 1, 2017, the Company voluntarily changed its accounting principles for recognizing actuarial gains and losses and expected returns on plan assets for its defined benefit pension and other postretirement benefit plans, with retrospective application to prior periods. Prior to 2017, the Company amortized, as a component of pension and other postretirement expense, unrecognized actuarial gains and losses (included within Accumulated other comprehensive income (loss)) over the average remaining service period of active plan participants expected to receive benefits under the plan, or average remaining life expectancy of inactive plan participants when all or almost all of individual plan participants were inactive. The Company also historically calculated the market-related value of plan assets based on a five-year market adjustment. Under the new principles, actuarial gains and losses will be immediately recognized through net periodic benefit cost in the Statement of Income, upon the annual remeasurement in the fourth quarter, or on an interim basis if specific events trigger a remeasurement. In addition, the Company has changed its accounting policy for measuring the market-related value of plan assets from a calculated amount (based on a five-year smoothing of asset returns) to fair value. The Company believes these changes are preferable as they result in an accelerated recognition of actuarial gains and losses and changes in fair value of plan assets in its Consolidated Statement of Income, which provides greater transparency and better aligns with fair value principles by fully reflecting the impact of interest rate and economic changes on the Company's pension and other postretirement benefit liabilities and assets in the Company's operating results in the year in which the gains and losses are incurred.

~~Other Matters~~

Foreign Currency:

Assets and liabilities of subsidiaries are translated at the rate of exchange in effect on the balance sheet date; income and expenses are translated at the average rates of exchange prevailing ~~each month~~ during the ~~quarter.~~reporting period. Related translation adjustments are reflected as a separate component of accumulated other comprehensive ~~income (loss).~~loss. Foreign currency gains and losses resulting from transactions, and the related hedging activity, are included in the Consolidated ~~Statement~~Statements of Income.

For the ~~nine~~six months ended ~~September~~June 30, ~~2017, the~~2021, the Company recorded ~~positive~~negative foreign currency translation adjustments of ~~$40.9~~$20.2 million that ~~increased~~decreased shareholders' equity, compared ~~with a positive~~with negative foreign currency translation adjustments of ~~$3.3~~$48.0 million that ~~increased shareholders'~~decreased shareholders' equity for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020. The foreign currency translation adjustments for the ~~nine~~six months ended ~~September~~June 30, ~~2017 were positively~~2021 were negatively impacted by the ~~weakening~~strengthening of the U.S. dollar relative to other foreign currencies, including ~~the Romanian Leu, Chinese Yuan, Indian Rupee and Polish Zloty.~~the Euro.

Foreign currency exchange gains and losses, net of hedging activity, resulting from transactions included in the Company's operating results for the ~~third~~ ~~quarter~~three months ended June 30, 2021 totaled $3.5 million of ~~2017 were $1.2 million,~~net losses, compared with ~~losses~~$0.6 million of ~~$2.8 million~~net gains during the ~~third~~ ~~quarter of 2016.~~three months ended June 30, 2020. Foreign currency exchange gains and losses, net of hedging activity, resulting from transactions included in the Company's operating results for the ~~first~~ ~~nine~~six months ended June 30, 2021 totaled $5.6 million of ~~2017 were $2.6 million,~~net losses, compared with $0.7 million of net gains during the six months ended June 30, 2020.

Supplemental Non-GAAP Measures

In addition to results reported in accordance with U.S. 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 and free cash flow. This information is intended to supplement GAAP financial measures and is not intended to replace 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 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 ~~$5.8 million~~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. 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, including decisions concerning the allocation of resources and assessment of performance.

Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, adjusted for items that are not part of the Company's core operations. These items include 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, and other items from time to time that are not part of the Company's core operations. Management believes adjusted EBITDA is useful to investors as it is representative of the Company's core operations and is used in the management of the business, including decisions concerning the allocation of resources and assessment of performance.

Table of Contents

Reconciliation of net income to net income attributable to The Timken Company to adjusted net income, adjusted EBITDA and adjusted EBITDA Margin:


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Net Sales	$	1,062.9		$	803.5		$	2,088.3		$	1,726.9
Net Income Attributable to The Timken Company	104.8			61.9			218.1			142.6
Impairment, restructuring and reorganization charges (1)	2.2			5.8			7.4			11.6
Corporate pension and other postretirement benefit related expense (2)	3.5			8.8			4.4			8.8
Acquisition-related charges (3)	1.4			0.9			1.2			4.2
Acquisition-related gain (3)	—			—			(0.6)			—
Property (recoveries) losses and related expenses (4)	—			0.1			—			(2.1)
Noncontrolling interest of above adjustments	—			—			0.2			—
Provision for income taxes (5)	(5.8)			(0.5)			(17.9)			(3.4)
Adjusted Net Income	$	106.1		$	77.0		$	212.8		$	161.7
Net income (loss) attributable to noncontrolling interest	2.4			(0.1)			5.1			3.2
Provision for income taxes (as reported)	29.4			28.0			54.7			57.6
Interest expense	15.3			18.9			30.2			36.0
Interest income	(0.7)			(0.6)			(1.2)			(2.1)
Depreciation and amortization expense (6)	42.0			40.5			84.7			81.4
Less: Noncontrolling interest	—			—			0.2			—
Less: Provision for income taxes (5)	(5.8)			(0.5)			(17.9)			(3.4)
Adjusted EBITDA	$	200.3		$	164.2		$	404.0		$	341.2
Adjusted EBITDA Margin (% of net sales)	18.8		%	20.4		%	19.3		%	19.8		%

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.


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Diluted earnings per share (EPS)	$	1.36	$	0.82	$	2.82	$	1.88
Adjusted EPS	$	1.37	$	1.02	$	2.75	$	2.13
Diluted Shares	77,254,157		75,698,289		77,257,761		76,032,049

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


	Three Months Ended June 30, 2021
	Mobile			Process			Unallocated Corporate			Total
Net Sales	$	494.2		$	568.7		$	—		$	1,062.9
EBITDA	67.3			141.2			(15.1)			193.4
Impairment, restructuring and reorganization charges (1)	1.2			0.8			—			2.0
Corporate pension and other postretirement benefit related expense (2)	—			—			3.5			3.5
Acquisition-related charges (3)	0.2			0.2			1.0			1.4
Adjusted EBITDA	$	68.7		$	142.2		$	(10.6)		$	200.3
Adjusted EBITDA Margin (% of net sales)	13.9		%	25.0		%	—		%	18.8		%

Table of Contents


	Six Months Ended June 30, 2021
	Mobile			Process			Unallocated Corporate			Total
Net Sales	$	998.7		$	1,089.6		$	—		$	2,088.3
EBITDA	146.9			272.2			(27.0)			392.1
Impairment, restructuring and reorganization charges (1)	1.5			5.4			—			6.9
Corporate pension and other postretirement benefit related expense (2)	—			—			4.4			4.4
Acquisition-related charges (3)	0.4			0.3			0.5			1.2
Acquisition-related gain (3)	—			—			(0.6)			(0.6)
Adjusted EBITDA	$	148.8		$	277.9		$	(22.7)		$	404.0
Adjusted EBITDA Margin (% of net sales)	14.9		%	25.5		%	—		%	19.3		%


	Three Months Ended June 30, 2020
	Mobile			Process			Unallocated Corporate		Total
Net Sales	$	342.6		$	460.9		$	—	$	803.5
EBITDA	38.8			126.3			(15.3)		149.8
Impairment, restructuring and reorganization charges (1)	2.4			2.2			—		4.6
Corporate pension and other postretirement benefit related expense (2)	—			—			8.8		8.8
Acquisition-related charges (3)	0.7			0.3			(0.1)		0.9
Property (recoveries) losses and related expenses (4)	0.1			—			—		0.1
Adjusted EBITDA	$	42.0		$	128.8		$	(6.6)	$	164.2
Adjusted EBITDA Margin (% of net sales)	12.3		%	27.9		%	NM		20.4		%


	Six Months Ended June 30, 2020
	Mobile			Process			Unallocated Corporate		Total
Net Sales	$	809.3		$	917.6		$	—	$	1,726.9
EBITDA	113.9			233.8			(26.4)		321.3
Impairment, restructuring and reorganization charges (1)	3.6			5.3			0.1		9.0
Corporate pension and other postretirement benefit related expense (2)	—			—			8.8		8.8
Acquisition-related charges (3)	2.6			1.2			0.4		4.2
Property (recoveries) losses and related expenses (4)	(2.1)			—			—		(2.1)
Adjusted EBITDA	$	118.0		$	240.3		$	(17.1)	$	341.2
Adjusted EBITDA Margin (% of net sales)	14.6		%	26.2		%	NM		19.8		%

(1) Impairment, restructuring and reorganization charges (including items recorded in cost of products sold) relate to: (i) plant closures; (ii) the rationalization of certain plants; and (iii) severance related to cost reduction initiatives. 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 (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 14 - Retirement Benefit Plans and Note 15 - Other Postretirement Benefit Plans for additional discussion.

(3) Acquisition-related charges represent measurement period adjustments to the bargain purchase gain on the acquisition of the assets of Aurora that closed on November 30, 2020 and deal-related expenses associated with completed and potential transactions, as well as any resulting inventory step-up impact.

Table of Contents

(4) 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.

~~nine~~(5) ~~months~~Provision for income taxes includes the net tax impact on pre-tax adjustments (listed above), the impact of ~~2016.~~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 in interim periods.

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

~~Forward-Looking Statements~~

Free Cash Flow:

Free cash flow represents net cash provided by operating activities less capital expenditures. Management believes free cash flow is useful to investors because it is a meaningful indicator of cash generated from operating activities available for the execution of its business strategy.

Reconciliation of net cash provided by operating activities to free cash flow:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net cash provided by operating activities	$	147.1	$	247.4	$	178.8	$	303.6
Capital expenditures	(31.1)		(24.7)		(60.5)		(56.5)
Free cash flow	$	116.0	$	222.7	$	118.3	$	247.1

Table of Contents

Ratio of Net Debt to Adjusted EBITDA:

The ratio of net debt to adjusted EBITDA for the trailing twelve months represents total debt less cash and cash equivalents divided by adjusted EBITDA for the trailing twelve months. The Company presents net debt to adjusted EBITDA because it believes it is more representative of the Company's financial position as it is reflective of the Company's ability to cover its net debt obligations with results from its core operations. Net income for the trailing twelve months ended June 30, 2021 and December 31, 2020 was $369.8 million and $292.4 million, respectively. Net debt to adjusted EBITDA for the trailing twelve months was 1.7 at June 30, 2021, compared with 1.9 at December 31, 2020.

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


	Twelve Months Ended
	June 30, 2021		December 31, 2020
Net income	$	369.8	$	292.4
Provision for income taxes	101.0		103.9
Interest expense	61.8		67.6
Interest income	(2.8)		(3.7)
Depreciation and amortization	168.3		167.1
Consolidated EBITDA	698.1		627.3
Adjustments:
Impairment, restructuring and reorganization charges (1)	$	23.8	$	25.9
Corporate pension and other postretirement benefit related expense (2)	14.1		18.5
Acquisition-related charges (3)	0.7		3.7
Acquisition-related gain (4)	(11.7)		(11.1)
Gain on sale of real estate	(0.4)		(0.4)
Property losses (recoveries) and related expenses (5)	(3.4)		(5.5)
Tax indemnification and related items	0.5		0.5
Total Adjustments	23.6		31.6
Adjusted EBITDA	$	721.7	$	658.9
Net Debt	$	1,205.9	$	1,244.3
Ratio of Net Debt to Adjusted EBITDA	1.7		1.9

(1) Impairment, restructuring and reorganization charges (including items recorded in cost of products sold) relate to: (i) plant closures; (ii) the rationalization of certain plants and (iii) severance related to cost reduction initiatives. 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.

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

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

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

Table of Contents

FORWARD-LOOKING STATEMENTS

Certain statements set forth in this Form 10-Q and in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 that are not historical in nature (including the Company's forecasts, beliefs and expectations) are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, Management's Discussion and Analysis contains numerous forward-looking statements. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “outlook,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other similar words, phrases or expressions. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-Q. The Company cautions readers that actual results may differ materially from those expressed or implied in forward-looking statements made by or on behalf of the Company due to a variety of factors, such as:

•deterioration in world economic conditions, or in economic conditions in any of the geographic regions in which the Company ~~conducts~~or its customers or suppliers conduct business, including ~~additional~~ adverse effects from ~~the~~a global economic slowdown, terrorism, or hostilities. 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, ~~and~~ changes in currency ~~valuations;~~valuations and recent world events that have increased the risks posed by international trade disputes, tariffs and sanctions;

•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, as a result of COVID-19 or other pandemics and associated governmental measures such as restrictions on travel and manufacturing operations;

•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 effects of distributor inventory corrections reflecting de-stocking of the supply chain and whether conditions of fair trade continue in the ~~U.S.~~Company's markets;

•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, and new technology that may impact the way the Company’s products are produced, sold or distributed;

•changes in operating costs. This includes: the effect of changes in the Company’s manufacturing processes; changes in costs associated with varying levels of operations and manufacturing capacity; availability and cost of raw materials and energy; changes in the expected costs associated with product warranty claims; changes resulting from inventory management and cost reduction ~~initiatives and different levels of customer demands;~~initiatives; the effects of unplanned plant shutdowns; the effects of government-imposed restrictions meant to address climate change; and changes in the cost of labor and benefits;

•the success of the Company’s operating plans, announced programs, initiatives and capital investments; the ability to ~~complete previously announced transactions; the ability to~~ integrate acquired ~~companies;~~companies and to address material issues 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;~~earnings, realization of synergies and expected cash flow generation;

•the Company’s ability to maintain appropriate relations with unions or works councils that represent Company associates in certain locations in order to avoid disruptions of ~~business;~~business and to maintain the continued service of our management and other key employees;

•unanticipated litigation, claims, investigations or assessments. This includes: claims, investigations or problems related to intellectual property, product liability or warranty, foreign export and trade laws, competition and anti-bribery laws, environmental or health and safety issues, data privacy and taxes;

•changes in worldwide financial and capital markets, including availability of financing and interest rates on satisfactory terms, which affect the Company’s cost of funds and/or ability to raise capital, as well as customer demand and the ability of customers to obtain financing to purchase the Company’s products or equipment that contain the Company’s products;

•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;

Table of Contents

•the impact on the Company's pension obligations and assets due to changes in interest rates, investment performance and other tactics designed to reduce risk; and

~~retention of CDSOA distributions; and~~


•	~~those items identified under Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the year ended~~ ~~December 31, 2016~~.•those items identified under Item 1A. "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 or this Form 10-Q.

Additional risks relating to the Company's business, the industries in which the Company operates, or the Company's common shares may be described from time to time in the Company's filings with the Securities and Exchange Commission. All of these risk factors are difficult to predict, are subject to material uncertainties that may affect actual results and may be beyond the Company's control.

Readers are cautioned that it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results and that the above list should not be considered to be a complete list. Except as required by the federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to information appearing under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q. Furthermore, a discussion of market risk exposures is included in Part II, Item 7A. Quantitative and Qualitative Disclosure about Market Risk, of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~.2020. There have been no material changes in reported market risk since the inclusion of this discussion in the Company’s Annual Report on Form 10-K referenced above.

ITEM 4. CONTROLS AND PROCEDURES


~~(a)~~	~~Disclosure Controls and Procedures~~

(a)Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)). Based upon that evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

(b)Changes in Internal Control Over Financial Reporting


~~(b)~~	~~Changes in Internal Control Over Financial Reporting~~

During the Company’s ~~most recent~~ fiscal quarter ended June 30, 2021, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved in various claims and legal actions arising in the ordinary course of business. SEC regulations require us to disclose certain information about environmental proceedings when a governmental authority is a party to the proceedings if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. Pursuant to such regulations, the Company uses a threshold of $1 million or more for purposes of determining whether disclosure of any such proceedings is required as we believe matters under this threshold are not material to the Company. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position or results of operations.

Item 1A. Risk Factors

~~Our~~The Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2020, included a detailed discussion of our risk factors. There have been no material changes to the risk factors included in the ~~Company’s~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020. Investors should not interpret the disclosure of any risk factor to imply that the risk has not already materialized.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Common Shares

The following table provides information about purchases by the Company of its common shares during the quarter ended ~~September~~June 30, ~~2017~~.2021.


Period	Total number of shares purchased (1)	Average price paid per share (2)		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs (3)
4/1/2021 - 4/30/2021	2,552	$	85.36	—	9,950,000
5/1/2021 - 5/31/2021	61,126	88.09		—	9,950,000
6/1/2021 - 6/30/2021	638	86.35		—	9,950,000
Total	64,316	$	87.96	—

(1)Of the shares purchased in April, May, and June, 2,552, 61,126, and 638, respectively, represent common shares of the Company that were owned and tendered by employees to exercise stock options and to satisfy withholding obligations in connection with the exercise of stock options or vesting of restricted shares.

(2)For shares tendered in connection with the vesting of restricted shares, the average price paid per share is an average calculated using the daily high and low of the Company's common shares as quoted on the New York Stock Exchange at the time of vesting. For shares tendered in connection with the exercise of stock options, the price paid is the real-time trading stock price at the time the options are exercised.

(3)On February 12, 2021, the Company's Board of Directors approved a new share purchase plan, effective March 1, 2021, pursuant to which the Company may purchase up to ten million of its common shares, in the aggregate. This share purchase plan expires on February 28, 2026. Under this plan, the Company may purchase shares from time to time in open market purchases or privately negotiated transactions, and it may make all or part of the purchases pursuant to accelerated share repurchases or Rule 10b5-1 plans. The previous share purchase plan expired on February 28, 2021.

Period
Total number
of shares
purchased ⁽¹⁾

Average
price paid
per share ⁽²⁾

Total number
of shares
purchased as
part of publicly
announced
plans or
programs

Maximum
number of
shares that
may yet
be purchased
under the plans
or programs ⁽³⁾

7/1/17 - 7/31/17 66,761
$ 46.96
64,000
9,368,000
8/1/17 - 8/31/17 233,321
44.31
206,000
9,162,000
9/1/17 - 9/30/17 43,397
46.36
42,000
9,120,000
Total 343,479
$ 45.09
312,000
9,120,000

Table of Contents


~~(1)~~	Of the shares purchased in July, August and September, 2,761, 27,321 and 1,397, respectively, represent common shares of the Company that were owned and tendered by employees to exercise stock options and to satisfy withholding obligations in connection with the exercise of stock options and vesting of restricted shares.

~~(2)~~

For shares tendered in connection with the vesting of restricted shares, the average price paid per share is an average calculated using the daily high and low of the Company's common shares as quoted on the New York Stock Exchange at the time of vesting. For shares tendered in connection with the exercise of stock options, the price paid is the real-time trading stock price at the time the options are exercised.

~~(3)~~

On February 6, 2017, the Board of Directors of the Company approved a share purchase plan pursuant to which the Company may purchase up to ten million of its common shares in the aggregate. This share repurchase plan expires on February 28, 2021. The Company may purchase shares from time to time in open market purchases or privately negotiated transactions. The Company may make all or part of the purchases pursuant to accelerated share repurchases or Rule 10b5-1 plans.

Item 6. Exhibits










































































1231.1		~~Computation of Ratio of Earnings to Fixed Charges.~~

~~31.1~~	Certification of Richard G. Kyle, President and Chief Executive Officer (principal executive officer) of The Timken Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Philip D. Fracassa, Executive Vice President and Chief Financial Officer (principal financial officer and principal accounting officer) of The Timken Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certifications of Richard G. Kyle, President and Chief Executive Officer (principal executive officer) and Philip D. Fracassa, Executive Vice President and Chief Financial Officer (principal financial officer and principal accounting officer) of The Timken Company, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		Financial statements from the quarterly report on Form 10-Q of The Timken Company for the quarter ended ~~September~~June 30, ~~2017,~~2021 filed on ~~October 25, 2017,~~August 2, 2021, formatted in Inline XBRL: (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		THE TIMKEN COMPANY
Date: August 2, 2021		By: /s/ Richard G. Kyle
		Richard G. Kyle President and Chief Executive Officer (Principal Executive Officer)

Date: August 2, 2021		~~THE TIMKEN COMPANY~~
~~Date: October 25, 2017~~	~~By: /s/ Richard G. Kyle~~
	~~Richard G. Kyle~~ ~~President and Chief Executive Officer~~ ~~(Principal Executive Officer)~~

~~Date: October 25, 2017~~	By: /s/ Philip D. Fracassa
		Philip D. Fracassa Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

5147



	Three Months Ended
	September 30, 2017							September 30, 2016
	Previous Accounting Method		As Reported		Effect of Accounting Change			As Previously Reported		Revised		Effect of Accounting Change
Cost of products sold	$	556.7	$	554.4	$	(2.3	)	$	489.9	$	487.7	$	(2.2	)
Gross profit	214.7		217.0		2.3			167.5		169.7		2.2
Selling, general and administrative expense	136.8		134.0		(2.8		)	109.5		107.2		(2.3		)
Pension settlement expenses	3.9		—		(3.9		)	10.3		0.1		(10.2		)
Operating income	72.7		81.7		9.0			42.4		57.1		14.7
Income before income taxes	66.2		75.2		9.0			34.5		49.2		14.7
Provision for income taxes	18.0		21.1		3.1			13.5		15.2		1.7
Net income	48.2		54.1		5.9			21.0		34.0		13.0
Net income attributable to The Timken Company	$	47.6	$	53.5	$	5.9		$	20.6	$	33.6	$	13.0
Basic earnings per share	$	0.61	$	0.69	$	0.08		$	0.26	$	0.43	$	0.17
Diluted earnings per share	$	0.60	$	0.68	$	0.08		$	0.26	$	0.43	$	0.17



	Nine Months Ended
	September 30, 2017							September 30, 2016
	Previous Accounting Method		As Reported		Effect of Accounting Change			As Previously Reported		Revised		Effect of Accounting Change
Cost of products sold	$	1,630.9	$	1,626.5	$	(4.4	)	$	1,484.3	$	1,477.7	$	(6.6	)
Gross profit	594.9		599.3		4.4			530.7		537.3		6.6
Selling, general and administrative expense	383.8		377.4		(6.4		)	338.0		331.3		(6.7		)
Pension settlement expenses	15.7		—		(15.7		)	11.9		1.3		(10.6		)
Operating income	191.6		218.1		26.5			162.1		186.0		23.9
Income before income taxes	176.2		202.7		26.5			189.9		213.8		23.9
Provision for income taxes	19.3		28.5		9.2			61.1		65.8		4.7
Net income	156.9		174.2		17.3			128.8		148.0		19.2
Net income attributable to The Timken Company	$	156.9	$	174.2	$	17.3		$	128.5	$	147.7	$	19.2
Basic earnings per share	$	2.02	$	2.24	$	0.22		$	1.63	$	1.87	$	0.24
Diluted earnings per share	$	1.99	$	2.21	$	0.22		$	1.62	$	1.86	$	0.24



	September 30, 2017									December 31, 2016
	Previous Accounting Method			As Reported			Effect of Accounting Change			As Previously Reported			Revised			Effect of Accounting Change
Inventories, net	$	679.6		$	687.5		$	7.9		$	545.8		$	553.7		$	7.9
Total current assets	1,466.4			1,474.3			7.9			1,204.0			1,211.9			7.9
Deferred income taxes	50.9			47.9			(3.0		)	54.4			51.4			(3.0		)
Total other assets	1,050.1			1,047.1			(3.0		)	749.9			746.9			(3.0		)
Total assets	3,358.7			3,363.6			4.9			2,758.3			2,763.2			4.9
Earnings invested in the business	1,622.2			1,400.2			(222.0		)	1,528.6			1,289.3			(239.3		)
Accumulated other comprehensive loss	(267.8		)	(41.0		)	226.8			(322.0		)	(77.9		)	244.1
Total shareholders' equity	1,418.2			1,423.0			4.8			1,274.9			1,279.7			4.8
Noncontrolling interest	32.8			32.9			0.1			31.1			31.2			0.1
Total equity	1,451.0			1,455.9			4.9			1,306.0			1,310.9			4.9
Total liabilities and shareholders' equity	$	3,358.7		$	3,363.6		$	4.9		$	2,758.3		$	2,763.2		$	4.9



	Initial Purchase Price Allocation
Assets:
Accounts receivable, net	$	27.6
Inventories, net	29.1
Other current assets	4.7
Property, plant and equipment, net	31.6
Goodwill	147.6
Other intangible assets	175.3
Other non-current assets	1.9
Total assets acquired	$	417.8
Liabilities:
Accounts payable, trade	$	9.5
Salaries, wages and benefits	5.8
Other current liabilities	8.2
Short-term debt	1.0
Long-term debt	2.0
Deferred income taxes	42.4
Other non-current liabilities	2.3
Total liabilities assumed	$	71.2
Net assets acquired	$	346.6



	Initial Purchase Price Allocation
			Weighted - Average Life
Trade names (indefinite life)	$	33.4	Indefinite
Trade names (finite life)	2.2		13 years
Technology and know-how	29.9		16 years
Customer relationships	108.2		17 years
Other	0.2		5 years
Capitalized software	1.4		3 years
Total intangible assets	$	175.3



	Initial Purchase Price Allocation		Adjustment			Final Purchase Price Allocation
Assets:
Accounts receivable, net	$	8.4				$	8.4
Inventories, net	17.8					17.8
Other current assets	5.3		(0.2		)	5.1
Property, plant and equipment, net	16.5					16.5
Goodwill	29.9		(1.1		)	28.8
Other intangible assets	27.9					27.9
Other non-current assets	0.1					0.1
Total assets acquired	$	105.9	$	(1.3	)	$	104.6
Liabilities:
Accounts payable, trade	$	8.1				$	8.1
Salaries, wages and benefits	1.3					1.3
Other current liabilities	4.4		(0.6		)	3.8
Long-term debt	2.2					2.2
Deferred taxes	10.4					10.4
Other non-current liabilities	7.6		(1.3		)	6.3
Total liabilities assumed	$	34.0	$	(1.9	)	$	32.1
Net assets acquired	$	71.9	$	0.6		$	72.5



	September 30, 2017			December 31, 2016
Land and buildings	$	478.2		$	425.4
Machinery and equipment	1,882.4			1,807.6
Subtotal	$	2,360.6		$	2,233.0
Accumulated depreciation	(1,518.4		)	(1,428.6		)
Property, plant and equipment, net	$	842.2		$	804.4



	As of September 30, 2017						As of December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible assets subject to amortization:
Customer relationships	$	322.4	$	97.6	$	224.8	$	211.4	$	84.4	$	127.0
Technology and know-how	126.4		29.9		96.5		95.2		25.4		69.8
Trade names	8.6		4.2		4.4		6.5		3.8		2.7
Capitalized software	260.0		223.4		36.6		251.7		211.8		39.9
Other	12.2		8.1		4.1		11.0		7.5		3.5
	$	729.6	$	363.2	$	366.4	$	575.8	$	332.9	$	242.9
Intangible assets not subject to amortization:
Trade names	$	53.8			$	53.8	$	19.4			$	19.4
FAA air agency certificates	8.7				8.7		8.7				8.7
	$	62.5			$	62.5	$	28.1			$	28.1
Total intangible assets	$	792.1	$	363.2	$	428.9	$	603.9	$	332.9	$	271.0



	September 30, 2017		December 31, 2016
Fixed-rate Medium-Term Notes, Series A, maturing at various dates through May 2028, with interest rates ranging from 6.74% to 7.76%	$	159.5	$	159.5
Fixed-rate Senior Unsecured Notes, maturing on September 1, 2024, with an interest rate of 3.875%	346.6		345.9
Variable-rate Senior Credit Facility with a weighted-average interest rate of 1.59% at September 30, 2017 and 1.50% at December 31, 2016	91.2		83.8
Variable-rate Accounts Receivable Facility with an interest rate of 2.07% at September 30, 2017 and 1.65% at December 31, 2016	69.2		48.9
Fixed-rate Euro Senior Unsecured Notes, maturing on September 7, 2027, with an interest rate of 2.02%	176.5		—
Variable-rate Euro Term Loan with an interest rate of 1.13% at September 30, 2017	117.8		—
Other	4.0		1.9
	$	964.8	$	640.0
Less: Current maturities	5.0		5.0
Long-term debt	$	959.8	$	635.0



	Mobile Industries		Process Industries		Corporate		Total
Severance and related benefit costs	$	1.3	$	—	$	—	$	1.3
Total	$	1.3	$	—	$	—	$	1.3



	September 30, 2017
Beginning balance, January 1	$	39.1
Tax positions related to the prior years:
Additions	5.6
Reductions	(1.3		)
Lapses in statutes of limitation	(28.6		)
Ending Balance	$	14.8



	Carrying Value		Fair Value Adjustment			Fair Value
Long-lived assets held for sale:
Land	$	0.2	$	(0.2	)	$	—
Total long-lived assets held for sale	$	0.2	$	(0.2	)	$	—

Long-lived assets held and used:
Altavista bearing plant	$	5.6	$	(3.1	)	$	2.5
Equipment at Benoni bearing plant	0.5		(0.5		)	—
Total long-lived assets held and used	$	6.1	$	(3.6	)	$	2.5



	Derivative Assets				Derivatives Liabilities
Derivatives designated as hedging instruments	Fair Value at 9/30/17		Fair Value at 12/31/16		Fair Value at 9/30/17		Fair Value at 12/31/16
Foreign currency forward contracts	$	0.3	$	2.3	$	2.9	$	0.5

Derivatives not designated as hedging instruments
Foreign currency forward contracts	1.3		7.6		1.0		1.6
Total Derivatives	$	1.6	$	9.9	$	3.9	$	2.1



Period	Total number of shares purchased ⁽¹⁾	Average price paid per share ⁽²⁾		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs ⁽³⁾
7/1/17 - 7/31/17	66,761	$	46.96	64,000	9,368,000
8/1/17 - 8/31/17	233,321	44.31		206,000	9,162,000
9/1/17 - 9/30/17	43,397	46.36		42,000	9,120,000
Total	343,479	$	45.09	312,000	9,120,000